Refit just first step on green road, say firms
April 2, 2009
By INGI SALGADO
Much work lay ahead before renewable power projects got off the ground, the private sector cautioned yesterday as it welcomed this week's generous renewable energy feed-in tariff (Refit) regime announced by the National Energy Regulator of SA (Nersa) .
Among the most pressing issues was whether a tender system for renewable energy projects would be implemented. The Department of Minerals and Energy favours a bidding system, but it has been roundly rejected by project developers, who argue that it sits uneasily with the Refit.
The department, Nersa and power utility Eskom, which has been designated South Africa's single buyer of renewable power, met yesterday to discuss the way forward.
Steve Lennon, Eskom's designated "climate change champion" and the managing director of the utility's corporate services, said details such as ensuring the independence of the single buyer mechanism, finalising the way the cost recovery mechanism would work and creating a grid code for renewable energy producers all had to be worked through.
Eskom needed to assess whether there was a need to change the way reserve capacity operated or to modify transmission infrastructure.
"It needs to be done in consultation with suppliers and the regulator," he said, indicating it could take some time.
Davin Chown, the head of operations of Genesis Eco-Energy, which last month announced an ambitious plan to roll out eight wind farms, said it was not clear what processes now needed to be followed.
His firm wanted clarity about a possible tender process, but was going ahead with licence applications to Nersa.
Chown was "pleasantly surprised" by the regulator's decision to raise tariffs substantially from an earlier draft proposal, to increase the Refit payments from 15 years to 20 years and to implement constant rates over this period.
Nersa's tariffs are R1.25 per kilowatt-hour (kWh) for wind power, which is likely to comprise the majority of projects in the beginning, 90c/kWh for landfill gas power, 94c/kWh for small-scale hydro power and R2.10/kWh for concentrated solar thermal power. This compares with the current Eskom tariff of about 22c/kWh.
Nersa said this week that the Refit would add 6 percent to 10 percent to the average tariff if the state met a 2013 target of securing 4 percent of electricity generated from renewables.
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