South Africa’s Renewable Energy Procurement: A New Frontier
In South Africa regular load shedding has been taking place since mid-2014 and is now predicted to last until 2018. The country faces its worst electricity supply side crisis in 40 years. The construction of two coal-fired power plants, Medupi and Kusile, of approximately 4 800 MW each is severely behind schedule and subject to significant cost overruns. The monopoly utility Eskom, which to date has generated 90 per cent of the country’s coal-fired electricity, is strapped for cash and ridden by crisis and has been struggling since 2005 to build an additional 17000 MW of generation capacity by 2018. By January 2015, one third of Eskom’s installed capacity, approximately 15 000 MW, was down and the country’s reserve margin on a knife edge. In addition to a commitment of R23 billion from National Treasury, the utility is now considering selling off its assets in an attempt to raise capital to fill an estimated funding gap of R200 billion ($17 billion) by 2018 (Reuters 2015). This paper evaluates the key features of RE IPPPP and builds on previous studies of its negotiation and implementation. Key tensions inherent were highlighted in the RE IPPPP between commercial priorities for ‘bankability’ under the norms and demands of project finance, and the requirements for economic development and community ownership, to which definitions and perceptions of risk are central.