South Africa Energy Minister to Intervene on Renewable Deals

Aug 27, 2014 9:39 am ET

(Updates with comment by deputy president in penultimate paragraph.)

Aug. 27 (Bloomberg) -- South African Energy Minister Tina Joemat-Pettersson said her department wants to address weaknesses in the process of commissioning renewable-power projects.

The country is seeking to cut the use of coal for electricity and is adding 3,725 megawatts of renewable-energy capacity by the end of 2016 through five rounds of tenders, three of which have been allocated. That may help state utility Eskom Holdings SOC Ltd. meet demand as it struggles to fund maintenance and expansion in the continent’s biggest economy.

“For the next round we want to intervene so that local players do have a fair share” of contracts, the minister, who took charge in May, said today in a panel discussion in Johannesburg. “Obviously we can do nothing about those that have already been decided on.”

The department will announce on Nov. 24 preferred bidders in a fourth round of the renewables projects, according to its website.

“The first round, as you heard, gave 20-year contracts to companies and there was only a small percentage of localization,” Joemat-Pettersson said after the discussion. “There’s obviously some good in the model, but there are obviously some weaknesses.”

Different Models

State-owned Eskom is building Africa’s two largest coal- fired power plants to meet demand and fend off the threat of blackouts. The nation plans to construct nuclear facilities that would become operational after 2020, Deputy President Cyril Ramaphosa said last month.

“We’re working on different models and once we have the models sorted out will be able to make the announcements,” Joemat-Pettersson said of the plans to build a nuclear facility. “Just like with the IPPs, there’s private-sector involvement so there are different models.”

Eskom has connected 21 renewable-energy projects by independent power producers, with 1,076 megawatts of capacity, to the grid, the utility said in its annual report released last month. Of this, about 467 megawatts are available to the system.

South Africa will restructure energy generation and distribution, offering opportunities for private companies to get involved, Ramaphosa in a speech in the National Council of Provinces in Cape Town.

“The private sector has a significant role to play in resolving our energy shortfall,” he said.

--With assistance from Mike Cohen in Cape Town.