South Africa has postponed significantly the bidding deadline for future renewables projects to give officials time to catch up, sparking fears that some developers will throw their hands up and abandon the country altogether.
The government says it will not close bidding on third-round projects until May 2013 – more than eight months later than expected – so it can focus on finalising rounds one and two, both already postponed.
The latest setback follows a chaotic series of delays dribbled out by government over the summer, with the first round of projects – comprising 1.4GW of wind, PV and concentrating solar power capacity – still languishing in limbo.
Those projects were supposed to have reached financial close and been offered power-purchase agreements (PPAs) by June, but the government has acknowledged its inability to keep up with the originally intended pace of progress.
Coming on top of a series of deadly strikes that have rocked South Africa’s mining industry over the past month, the latest setback for the renewables programme elicited fierce condemnation of President Jacob Zuma’s stewardship of the economy from business groups and opposing politicians.
“This debacle points to the broader problem of the need for institutional reform in South Africa’s energy governance,” says Lance Greyling, a member of the opposition Democratic Alliance party, and the country’s shadow energy minister. “Too many decisions are made as a function of [Energy Minister Dipuo Peters’] whim at the expense of economic growth.”
Meanwhile, the ever-shifting goalposts have left many developers cold and dampened enthusiasm for Africa’s largest economy among manufacturers.
“I’m very disappointed with the latest delays,” says Eddie O’Connor, chief executive of Mainstream Renewable Power.
“We understand that this is a long-term programme, and they need to learn to walk before they run,” O’Connor tells Recharge. “But this just doesn’t seem to gel with the government’s previously announced policy that they were going to try to do things as quickly as they could.”
After a long-touted feed-in-tariff was allowed to fizzle out several years ago, South Africa used the 2011 UN climate talks in Durban to re-launch its renewables programme – now operating under a complex bidding system – into the global spotlight.
Although privately fearful of the potential implications for its energy-intensive economy, the government embraced wind and solar as way to create jobs and plug the country’s short-term energy gap.
The government has already announced “preferred bidders” in the first two rounds, totaling 2.5GW of capacity, but the projects cannot move forward until developers have PPAs with state-owned utility Eskom in hand.
Greyling argues that smaller local developers who have already invested in legal, technical and financial work will not be able to wait until next May for an update – particularly if they believe more delays are likely.
That will leave the industry firmly in the hand of larger, established energy companies – precisely the outcome the government had hoped to avoid.