Renewable energy rules slammed by smaller developers

Submit your comment The criteria for selecting renewable energy projects that qualify for feed-in tariffs were biased against small local companies, developers said last week.

The long-awaited rules were released by the National Energy Regulator of SA (Nersa) last month. They propose a weighted scoring system to select licensees, with the highest scorers becoming eligible to obtain licences and sign power purchase agreements (PPAs) with either Eskom or an independent systems operator.

Subsolar, which hopes to develop a 50 megawatt concentrating solar power (CSP) plant in the Northern Cape, expressed concern that applicants with high scores were not guaranteed to secure go-ahead for their projects, but nevertheless had to fork out large sums of money for feasibility studies.

"The recent proposal facilitates only large independent power producers that are able to invest millions of rand prior to receiving any confirmation of a PPA or receiving a licence," said Dick Berlijn, the founder and chief executive of Subsolar.

Subsolar expects to spend between R5 million and R15m on the feasibility study for its proposed R2 billion solar thermal plant.

"For small companies that's a lot. It's okay for the big guys," said Berlijn. "The emphasis on getting things up as soon as possible opens the way for non-South African companies to come in and take the market."

Berlijn believed the problem could be resolved if South Africa increased its low short-term renewable energy target of 10 000 gigawatt-hours by 2013, the equivalent of about 4 percent of projected electricity demand.

The selection criteria allow for a total of only 50MW of renewable power from CSP by 2013, compared with 500MW for wind and 325MW for other renewable energy technologies.

Subsolar, majority-owned by black-owned electrical engineering company Premar, has selected CSP trough technology for its plant. Nersa's renewable energy feed-in tariff for this technology amounts to R3.13 a kilowatt-hour.

Davin Chown, the managing director of Mainstream SA, the Irish-backed project developer that hopes to start building a wind farm in Jeffreys Bay next year, agreed that the rules were weighted against smaller independent power producers.

"For smaller companies to comply will be a challenge, but not insurmountable," he said.

He believed Nersa and the Department of Energy were simply trying to protect themselves from "a slew of dud projects. Financial backing is vitally important because you've got to know the applicant is not just a speculator. Can you actually get the project built, or will you just try to on-sell to someone else?"

Chown welcomed publication of the rules. "They are a critical component of a vast basket of hoops we have to jump through. We welcome them, they are long overdue, and we now need to get into the detail," he said.

Mainstream would seek clarity on a number of technical issues raised in the rules. "There's technical detail behind some of the guidelines that needs to be unpacked. We need to ensure our interpretation and theirs is the same thing," he said.

Nersa has given parties until March 18 to comment on the rules.