Cabinet is holding up the IRP — and the move to mixed energy
Renewable energy experts have also reported that the sector is on track to meet the 2030 goal to connect 20GW of renewable power to the grid
Policy uncertainty for SA’s energy mix has discouraged investor confidence in the sector. Without an updated policy there is no framework to procure the generation of new energy.
The draft 2019 Integrated Resource Plan (IRP) supports an energy mix of coal, gas, nuclear and renewables. It was reported that National Treasury allocated about R200bn towards renewable energy, but without a policy commitment from the government these funds remain inaccessible.
In July, the department of mineral resources and energy directed a clear path for the approval of the draft IRP 2019 by September. In August, the independent power producers (IPP) procurement programme unit (which conducts its activities in accordance with the renewable and non-renewable generation capacity allocated by the IRP 2010) committed to a swift implementation of the programme following the cabinet’s approval of IRP 2019. Without the approved IRP 2019, the unit cannot roll out its procurement programme for the generation of new energy.
A month ago, all indicators pointed to bid window round five running its course in the first quarter of 2020. These steps are critical to demonstrate policy certainty and a procurement programme that will support investor confidence. The cabinet’s failure to approve the draft IRP 2019 and the lack of a timeline for approval will set back this bid window indefinitely.
‘Soon’ isn’t good enough
The draft IRP 2019 ostensibly identifies the government’s objectives and the country’s energy demands but was once again met with resistance — this time by the cabinet, on September 18. The only comment from the presidency thus far is that the policy will be concluded “soon”, but it refuses to offer a timeframe for approval.
The presidency also cited the Eskom paper on restructuring (which is yet to be served on the cabinet) and finance minister Tito Mboweni’s paper “Economic Transformation, Inclusive Growth and Competitiveness: Towards an Economic Strategy for SA” as key policy documents that require consideration.
What is clear is that the IRP 2019 has the support of both the National Treasury and the IPP procurement programme unit. Renewable energy experts have also reported that the sector is on track to meet the 2030 goal to connect 20GW of renewable power to the grid.
The policy was also originally debated through the National Economic Development and Labour Council (Nedlac) for months earlier this year an,d despite “deep ideological differences”, was finally tabled with the cabinet in September. The exclusion of new nuclear projects and the diminishing role of coal were two impasses that require extensive consultation with labour and community representatives. Key stakeholders with strong political, social and economic objectives have now considered and debated the policy at length.
What is unclear is why the cabinet failed to approve the policy. We share in the minster of mineral resources and energy’s concern: the approval of the IRP 2019 (SA’s “energy road map”) will open the way for the procurement of new generation capacity. This will benefit both public- and private-sector interests and will see large-scale economic (and social) transformation to meet country’s energy demands. Simply stating that the policy will be approved “soon” is insufficient and calls for intervention by all stakeholders to hold the cabinet accountable for its decisions and its failure to act swiftly.
The ministers’ recent discussions with various representatives from IPPs on September 26 shows that there is a commitment to invest in this sector. In the meeting, Gwede Mantashe, and Pravin Gordhan requested IPPs to voluntarily reduce tariffs. While stakeholders are considering this request, it should not hold the cabinet back from approving the draft IRP.
• Lalla is CEO and Pillay director at LNP Attorneys.