MIKE TEKE AND PETER VENN: Godongwana’s R9bn green energy tax boost could unlock billions more

The R9bn in tax incentives for private sector installation of renewable energy power facilities announced by finance minister Enoch Godongwana last week is a critical new step on the road to greater energy security. This is a boon not only for the country, but also for businesses and households able to take advantage of these incentives.

Since the government abolished restrictions on larger-scale energy projects last year, companies (particularly in the mining sector) have already planned, or built, 6.5GW of power plants, the vast bulk of which is wind and solar renewable projects.

Until now, the only incentive to do this has been the desperate quest for energy security to allow mines to operate at levels closer to their optimum, after years of being forced to restrict power supply to operations.

But Godongwana’s announcement of a 125% tax deduction for installing these kinds of projects means we’re now likely to see many more gigawatts added to that 6.5GW. And it’s an incentive likely to attract businesses beyond just the mining sector too.

As it is, the R254bn commitment to relieve most of Eskom’s debt offers an opportunity to ease the grip load-shedding has on our country. To allow South Africans to optimise the opportunity of the tax incentives, let’s hope Eskom uses its debt-servicing savings to focus on infrastructure — including maintaining its plants, and adding to the grid. 

This will ensure that as new generation capacity becomes available, the grid will have the capacity to cater to those parts of the country not suitable for wind and solar power generation.

There are various ways to incentivise new generation capacity. The city of Cape Town showed the way earlier this year when it announced it will pay cash and an incentive to businesses — and later to ordinary households — that feed their excess power into the grid.

We hope other metro local authorities, and then larger towns, are preparing to introduce similar schemes, especially as the new tax incentives will ensure greater capacity for this.

This will mean not only less load-shedding, but greater energy security too — and all this at a cheaper cost.

Clean and green

As it stands, Eskom emergency diesel plants cost about R7/kWh to produce power (and that’s before you consider the carbon implications). But if Eskom or a local authority such as Cape Town is able to pay about R1/kWh, this would be a huge saving for the country and the consumer.

And considering it would come from renewables, it would also be clean power that will not cough out the sort of emissions we see with diesel- or coal-fired power.

If the government wants to optimise the private sector opportunities the 125% tax incentive can open, Godongwana’s cabinet colleagues could take a range of steps, particularly as he has put a lifespan of only two years on this scheme (though, hopefully, this could be extended if it’s working well.)

It’s a time-consuming process to rezone land on a site-by-site basis. So why can’t municipalities or provinces make all agricultural land open for wind and solar farms, since these projects don’t affect farming operations?

We could also make the process of constructing wind and solar farms much easier. As it stands, several departmental permissions are needed.

For example, the department of environment, forestry & fisheries requires an environmental impact assessment; the department of mineral resources & energy needs to “sterilise” surface mining rights; a water use licence is required for water to be used during construction; and the South African National Roads Agency, the South African Weather Service and the South African Civil Aviation Authority all have to approve plans. And there are plenty more besides.

Now, each of these departments has good regulatory reasons that such permissions are needed. But equally, there is no good reason why applications should have to travel through each department, one at a time, for each project. These permissions can surely be considered simultaneously.

The good news is that it seems the government is gearing up to make all of these things possible. Perhaps the state of disaster can open the way to do this even more rapidly.

There should be even more adrenaline in the process, once the new energy minister is appointed; we would like to offer that person our detailed ideas on these subjects.

There is still much to do, but Godongwana has opened the path to alleviating load-shedding. Through the smart use of incentives he has found a way to deploy private capital to solve the immediate challenges, allowing companies such as ours to play our role in this new landscape. 

* Teke is the CEO of Seriti Resources and Venn is CEO of Seriti Green, which will build a 155MW wind energy facility in Mpumalanga as part of a larger 900MW project