In yet another cabinet shuffle by South African president Jacob Zuma, Mr David Mahlobo, former minister of State Security has been appointed Energy Minister. His appointment marks the third Minster of Energy the country has had in the last eight months. Tina Joemat-Pettersson was axed in March 2017 after the nuclear programme was halted following a court ruling. Her successor, Mmamoloko Kubayi, has been redeployed to head the Communications Ministry. Mahlobo, a Zuma loyalist, has wasted no time driving the nuclear agenda. Commentators are now asking where his appointment will leave the countries REIPP program (Renewable Energy Independent Power Producer Program).
It is interesting that Mahlobo’ s appointment co-insides with the Department of Environmental Affairs (DEA) authorising the final Environmental Impact Assessment (EIA) for an additional nuclear power station at Duynefontein. This allows Eskom to develop a new nuclear plant next to the existing Koeberg power station. Mahlobo, speaking for the first time as Energy Minister at the Gen Four International Forum held recently, reignited the nuclear build program by saying that the DEA’s authorisation allows for a public participation process for nuclear to restart, emphasising that nuclear power provides base load and will prepare the country for all-inclusive energy mix.
There has been a two year stand-off in signing off Round 4 of the REIPPP. Kubayi’s short tenure brought the program back on track by specifying a 77c/kWh tariff cap for Round 4 across all renewable technologies, a move which has Independent Power Producers or IPP’s as they are commonly known, crying foul. Will Mahlobo interfere with the finalisation of Round 4 which closes at the end of October 2017? It is unlikely.
Reading between the lines it could be that a revised Integrated Resource Plan (IRP) will specify a reduced capacity allocation to nuclear power, currently at 9, 6 Gigawatts. In such a case, the allocated capacity to renewables may be increased. For now, Mahlobo has made no announcements regarding renewables but whatever energy mixed is announced going forward, we can expect revised conditions for REIPP Program.
Many argue that up until Round 4, IPP’s had it rather good. The average power price for bid window one was R3, 65 p/kwh, bid window two, R2,18 p/kwh and bid window three, R1,17 p/kwh. The vast majority of projects in Rounds 1 to 3 are foreign owned and their profits are repatriated to their home countries. Kubayi, by capping the tariff at 77c p/kw/h for Round 4, has essentially brought the industry to order. She expressed concern regarding project ownership and we can expect new conditions for the next round which may include 51% black ownership for all projects. This may also extend to project land ownership. We can also expect new construction quotas in terms of local labour and materials.
Mahlobo’ s appointment is seen as an attempt by Zuma to drive the nuclear deal home. However, we may just see a balance struck between nuclear and renewables by the new minister, with a revised set of conditions for both. As an IPP in South Africa you need broad shoulders and nimble feet. Anything can happen.
Author: Bryan Groenendaal