Fallout from nuclear judgement exposes renewables

The South African government is still trying to come to terms with a recent court judgement that has stopped nuclear procurement in its tracks, but the impact is affecting other technologies as well.

No new date has been set for the signing of 37 outstanding power purchase agreements with Eskom as the Department of Energy is trying to salvage the procurement process that suffers from the same defects that put a huge spanner in the nuclear works.

Nevertheless, newly-appointed energy minister Mmamoloko Kubayi announced at a media briefing on Saturday that government would not appeal the ruling handed down by two judges of the Cape High Court on April 26.

The application was brought by Earthlife Africa and another against the minister of energy and five others. It reviewed and set aside two section 34 determinations and a Request for Information for nuclear procurement, as unconstitutional and unlawful. It also reviewed and set aside decisions to table in parliament bilateral inter-governmental agreements between South Africa and Russia, the US and South Korea. These agreements were supposed to provide the legal framework for nuclear co-operation between South Africa and the relevant countries.

Section 34 of the Electricity Regulation Act determines that the minister of energy must make a determination of any new generation the country needs to ensure uninterrupted supply of electricity. The determinations should deal with a variety of aspects such as new generation capacity, including the source of the new capacity, the percentage of the energy mix it would represent, whom it should be bought from and sold to.

The determination is published in the Government Gazette and should be done in consultation with energy regulator Nersa.

Kubayi said the same process followed with regard to the nuclear determination was also followed for all other determinations. That would indicate that all previous determinations in terms of section 34 of the Act suffer from the same defects, namely a lack of public consultation by Nersa.

That includes determinations for generation from renewable energy sources, coal and gas.

Kubayi stopped short of saying the department’s much acclaimed renewable energy independent power producer procurement (REIPPP) programme is at risk, but confirmed that no new date has been set for the signing of the outstanding power purchase agreements for 37 projects that are a prerequisite for financial close. Moneyweb earlier reported that an earlier deadline set by Kubayi’s predecessor Tina Joemat-Pettersson for April 11 was cancelled as a result of the cabinet reshuffle that resulted in the change of minister.

Kubayi said the department is engaging its IPP office and wants to act pro-actively to prevent “being in court every day”. She said she gave instructions that the process to arrive at a determination, as well as all determinations already in place, should be reviewed.

It seems the officials are still trying to find a way to regularise existing determinations.

Kubayi said a compliant process for future determinations will be developed together with Nersa.

Moneyweb earlier reported that the projects represent foreign investment totalling about R50 billion and that Eskom has already delayed the process for more than a year. South African Renewable Energy Council chair Brenda Martin earlier told Moneyweb investors are considering their options and some might have to withdraw if projects are stalled any longer.

Kubayi said government remains committed to implementing its energy policy, including the procurement of 9 600MW of nuclear generation capacity. She brushed off the court’s criticism of this as being “irrational” and said the court overreached on this point and should leave policy to the executive. She also indicated that the department is prepared to defend this position in court.

She said the procurement would go ahead even before the completion of the 2016 Integrated Resource Plan that is now only expected in the first quarter of 2018.

Kubayi said Department of Energy deputy director general for nuclear energy Zizamele Smodeni Mbambo is currently engaging representatives of the US, Russia, South Korea, China and France with the aim of concluding new inter-governmental agreements before restarting nuclear procurement. This is done in consultation with the departments of International Relations and Cooperation, Justice and the State Law Advisor to ensure alignment with existing legislation.

She said these agreements will be the result of bilateral negotiations between South Africa and the respective governments and therefore each will be unique. Nevertheless, government negotiations will take place within a predetermined and standard framework to prevent a situation where an agreement goes too far like the previous one with Russia.

The court in its ruling said the agreement went further than an inter-governmental framework and almost constituted a buying agreement.

Kubayi gave a commitment to keep the public informed as the new processes are determined and timeframes are set.

Martin on Sunday told Moneyweb SAREC is to get a legal opinion on the effect of the judgement on renewable projects. She pointed out that some of the detail regarding the determinations are not the same as in the nuclear case. That includes the time Nersa spent considering its concurrence with the minister.

Brought to you by Moneyweb.