The concentrated solar power (CSP) industry in South Africa has called for clarity on connection to the power grid, as well as certainty about timeframes.
“We need further clarity on timeframes and future allocation, as well as considering procurement of larger CSP portfolios to minimise cost,” consulting firm Allen & Overy partner Jason van der Poel told delegates at the CSP South Africa 2015 conference, in Cape Town, this week.
He added that Eskom had made it “patently clear” that grid connections for projects in the fourth round of the Renewable Energy Independent Power Producer Procurement Programme, would be very challenging.
The conference, which has drawn delegates from around South Africa and key foreign investors, particularly from Spain, has focused on the opportunities for the CSP industry in Southern Africa. However, it is stressed that a funding crisis at Eskom had caused uncertainty.
“It does seem that funding shortfalls at Eskom were the cause of delays in the previous round of renewables. That’s been addressed now by bailouts, loans and increased tariffs. We hope that now Eskom will be able to do the grid strengthening, although it will take time to achieve,” said Van der Poel.
Eskom was given a R23-billion bailout after President Jacob Zuma’s State of the Nation Address to Parliament in February, while the National Energy Regulator of South Africa had announced a 12.69% tariff increase for 2015/16. Van der Poel said red tape was also hampering projects, even those that were connected to the grid.
Another concern for the industry centred around local community, job creation and local content expectations. “The government is watching this. The private sector needs to get it right,” said Van der Poel, adding that there was a need for government guidance on local economic development planning.
Javier Relancio, who heads up the African solar programme for consulting firm Mott MacDonald, said lenders had certain expectations about new technologies in this rapidly growing sector. They wanted more scrutiny of suppliers. “Research and development is a key thing for CSP and we believe we have the right processes in place. We have to trust the new technologies. We have to be open to assessing the technology in detail and see that it is reliable.” The current trend is towards more products with thermal energy storage. Responding to a question from a delegate as to whether CSP was “less bankable” than solar photovoltaic (PV), Relancio said PV was seen as a lower risk for banks, owing to the higher amount of operational projects available and the lower complexity of technology. However, he said solar PV also had lower returns for bankers. On grid connection, Relancio said it would make sense for government to be more explicit in its conditions for connecting projects to the grid.
“We expect the request for proposals may place a responsibility on the bidder to liaise with Eskom to make sure the grid connection is workable before they bid, so that the Department of Energy does not take on extra liability for that,” he stated.