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Views from a leading IPP

How does the recent clarification from the DOE about the REIPPPP relating to the qualified go-forward in respect of pricing and timing affect your prospective projects? Please answer per technology – solar PV, concentrated solar, and wind.
The proposed price amendments by the DoE has affected our entire R4 portfolio in the same manner i.e in both our wind and our solar projects the targeted price cap of 77cents per kw/h is difficult to achieve. The impact of this cap differs based on the technology, for instance our Solar CSP project on a kw/h basis cannot be compared to the wind projects that we will be closing as the CSP has a different tariff structure that has a different price for peak periods.
The timing proposed is very tight but attainable for the purposes of securing the PPA signatures.
2. What is your current view of the outlook for the REIPPPP beyond 2020? What is at stake for the country in your view?
Our outlook for renewable energy power demand post 2020 is positive, the only uncertainty at this point is the vehicle through which this renewable energy demand will be supplied. The latest version of the IRP that is being finalised will be concluded within the 1st half of 2018 if the current timetable is observed, this plan will reveal how the energy mix post 2020 will be shaped.
The consensus is that the current surplus capacity that Eskom has will run dry post 2021 and new build energy will be required. From a cost and a timing perspective there is little argument against renewable energy being the preferred optimal energy source to meet this demand as tariff prices are projected to continue dropping.
The vehicle of REIPPP or the creation of a different platform of incorporating new build energy is the only debate at this point, new build power will be required and it will need to be supplied. There is no evidence to suggest that this new build power can be supplied more timeously, within cost and budget than through Independent Power Producers.
Energy security is the fundamental risk at hand, linked to energy security is the stability of the economy itself. South Africa cannot afford to experience another point in time where our existing power generation fleet is unable to provide the foreseen energy demand required. We know when more capacity is required, the state models and accounts for this. The discontinuation of incorporating cheaper, faster and more reliable renewable energy power through Independent Power Producers increases the risk profile of our current generation fleet being unable to meet our demand curve post 2021.
3. Have you been bidding on African projects and what is your view about the opportunity for utility scale projects in Africa?  Please address issues of risk and price within this context.
We have worked on conventional power opportunities as well as renewable energy opportunities in the rest of the African continent. Zambia and Senegal are 2 regions that I can highlight, in both these markets we have identified buying programs that are structured with a strong suite of legal, financial and regulatory documentation.
The absence of structured procurement programs introduces multiple risk layers to a project which positively correlates with increased tariffs to absorb the additional risk. In both these markets we have bid in the Scaling Solar Program which allows for lower tariff bids due to the strength of the underpin behind the PPA’s. We have also worked on bilateral bids which by sheer nature have involved longer timetables with more bespoke agreements being required and a higher risk profile of success being associated with the project.
4. In respect of embedded generation in SA – what business models has your company operated – turn key project for client or lease agreements?
We have and are exploring both turn key and electricity sales lease agreement for clients. It all depends on the bespoke needs and requirements of our takers
6. Briefly summarise the growth strategy for Pele Green Energy for the next 10 years?
PGE will continue to follow new build growth opportunities in South Africa, the rest of the African market is our 5year goal with an emerging market footprint being our targeted long-term objective (5-10yrs).
As an IPP that develops, owns and operates renewable energy projects at various stages of development, construction and operation we will always focus on ensuring that we are fully occupying the critical areas of the power plants life cycle and value chain. Our initial entry strategy was to secure a footprint through holding significant minority investments in power plants, the strategy has now evolved to holding majority equity positions in the projects that we are invested in, including extending the provision of PGE’s full management, technical and operations capabilities to the projects that we hold.
Consolidation of the market will naturally take place due to the ever increasing capital requirements, we will actively analyse the secondary market to ensure that any complimentary portfolio and or companies will be brought into the Pele Energy Group.
Pele Green Energy