The Government of South Africa has announced that Eskom must sign the power purchase agreements (PPAs) for 26 IPP projects by the end of October.
The energy minister opened the window for the signing of the contracts setting the tariff cap at 77 cents per KWh. Eskom refused to sign the agreements in 2016, because it said it had an over supply of electricity and the current prices were unaffordable for the company.
This price point could be challenging for some projects due to currency, inflation and equipment changes since the projects were procured. The 77c/kWh would apply to all the technologies procured during bid windows 3.5 and 4 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), including the 100 MW Redstone Solar Thermal Power project.
In August 2016, we informed that Eskom postponed the PPA that was supposed to signed for the Redstone project with a total investment of ZAR8 billion (US$691.8 million). It is unclear how the 100 MW Redstone CSP project could meet the cap, which is below any tariff bid for a CSP project domestically or internationally.
Photovoltaic and wind technology will also struggle to meet the price given turbine technology changes since 2015, the closure of local manufacturing capacity and escalation in both construction and grid-connection costs.
According to sources, the Energy ministry said that the decision to sign was binding on Eskom, which should ensure all contracts are in place for signing on 28 October 2017.The combined price of all the delayed projects represent a value of US$4.5 billion.
77c /KWhr is going to be hard to meet for non Solar PV / Wind. CSP is nowhere near that price point.
New Solar will easily meet that point, but its going to be hard to get companies to build in South Africa if the government reneges on their contracts like they just have.
Transmission costs, infrastructure, maintenance, salaries etc play a part in that, as does corruption.
The major cost of course is the one I haven't mentioned - interest on debt. Interest payments last year on debt were 14billion. Thats not debt repayment, thats _just the interest due_ on the debt (which is in the 400billion or so range).
Eskom has a mixed bag of energy provisioning - some is cheaper, some is more expensive (i.e. gas turbines run as diesel turbines).
Their major cost at the moment seems to be debt payments, which are increasing rather rapidly - they know they're in trouble.
A shrinking economy due to the stunningly inept ANC governance, coupled with overwhelming corruption, nepotism, and what looks like 20 years of no maintenance at Eskom has turned a once proud SoE into something that likely won't last 20 years longer.
South Africa will be just another failed state soon enough.