Feed-in tariffs announced in South Africa

Thembani Bukula,
Regulator Member for
Electricity Regulation,
Pretoria, South Africa — (METERING.COM) — April 7, 2009 – Renewable energy feed-in tariffs (REFIT) for various renewable energies were approved last week by the National Energy Regulator of South Africa (NERSA).

The tariffs per kWh announced range from ZAR0.90 (US$0.10) for landfill gas and ZAR0.94 for small hydro (less than 10 MW) to ZAR1.25 (US$0.14) for shore-based wind and ZAR2.10 (US$0.23) for concentrated solar.

Other qualifying technologies will be considered for inclusion in six months.

The NERSA also decided that initially the national utility, Eskom, would be the purchasing agency, and that the tariffs will be reviewed every year for the first five-year period of implementation and thereafter every three years, with the resulting tariffs applicable to new projects.

“The REFIT guidelines will create an enabling environment for achieving government’s 10,000 GWh renewable energy target by 2013 and sustaining growth beyond the target,” said Thembani Bukula, regulator member for Electricity Regulation in NERSA.

The four renewable technologies, wind, biomass, solar and small-scale hydro, are expected to be the primary contributors towards achieving this target.

According to NERSA the basic economic principle underpinning the feed-in tariffs is the establishment of a tariff that covers the cost of generation plus a “reasonable profit” to induce developers to invest.

NERSA also notes that the purchase obligation applies to all projects. In the REFIT’s initial stages, whilst a renewable energy industry is being established, it is expected that there may be a number of small projects introduced as industry tests the market. In addition, there is lot of interest from small developers and individuals looking at getting involved with renewable energy, creating greater awareness and economic activity in this area.

In the initial phases, however, it is not expected that applications will be made for micro generation projects (less than 1 MW) due to the costs involved. NERSA has indicated that it will make provision for such projects in the future.

Frost & Sullivan energy analyst Sipha Ndawande said the tariff announcements mark a turning point for the development of renewable energy projects in South Africa. However, the grid access rules still need to be resolved, said Ndawande, adding: “Key industry stakeholders are optimistic that these issues are likely to be resolved sooner rather than later, and clarity will be provided in the coming months.”