2023 Renewables Outlook: The year of the private PPA

By Jan Fourie, Executive Vice President, Sub Saharan Africa, Scatec

The year 2023 will be the year of the private power purchase agreement (PPA) - a culmination of events that have been in the works for a long time.

Firstly, the Eskom situation is not improving and will require much focus to get it back on track. This is likely to happen only in the medium to long term. Businesses must realise that they must be part of the solution, not just for themselves but for South Africa.

As PPAs gain momentum in 2023, we must see this change happening on all fronts, both in government and private procurement. Both avenues are necessary to keep the lights on and to deal with the Eskom power stations that will be decommissioned in the coming years.

The COVID-19 pandemic brought home just how interdependent we are and how we can be affected by the fragility of crucial industries and supply-chain networks. Whether 1MW, 100MW or 1000MW that a big corporate can bring onstream, it relaxes overall pressure on the grid and is one way in which we can limit the need for load shedding.

We also saw a change in government policy in 2022.

It became possible to provide private power at scale in South Africa. The cap of 100MW for self-generation was removed and signed into law. The removal of the cap was welcome news for the private power sector. The sector can now unleash the true potential of private power in South Africa and think large-scale when it comes to development and finance.

The City of Cape Town’s recent implementation of a feed-in tariff for all small-scale embedded generation systems has paved the way for municipalities to pay residents and businesses for excess energy generated – a significant step in the right direction.

Corporates, sponsors and lenders now need to come to terms with what it means to procure private power. They must come to terms with the different risk allocations of a government PPA with a sovereign guarantee versus a corporate off-taker with a credit rating.

We’ve seen the biggest level of alignment on a policy and political level that I can remember since I started working in the renewables space. This includes the Department of Mineral Energy and Resources, the IPP Office (Independent Power Producers), Eskom, and the Government together pulling in the right direction because of the threat we are facing as a country.

The more of this kind of stability and certainty we can have, the better for our energy prospects in future. Continuity in terms of people and policy is vital.

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