Postponement of South Africa's renewable energy round: sweet and sour

The delay of the government's bid program for green power by seven months could mean that small developers decide to give up. On the other hand, it is a positive step to good corporate control.

So says Peter Venn, regional director of Windlab.

Windlab is a partner in the development of a wind farm of 140 MW near Bedford and Cookhouse in the Eastern Cape and is also involved at Moyeng Energy's 94.5 MW wind farm near Vredenburg on the West Coast. Both projects were appointed as preferred bidders in the second round.

On Friday it was announced that the third round's bid date of 1 October this year has been postponed to May 7 next year. According to the Department of Energy it so that the preferred bidders in the first two rounds are given enough time to reach financial approval.

The first round of projects according to the original timeline would get financial approval by June, but it has not happened yet , partly due to delays on government's side.

Venn said he understands the government's decision because it is the first time that the government has approached such a complex bid program, and government departments are involved much more than they realize. However developers spend millions monthly on their projects to get ready and any delay in the process means greater pressure on their cash flow.

The department apologized for the delay in a statement yesterday, but said it is in the best interest of the bid program. The delay is due to requests from the industry, the need for financial approval for the first two rounds to trade and to refine the amount of power generation capacity available for the remaining round.

Venn expects that the allocations to developers who fail to get financial approval in the first two rounds may be transferred to the third or subsequent rounds. So far 28 projects in the first round and 19 projects in the second round have been approved.

Lance Greyling, the DA's spokesperson on energy, said the delay dampens the incentive to renewable energy investing and comes at the expense of small businesses, consumers and job creation.

Venn says it costs millions to prepare a bid. It costs between R1 billion and R3 billion to build a wind farm, and almost all the projects have foreign investors.

Note: this story was originally published in Afrikaans and has been translated using an online translation service.

http://www.sake24.com/Ekonomie/Uitstel-van-groen-ronde-soet-en-suur-20120910