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Patel says ‘pragmatic solution’ to be found to localisation-linked renewables delays

21ST JUNE 2022

BY: TERENCE CREAMER

original article here

Trade, Industry and Competition Minister Ebrahim Patel reports that government is working to find a “pragmatic solution” to the problem where local-content requirements contained in government’s electricity procurement programmes are delaying the construction of utility scale renewable-energy projects.

“I’ve asked the Department of Trade, Industry and Competition (DTIC) team to meet with the energy team to see how we can ensure that our localisation goals don’t retard the development of green energy, and that we find ways to speed up processes,” Patel said in response to a question posed by Engineering News on the side-lines of the Manufacturing Indaba.

The localisation requirement, particularly for solar panels, has been raised as a challenge for both the non-powership projects identified as preferred bids under the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), as well as for the preferred bidders identified following bid window five (BW5) of the Renewable Energy Independent Power Producer Procurement Programme.

Financial close for projects under both programmes has been delayed, with the BW5 projects currently scheduled to close on a staggered basis in July and September and with only three RMIPPPP projects having signed power purchase and implementation agreements with Eskom and the Department of Mineral Resources and Energy, following several delays.

A recent report by Meridian Economics on how South Africa’s load-shedding crisis could be resolved by early 2024 warns that the local-content requirements for solar photovoltaic (PV) panels have emerged as a serious impediment to the projects proceeding and it, thus, recommended that the requirement be scrapped.

The study argues, too, that delaying the projects will cause “greater economic damage and deindustrialisation downstream than the very modest benefits from PV panel localisation”.

“Given that South Africa has absolutely no competitive advantage in manufacturing PV panels, that all the raw materials must be imported and that, to be competitive, the process will have to be highly automated, there appears to be no economic rationale for imposing more load-shedding on South Africans and ‘taxing’ them to subsidise the establishment of local panel manufacturers,” the Meridian report asserts.

Patel said he continued to believe there to be a “big opportunity” in the manufacture of renewables components locally on the back of the investment government and electricity consumers had made to unlock the renewables industry.

He also reported that some industrialists had indicated to him that they could move with speed to establish local production.

“[But] in the end, this will require some pragmatic solution,” he added, without offering specifics.

“The lesson we learned from the early phase [of the renewables roll-out] is that not enough thought had been given to developing industrial capabilities in the generation of clean energy.

“And so, in the next phase, while still wanting to do it as expeditiously as possible, we are working on the localisation elements,” Patel said.

Government and stakeholders have, for some time, been developing a South African Renewable Energy Masterplan, but the social compacting process had not yet been concluded.

Patel reiterated the importance government was placing on these sector partnerships and on the green economy in pursuit of the DTIC’s three priorities of industrialisation, transformation and building a capable State.

He also reported that work was progressing on other elements of government’s green industrialisation drive, including in the areas of green hydrogen production and the local manufacture of electric vehicles.

A draft green hydrogen commercialisation strategy will be presented to Cabinet in August and the electric vehicle (EV) policy is expected by October, with discussions currently under way with the National Treasury and stakeholders following the publication last year of a draft Green Paper on EVs. 

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