Renewables

Govt signals reduction or elimination of guarantees for REIPPPP projects

23RD FEBRUARY 2022

BY: TERENCE CREAMER

original article here

A government study is currently under way to explore alternative support for the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), the National Treasure states in its 2022 Budget Review.

“This is expected to result in a reduction or elimination of guarantee requirements for the programme, reducing the stock of contingent liabilities,” the documents adds, while stressing that contingent liability risks for independent power producers (IPPs) represent a low risk to the fiscus.

After signing additional projects in 2021, government has committed to procure up to R208.5-billion in renewable energy under the REIPPPPP.

Electricity produced by REIPPPP projects is purchased by Eskom, which is the designated single buyer, after government has entered into power purchase agreements with the IPPs.

The purchases are funded through a revenue allocation in the Eskom tariff, which is determined by the National Energy Regulator of South Africa.

The Budget Review states that a further 6 783 MW, with an associated investment of at least R128-billion, is expected to be procured under the REIPPPP over the three-year expenditure period.

In addition, the National Treasury notes that Risk Mitigation Independent Power Producer Procurement Programme projects that are ready to proceed can generate up to 800 MW.

“The value of signed projects, which represents government’s exposure, is expected to amount to R177-billion by 31 March 2022.

“Exposure is expected to decrease to R156.6-billion in 2022/23, R137.8-billion in 2023/24 and R120.8-billion in 2024/25,” the National Treasury states.

It adds that a government study is exploring alternative support for the REIPPPP, but does not provide details of the possible alternatives. 

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