Cost Key Factor for South Africa Energy Projects, Minister Says

(Bloomberg) -- South Africa will study the cost of power generation from various projects and expects to announce a decision on new renewable sources by Dec. 7, according to Energy Minister David Mahlobo.

The energy department has met with lenders over the pending projects and “let them know where we stand,” Mahlobo said in an interview late Friday at an event with private energy developers. “Ultimately any solution, whether it is renewable or non-renewable, the issue of affordability is very important.”

Following power shortages since 2008 that hobbled South Africa's economy, the government attracted more than 200 billion rand ($14.6 billion) of clean-energy investment. Some of those projects were threatened by state-owned utility Eskom Holdings SOC Ltd.'s opposition to off-take deals for renewable power, which it said was expensive and not always available. The agreements have still not been completed, despite an order by President Jacob Zuma to sign them.

The government is revising its Integrated Energy Plan, which sets long-term policy and will indicate the pace and scale of changes to the generation mix for the country which currently relies on coal for more than 75 percent of its electricity. South Africans last year bought the least power in more than a decade as the economic growth slowed and demand declined. Eskom has a generation surplus as two of its newest stations are adding more units.

Gas-Fired Generation

Mahlobo, the third energy minister to serve in the position this year, said he anticipates growth for private producers in areas including gas-fired generation as Eskom's oldest plants reach the end of their lifespans. He said while coal remains the most widely used electricity source, it must be accompanied by “greater technology” to result in lower emissions. 

Price remains part of ongoing discussions with the energy department for the anticipated renewable energy projects in bid rounds known as 3.5 and 4, he said.

“We could be in a position to conclude them ultimately when the power-purchase agreements are signed,” Mahlobo said.

The Democratic Republic of Congo's planned Grand Inga dam should also be a source of power and South Africa will help to drive investment in the project, Mahlobo said. South Africa struck a deal in 2013 for 2,500 megawatts from the plant that will be expanded in phases. “Ultimately, we have to get it built,” he said.

The development of nuclear energy has been taken “one step at a time” and awaits finalization of the resource plan, to be followed by an open-tender process, Mahlobo said. He dismissed criticism that he's rushing the process.

“You can't put the procurement process under the carpet,” he said. “It will be on the table. Everyone will be able to see.”

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Rene Vollgraaff, Ben Sills

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