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Projects and Energy Weekly Snippets

13 April 2015

South Africa ranks in top 10 for renewable investment for 2014

The renewable energy industry saw an enormous rebound in 2014, coming in with a 17% increase after suffering declines for the previous two years. The 103 GW of generating capacity added around the world made 2014 the best year ever for newly installed capacity, according to the UNEP's 9th annual Global Trends in Renewable Energy Investments report. Aiding 2014 in achieving these results was the sharp decline in technology costs, particularly in solar.

Africa was the recipient of some of these investments as the industry saw a rapid expansion into new markets in developing countries. While South Africa, compared with some other African nations, is an old hat in the renewable sector, it did make the top 10 list of countries for investments in the renewables sector. South Africa saw $5.5 billion in investment in its renewable sector over 2014, while Kenya saw more than $1 billion in renewable investment over the same period.

Africa will continue to see its figures in renewable investment rise as a number of countries pursue sustainable energy development and a number of small off-grid projects, as well as major solar and wind projects, kick off in every corner of the continent. Egypt alone has already seen a number of agreements signed in 2015 that will bring significant investment funds into its renewable sector. The country was recently tagged in Ernst & Young’s Renewable Energy Country Attractiveness Index report with a listing of “erupts”. The country has revived its efforts to generate at least 20% of its power from renewables by 2020.

Alternative Energy Africa, 1 April 2015

Ramaphosa engages Nedlac social partners on Eskom

Deputy President Cyril Ramaphosa on 2 April engaged the National Economic Development and Labour Council (Nedlac) on Eskom matters. The meeting was the latest in a series of consultations by the Electricity War Room Inter-Ministerial Committee (IMC)‚ led by Mr Ramaphosa‚ with various sectors to develop a common understanding of the electricity supply challenge and invite comment and solutions.

The meeting received proposals from Business Unity South Africa‚ the Black Business Council‚ the Congress of South African Trade Unions, Fedusa‚ the National Council of Trade Unions and community representatives on addressing electricity challenges.

Mr Ramaphosa said: "We are seeking sustainable ways to stabilise Eskom and the national grid‚ and advance energy efficiency in our country; we want to return Eskom to optimal technical capability so that it can carry on doing what it does best. We also want to ensure that the governance processes and structures within Eskom are on a sound footing. We know that Eskom has leadership and governance challenges. We are taking steps to address these challenges."

He said the electricity challenge affected all sectors of society and needed to be addressed collectively. All constituencies committed themselves to working with the government and Eskom on a national energy efficiency campaign and efforts to restore public confidence in Eskom.

Business Day, 2 April 2015

IPSA extends power purchase agreement with Eskom

Dual-listed power plant developer Independent Power South Africa (IPSA) has, through its Newcastle Cogeneration (NewCogen) subsidiary, signed an extension of its 2011 medium-term power purchase programme with state-owned Eskom. NewCogen is contracted to generate 14.3 MW for sale to Eskom. The extension, which was valid for a year, could be extended for two subsequent periods of two years each, provided that Eskom received the necessary regulatory approvals.

"We are pleased that the power purchase agreement extension has been signed and the plant is able to continue [operating]. With this behind us, we plan to resume our expansion programme,” IPSA acting CEO Peter Earl said.

Engineering News, 7 April 2015

Renewable power: KfW grants $339 million loan to Eskom

On 8 April, German state-owned development bank KfW announced it had granted Eskom a loan of $339 million (ZAR4 billion) to assist in upgrading the national electricity grid.

With the country’s power grid under severe constraint, the loan will be used to connect renewable energy power solutions including wind and solar plants to the national grid to contribute towards achieving a reliable and secure supply of power, KfW said.

Norbert Kloppenburg, a management board member at KfW, said in a statement: “The adjustment of the energy supply is a big step for South Africa away from dependency on coal towards a more sustainable electricity generation.” KfW claims that by adding more renewable sources into the country’s national energy mix, South Africa can reduce its CO2 emissions by an estimated 5.5 million tonnes per annum.

Support and assistance from KfW comes at a critical time for the state power utility, not only has the generation and infrastructure taken a knock but former director and chairperson Zola Tsotsi stepped down following an investigation where claims were made against Tsotsi for “misconduct and dishonesty”. Following a board meeting, the relationship was dissolved amicably where Eskom said Tsotsi left on a good note, saying that the board had unity of purpose and that his decision to step down was in the interest of the company and the country and was done in order to allow the board to focus on the core issues facing the utility.

ESI Africa, 9 April 2015

Chinese solar PV supplier hopes to secure big slice of SA's rooftop market

Chinese photovoltaic (PV) module manufacturer Trina Solar, which initially entered the South African market in 2011 with a focus on the utility-scale projects emerging from the Department of Energy’s renewables programme, reports that it is increasingly turning its attention to the country’s high-potential commercial, industrial and residential rooftop solar market.

Africa sales manager Warren Pollard stated that it remains interested in the Renewable Energy Independent Power Producer Procurement Programme, having secured 50 MW during the first bid window and with other bids pending. However, the localisation demands, together with sharply falling prices, have lowered the programme’s overall attractiveness, with the scale of the opportunity not seen as sufficient on its own to justify a manufacturing investment.

For the immediate future, though, the group will turn its attention to the South African rooftop market, where it currently has modules with a combined capacity of around 10 MW deployed and where it is hoping to capture a 40% market share in the coming two years. Pollard expects the rooftop market to expand to around 50 MW in 2015, which remains modest when compared with the utility market, where the yearly deployment rate is around 300 MW.

However, should the regulatory constraints ease around feeding power into the grid from embedded generators, the uptake could accelerate, particularly as businesses and households seek to protect themselves from what could be another round of steep tariff increases.
The National Energy Regulator of South Africa is aiming to finalise new rules for small-scale solar PV generators wanting to supply electricity from their homes or businesses into the grid by the end of May.

Trina believes its ability to supply dual-glass durable modules will position it well for a market where temperatures are generally high and where there is also high humidity in certain regions. The immediate prospects are likely to be in off-grid rural electrification, as well as some commercial rooftop applications.

Engineering News, 9 April 2015

Norway's development fund to double power investments in Africa

Norway's state-owned development fund, Norfund, plans to double or even triple its investments in Sub-Saharan Africa's power sector by 2020, its managing director said on 8 April.

Norfund is developing hydropower in sub-Saharan Africa in partnership with Norway's power group Statkraft, and has teamed up with Britain's development fund CDC to invest in Globeleq Africa, a power company with an ambition to add 5 000 MW of new capacity. "We expect to double or even to triple the capital invested in Africa by 2020, depending on the projects," Kjell Roland, managing director of Norfund, told a conference in Oslo, which included energy ministers from Ghana and Zambia.

The fund, backed by the government of the oil-rich Nordic country, has invested more than two billion Norwegian crowns ($248.85 million) in Africa so far, mainly in Sub-Saharan Africa. The fund is seeking to develop power projects in partnership with private investors, like Kenya's 310 MW Lake Turkana wind power park, which will be the biggest wind park in Africa. "The project is on track to start producing power in 2016, and it should become a showcase for wind power in Africa," Mugo Kibati, a chairperson of the project company, told Reuters.

Sub-Saharan countries will need to invest $490 billion in power generation to reach 80% of electrification in 25 years, a study by McKinsey & Company showed. To bring investment into the power sector, African countries need to have cost-reflective electricity tariffs, clear regulations and a political will, said Adam Kendall, McKinsey's head of power and gas in Africa. Currently only about a third of the population have access to electricity in Sub-Saharan Africa, and in some countries, like Zambia, only 5% of rural and 26% of the urban population have electricity.

Engineering News, 9 April 2015

The above reflects a summary of certain news articles published during the preceding week. It is not an expression of opinion in respect of each matter, nor may it be considered as a disclosure of advice by any employee of Hogan Lovells.

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