Cape Town // A Saudi Arabian energy company’s pioneering molten salt solar plant in South Africa is under threat from the state electricity utility unhappy with the cost of renewables.
Riyadh’s Acwa Power together with the US company SolarReserve is developing the Redstone project, a molten salt central receiver in the Northern Cape province of South Africa. This is the first in the continent of a new generation of solar plants that are garnering interest around the world.
The technology uses a tower containing salt that is then heated by mirrors reflecting sunlight in a process known as concentrated solar power (CSP). As the salt heats, it is used to boil water which then turns a steam turbine, thereby generating electricity.
The novelty of using salt as storage is that it stays hot long after the sun is down, up to 12 hours in the Redstone case. Unlike photovoltaic solar, passing clouds have little effect on it. Redstone incorporates 1.2 gigawatt hours of energy storage, which enables it to produce during peak periods.
Owing to its ability to generate electricity when the sun is down or the array is under cloud cover, Masdar Institute scientists in Abu Dhabi are also looking at developing energy storage for the solar industry, The National has reported.
The Redstone project was slated for completion by 2018, and the South African government has already approved it. One of the last steps before construction was the signing of a purchase agreement with the state energy corporation Eskom.
Media reports say Eskom had twice declined to sign the agreement during a meeting with Acwa representatives in late August, a claim which the utility refutes. “Contrary to some media reports, Eskom has not decided to put on hold any renewable energy contracts,” Eskom spokesman Khulu Phasiwe told The National.
“In fact we have signed power purchase agreements with all successful bidders and we’re committed to signing all the remaining contracts under the current bid window 4.5 of the department of energy [DoE],”said Mr Phasiwe.
However, he did say that the utility has submitted a written request to the DoE asking for clarity or dialogue regarding the next contracting phase of independent power producers (IPPs) beyond the current window. “This does not mean that a decision has been taken to abandon the IPPs,” he said. The DoE could not be reached for comment.
That has not stopped the Eskom chief executive Brian Molefe from saying on a number of occasions that the utility is unhappy with contracts that compelled it to buy electricity from solar and wind providers, even when extra electricity was not needed.
Eskom is especially unhappy with the guaranteed price it paid to providers, while limited by law in what it could charge consumers for electricity. “We are also concerned about the prices we need to pay for some of these projects,” Mr Phasiwe says. “Some of them sell electricity to Eskom for 5,000 rand [Dh1,277] per megawatt hour [MWh], and yet we are expected to sell the same electricity at 800 rand per MWh. That is not sustainable.”
The electricity price is set by an independent body, the National Energy Regulator of South Africa (Nersa), which has consistently rejected Eskom’s appeal for price hikes of up to 25 per cent. Nersa spokesman Charles Hlebela says the regulator had not been approached about increasing tariffs.
According to the utility, the cost of the project, including a 20-year supply arrangement, had risen to 62 billion rand. “For Eskom to commit to 62bn for something that we don’t need? In any other company that would be called a wasteful expenditure.” Mr Phasiwe says.
Yet a standard power purchase agreement for a solar project, particularly with a public utility, includes payment for all electricity generated, not just what is used at specific times. This is what makes such projects bankable.
The utility faces a funding crisis with a looming 28bn rand gap at a time when bond holders are shying away from its debt issue. Last month Futuregrowth Asset Management, South Africa’s biggest specialist fixed-income manager, said it would no longer offer loans or roll over existing debt for state companies including Eskom, citing questions over corporate governance.
In the meantime, those companies that are still waiting for final contracts say they are in a bind.
“The delays make planning very difficult for our members and we are concerned that this may result in projects being abandoned,” says the South African Photovoltaic Industry Association (Sapvia). Up to 49 projects are affected and many have already spent money securing land and deploying technical experts, according to the association.
“Projects in preferred bidder status have spent up to 15 million rand on securing land, legal fees, bidding and design. Abandoning a project means this money is wasted and thousands of jobs may never materialise,” Sapvia warns.
While both Acwa and SolarReserve say they are not in a position to comment on the Redstone negotiations at this time, SolarReserve says it is a “long-term player in South Africa so we will be patient”.