Wednesday, March 31, 2010

Feed-in-tariff for Southern Africa

Eskom, the largest electrical utility company in Southern Africa, is preparing to roll out the first Renewable Energy Feed-In-Tariff (REFIT) on the African continent. The REFIT will guarantee a set price for renewable energy and is a very important policy tool in securing investment in a large scale wind or solar farm.

The National Energy Regulator of South Africa (NERSA) held a public hearing in Pretoria yesterday, Tuesday March 30, 2010 to get feedback from all stakeholders in order to define the rules for the selection criteria for renewable energy projects under the REFIT program.

The province of Ontario introduced the first REFIT in North America last year and it has been an incredible success in driving forward the development of new renewable energy projects and creating new jobs and opportunities. I suspect all Southern African countries will also benefit tremendously from this new REFIT.

The small (but very developed) country of Namibia which borders on South Africa is particularly interesting because it has an excellent wind resource, is much less densely populated than South Africa but has a huge demand for new generation, mostly from new mining developments and also has a good transmission system in place operated by NamPower. NamPower currently purchases almost all power from Eskom.

At this point, Eskom has said that they will consider cross-border projects as part of the REFIT. The timing seems good to move forward with a large wind or solar project involving a joint venture between a local renewable energy developer with a site locked up in Namibia and local connections, a large wind or solar developer with access to global capital and expertise and Eskom and NamPower. There may also be scope to involve some of the large mining companies operating in Namibia. Once the REFIT is in place, it will ensure certainty in pricing for all parties involved in such a joint venture project and I look forward to seeing who is going to be the first to capitalize on this opportunity.


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