Industry, greens applaud SAfrica's renewable tariff

JOHANNESBURG, April 2 Thu Apr 2, 2009 2:42pm BST

JOHANNESBURG, April 2 (Reuters) - South Africa's new renewable energy tariffs are a breakthrough in the country's efforts towards a more sustainable climate change and energy agenda, analysts and environmentalists said on Thursday.

The country's power regulator set renewable energy tariffs this week to boost investments in the sector and to meet South Africa's target of having 2 percent of the country's power output or 10,000 gigawatt hours (GWh) from renewables by 2013.

Analysts said the approved tariffs surpassed the expectations of even the most optimistic industry players and will be key to drive the industry forward, especially to generate power from wind.

"This is the biggest change in the electricity generation sector since utility Eskom was established in 1923," said Tristen Taylor, energy policy officer at think-tank Earthlife.

"The tariffs look fair, now it's up to the renewables industry to deliver."

Frost & Sullivan energy analyst Sipha Ndawande said renewable energy project developers had so far attracted interest from international investors, but launching of their projects was delayed by lack of adequate incentives.

"The government has taken a huge stride forward with the revised renewable energy tariffs," he said in a statement.

The tariff sets out the price per unit of electricity to be paid for renewable energy generated by private power producers.

The country will pay 1.25 rand for a killowatt hour produced from wind, 0.94 rand for the same from hydro, 0.90 rand from landfill gas and 2.10 rand for power from concentrated solar.

Taylor said the only disappointment was that micro generation projects were not included in the tariffs, but added the power regulator had promised to include them in the future.

Ndawande said it would take up to four years before the bulk of wind farms will be commissioned.

"The wind power market will be driven by an increasing number of joint ventures between project developers with local knowledge and private equity investment firms, backed by the support of international wind turbine manufacturers," he said.

The new tariffs will also serve as an incentive for municipalities to become involved in power generation, he said.

South Africa, the largest emitter on the continent, depends on coal for 90 percent of its electricity needs. Moves to diversify to other energy sources have so far stalled due to a lack of policy framework and incentives for investors.

The renewables tariff has long been anticipated to stimulate large-scale investments, with other incentives mulled by the government for the future.

While only a few concentrated solar power projects are expected to be undertaken in the country due to the large capital investment and expertise required, Ndawande expects an exponential rise in the number of landfill gas projects.

"If we assume that 85 percent of the announced large scale renewable energy projects are executed in the country, electricity produced from renewable energy will overshoot (the 10,000 GWh) target quite substantially," he said. (Reporting by Agnieszka Flak; editing by James Jukwey)

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