Eskom has landed the first blow to the South African renewable energy market.

SolarReserve-backed concentrated solar power project of 100 MW capacity will not be able to inject power into the grid thanks to a refusal by Eskom to sign a 20-year power purchase agreement with the project.

The decision not to signed the PPA spells doom for the project which represents R50 billion (US$3.8 billion) in investment.

The refusal to sign PPA comes days after Eskom openly stated that it will no longer sign PPAs with any renewable energy projects. The utility stated that there was excess renewable energy going into the grid which has also increased the cost of power.

SolarReserve had won the rights to develop the project through competitive auctions under the Renewable Energy Independent Power Producers Procurement Programme. The 100 MW project was secured at a tariff of US¢12.4/kWh. The project also has 12-hour storage facility based on molten salts.

In the past, Eskom has expressed difficulty in absorption of the rapidly increasing renewable energy capacity in the country due to transmission capacity constraints. The utility recently secured funding to strengthen power grid. The African Development Bank (AfDB) announced a $1.34 billion loan to South African utility Eskom for the expansion and strengthening of its transmission network.

The refusal to sign a PPA has also raised doubts about the future of the REIPPP programme. Last year, the Minister of Energy, Tina Joemat-Pettersson, announced that she would approach the National Energy Regulator (NERSA) to make arrangements to offer an additional 6.3 GW in future auctions.

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