S.Africa cuts proposed green energy subsidies

Wed Mar 23, 2011 6:25pm GMT
 

JOHANNESBURG (Reuters) - South Africa cut proposed subsidies for renewable energy after it revised its estimates for debt and inflation, a document showed on Wednesday, a move likely to hurt much-anticipated investment in green energy.

The national energy regulator in March 2009 unveiled attractive feed-in-tariffs meant to stimulate large-scale investments, but the country has yet to sign a deal with one of the independent producers already putting money into projects.

Africa's biggest economy is struggling to meet fast rising demand for power, and state-owned utility Eskom said supply would remain tight until 2015, and especially over the next two years, until its two new power plants come on stream.

Private producers and industry have long said they could supply thousands of much-needed megawatts -- either through greenfield projects or via cogeneration at their plants -- but have been blocked by a lack of power purchase deals.

The industry welcomed the initial announcement of the tariffs, which set out the price per unit of electricity to be paid for renewable energy and which they said covered the cost of power generation and allowed for a reasonable profit.

A review paper published this week showed that the regulator had revised the subsidies for the various types of energy sources downwards by between 7 and 40 percent, a move likely to anger investors and even delay construction of plants.

"The renewable energy feed-in tariffs (REFITs) approved in 2009 are reviewed as the financial and economic parameters used in the tariff determination of 2009 have since changed," the regulator said in the document.

South Africa is increasingly looking towards renewable energy sources to help plug a chronic power shortage and decrease its dependence on the coal-fired power stations that provide most of its electricity.

The regulator said it would hold public hearings on the revised tariffs on May 5, to be approved by May 26.

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