South Africa proposes renewables incentive tariff including hydro

South Africa's energy regulator has issued proposed renewable energy "feed-in" tariffs intended to set guaranteed prices that national utility Eskom must pay for electricity generated by small hydro, wind, solar, and landfill gas projects.

The National Energy Regulator of South Africa (NERSA) said December 15 that other renewable energy technologies might be included in subsequent years. Its definition of qualified renewable energy, "produced by means of naturally occurring non-depletable sources of energy," includes the technologies mentioned above, plus tidal, wave, ocean current, biomass, and geothermal sources.

"Feed-in Tariffs (FIT) are, in essence, guaranteed prices for electricity supply rather than conventional consumer tariffs," NERSA's consultation paper said. "The basic economic principle underpinning FITs is the establishment of a tariff (price) that covers the cost of generation plus a �reasonable profit' to induce developers to invest."

A qualifying renewable power generator is defined as a new investment in electricity generation using hydropower of less than 10 MW, wind, landfill gas, or concentrating solar power. A qualifying plant also can include project modernization, repowering, expansion, or additional capacity at existing sites, with only the additional capacity deemed to be qualifying.

Additional capacity for a modernized subsequent hydropower plant with an installed capacity up to a maximum of 50 MW shall qualify as renewable energy if the plant is modernized subsequent to April 1, 2008, and the modernization has resulted in an increase in electrical energy of at least 15 percent.

NERSA set the highest feed-in tariffs for hydro, at 73.76 SA cents (7.6 US cents) per kilowatt-hour in 2008 declining to 71.69 SA cents (7.4 US cents) by 2013. By comparison, wind tariffs would be set at 65.48 SA cents (6.8 US cents) per kWh in 2008 declining to 57.84 SA cents (5.9 US cents) by 2013.

NERSA proposes to require Eskom to purchase power from eligible facilities for the feed-in tariff price and then spread the additional expense above its avoided cost to all ratepayers. NERSA said it had no reliable avoided cost data at the time of modeling but estimated an avoided cost of 35 SA cents (3.6 US cents) per kWh for conventional power generation.

The agency invited written public comments on the proposed tariffs by January 15, 2009, which also is the deadline to register to present at a public hearing. The hearing is scheduled February 5, 2009. NERSA anticipates regulatory approval of the feed-in tariffs by March 9, 2009.

The NERSA consultation paper may be obtained from the agency Internet site, www.nersa.org.za. Comments are to be sent to Sibusiso Zungu, National Energy Regulator of South Africa, 526 Vermeulen St., Kulawula House, Arcadia, Pretoria; or P.O. Box 40343, Arcadia 0007 Pretoria, South Africa; E-mail: refit2008@nersa.org.za.

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