The Renewable Energy Independent Power Producer Procurement programme – otherwise known as the REI4P – is a programme developed to encourage private investment to help develop the renewable energy sector within South Africa. After 4 bidding rounds and over R200 billion invested in the programme (which has added 6 323MW of renewable power to South Africa’s grid through the construction of 92 new utility-scale RE facilities) a vitally important part of the success of RE now and in the future is ownership – the extent to which the RE programme helps to create jobs, provides social upliftment, and increases opportunities for economic ownership for a wide group of South Africans.
But who owns this energy? Project 90 by 2030 recently commissioned a new study to investigate the ownership structures in the REIPPP Programme. Richard Halsey, a Policy Researcher at Project 90, was closely involved with the study and had this to say:
Q: What was the impetus for the study and what were you hoping to highlight?
Richard: This new study is a follow on to our first, entitled THE ROLE OF OWNERSHIP IN A JUST ENERGY TRANSITION. Project 90 wanted to investigate the concept of ownership of energy in more detail, so we thought it would be a good idea to take a closer look at ownership structures in the Renewable Energy Independent Power Producer Procurement programme (REI4P). The ownership of energy sources is an important aspect of a just transition so while we were hoping to find out more about ownership structures, we were also aiming to improve future rounds of bidding within the RE programme and point out what could potentially be improved.
Q: One of the focus areas of Project 90’s work is the Ownership of Energy. Why is this such an important issue?
Richard: Ownership of energy covers the ownership of energy generation facilities and associated value chains, as we4ll as control over the RE energy that is produced. South Africa’s current energy-ownership structure is centralised and corporate. Eskom, a state owned company, is the sole electricity provider with a total monopoly on electricity. Coal mines are run by big, private companies without local community ownership. This pattern of energy ownership has persisted in the country for the last 100 years.
At the same time we are dealing with high levels of poverty, unemployment and inequality and our current energy system has exacerbated these injustices in our society, because of a lack of local control and ownership of energy by communities.
It has become clear to us through these studies, that if we want to transition away from fossil fuel-driven energy (coal) towards renewable energies we need to urgently address the ownership structure of energy generation technologies and include non-corporate, community-based, socially owned structures to create jobs, prosperity and more equality.
Q: How did you go about researching ownership in the REIPPP programme?
Richard: Since 2010, 4 bidding rounds for the REIPPPP have been undertaken and more than R200bn invested into the programme. In 2019, 6323MW of renewable power is connected to South Africa’s grid and 92 new RE facilities have been constructed across the country. An equally important part of the success of RE now and in the future is ownership – the extent to which this programme creates jobs, provides social upliftment and increases opportunities for economic ownership for a wide group of South Africans.
In our study, we tracked the ownership patterns that exist in the REI4P (based on publicly available information). We looked at the percentage of foreign vs local ownership, community ownership and BEE ownership in each RE project in the programmes 4 bidding rounds.
What we found out is that across all bidding windows, there is a higher percentage of foreign ownership (55%) than local ownership (45 %) with a growing concentration of ownership by fewer international companies with every bid window. South African companies seem to find it increasingly difficult to break into the bidding rounds.
With regards to community ownership, our research shows that the targets set by the IPP Office of 5% were exceeded by the RE projects. The average percentage of a RE project owned by a community is around 12 %. Despite this positive result, concerns have been raised by both civil society and industry representatives that community ownership is largely passive – communities have no real say in the running of projects, nor in the decisions that are taken as to how money is allocated towards community development.
The same outcomes were reached for BEE ownership. The numbers look positive but researchers have found that the BEE shareholders take on mostly a passive role in the RE projects both in terms of project finance, as well as being passive investors in construction and operations companies.
Q: What is the main take home message for you from this study?
Richard: The research was entirely based on publicly available information which was sometimes hard to come by. There is a clear lack of transparency and clarity in the REI4P programme when it comes to information in the public domain that relates to local, foreign, community ownership and BEE. However, one should expect detailed ownership information from a programme of huge interest for the country even though it is largely being driven by the private sector.
One of our recommendations in the report is that the IPP Office should establish a freely available online database which provides comprehensive details for each and every REI4P project.
We also found that there is a big research gap especially on community involvement and BEE that should be closed to improve future bidding rounds. Research should be undertaken to identify REI4P projects where community members are actively involved in the running of projects and in the selection of developmental initiatives. Such examples should be used as the basis for all community ownership arrangements. Existing BEE best practices can be collected to inform future RE programmes.
Q: Who are you hoping to reach with this study?
Richard: The study is targeted at South African Civil Society Organisations (CSO’s) and research institutes interested in the just energy transition and its various aspects. We hope the study will give organisations like ours – who advocate for a truly transformative Just Energy Transition including a shift of energy ownership structures – the impetus to continue the movement forward towards our low-carbon future.
DOWNLOAD THE REPORT: OWNERSHIP IN THE REIPPP PROGRAMME
