Power to the People: How South Africans will REIPPP the benefits of energy

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The future of energy in Africa and the world, is certainly a glowing, bright green – and, that’s not just according to Absa’s Head of Power, Utilities and Infrastructure, Bhavtik Vallabhjee.

In South Africa, with the rollout of a large number of renewable energy power projects… where the gas prices are… it makes for a compelling argument to actually look at gas as opposed to largely coal.

Bhavtik Vallabhjee, Head: Power, Utilities and Infrastructure, Absa Corporate and Investment Banking

In 2010, the South African government rolled-out its Renewable Energy Independent Power Producer Procurement (REIPPP) as the answer to the country’s anguish about the indebted state-owned Eskom’ continued struggle to keep the country’s lights on.

To date, there are 102 REIPPP projects closed in SA in under nine years and the program would be responsible for contributing more than 6,328MWs of clean renewable energy to the national power grid, while also making a positive impact on job creation and, the country’s socio-economic situation. There has been an investment of approximately R200 billion into the sector since the launch of REIPPP. Compare this to under 27 Independent Power Projects (IPPs) in sub-Saharan Africa prior to the launch of REIPPP in SA.

Thus, it comes as no surprise that, REIPPP has since been recognised as one of the most effective renewables competitive bidding programs in world.

We had very few number of IPPs on the continent and with the global success of the renewable energy program in South Africa, we've seen that number really grow… we've seen fantastic interest from international developers and local developers that have been developing the market.

Colin King, Principal: Resource and Project Finance, Absa Corporate and Investment Banking

But, while the renewable energy market has seen a drop in the price of gas, the coal market has started feeling the heat when it comes to financing – with major financiers putting forward stringent criteria and even pulling out funding independent coal-fired power plants.

As the gas prices are coming down, there's a big demand in South Africa and, the region to actually grow the gas market.

Colin King, Principal: Resource and Project Finance, Absa Corporate and Investment Banking

In light of recent discoveries and development in Mozambique – the ninth largest gas reserve in the world. According to Business Day, South Africa could potentially benefit from an estimated R6.9 billion in business opportunities.

If we get our act together as South Africa pretty quickly, it means we can latch onto some of that gas and as the government is actually envisaging, creating a gas market through the Gas-to-Power program. It could really go well for South Africa.

Bhavtik Vallabhjee, Head: Power, Utilities and Infrastructure, Absa Corporate and Investment Banking

The Gas-to-Power program, which is set to kick off in Eastern Cape and Northern Kwazulu-Natal, includes a distributed gas network in the country and, opens up a number of opportunities in terms of job creation and socio-economic opportunities for local communities.

They're not just bringing electricity and low-cost power to the users… they bring reliable power but also bring lots of socio-economic opportunities… they're bringing in the skills and, also creating opportunities for local communities and local skills and, development and businesses, that support the renewable energy program.

Colin King, Principal: Resource and Project Finance, Absa Corporate and Investment Banking

For more detail, watch the video below. Bhavtik Vallabhjee (Head: Power, Utilities and Infrastructure, Absa Corporate and Investment Banking) in discussion with Colin King (Principal: Resource and Project Finance, Absa Corporate and Investment Banking) about the development of South Africa’s renewable energy rescue plan and, the business opportunities that rest at the doorstep of Mozambique’s gas industry.