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Open Letter to Energy Policy Makers in SA

17 July 2011: REFIT common Industry position on settlement and way forward:

  1. The South African Wind Energy Association (SAWEA), South African Photovoltaic Association (SAPVIA) and the Southern Africa Solar Thermal and Electricity Association (SASTELA), consisting collectively of more than 90 member companies active in the renewable energy sector, confirm their support for the Renewable Energy Feed in Tariff as announced by NERSA in 2009 and reiterate their firm belief that it constitutes the internationally proven best way to quickly build a Renewable Energy  Industry as required by the IRP 2010.
  2. We confirm our support for a periodic review of the REFIT prices in order to ensure that the returns for investors stay at the determined benchmark given changing market conditions.
  3. In accordance with the Electricity Regulation Act the Renewable Energy Industry confirms its confidence in the National Energy Regulator as the custodian of the energy sector in South Africa.
  4. The Renewable Energy Industry accepts and acknowledges the Department of Energy as led by the Minister of Energy as the policy leader and primary facilitator of execution plans on energy policy for the country.
  5. We confirm our commitment to the rapid deployment of Renewable Energy in SA as required by the National Climate Change Response Green Paper and the Integrated Resource Plan 2010 and support initiatives aimed at ensuring that other policy objectives like economic growth, job creation, local manufacturing, BBBEE and skills transfer  are facilitated in the process.
  6. We acknowledge the importance that we as South Africans collectively put forward a united front at COP17 and that we showcase to the international community what progress has been made to address climate change.
  7. We believe firmly in NERSA’s pursuance of a REFIT that is structured to be as simple as possible in order to ensure that it works in practice.
  8. We stress that the IRP requires in excess of ZAR 350 billion in investment into Renewable Energy in the next 19 years (over ZAR 18 billion a year on average) and that investor confidence should be fostered and strengthened.
  9. Should government elect to diverge from a REFIT in favour of an alternative procurement process, we would expect that there would be consultation with industry.  The importance of consultation would be to ensure that the reasons for the temporary divergence away from a REFIT were well understood, that the interim revised procurement process was workable for both government and industry and finally to confirm the process to be followed to ensure that a REFIT is ultimately implemented in South Africa (as stated in 2009).
  10. We point out that market conditions, especially exchange rates, will always fluctuate between the time that the tariff is reviewed and the time when a generation licence is issued and suggest that NERSA at the point of issuing licences again amends the tariff if changes in market conditions require this to be done.
  11. We firmly believe that such a practice will remove any doubt about whether NERSA acts within its statutory mandate when announcing a REFIT and suggest that in this manner the only possible legal obstacle to the REFIT would be removed.
  12. We caution that the final decision on the procurement process, and the way in which the procurement process is structured, may have a profound impact on the country’s ability to generate Certified Emissions Reductions (“carbon credits”) under the Kyoto Protocol and pledge our expertise in ensuring collaboratively that this does not occur.
  13. We reiterate our commitment and desire to contribute positively to the South African economy in general and the energy sector in particular, using all the resources at our disposal.
  14. We request that whatever procurement approach is followed the DoE, Treasury and NERSA provide clarity prior to the issuance of the procurement documentation on the allocations, in total and by technology, of renewable energy to be procured and licensed and in which time period. A clear commitment to purchase specific amounts of renewable energy, allocated across technologies, is a key component of providing investor predictability and is a strong signal of intent that can be demonstrated by COP17.
  15. We request that the DoE, Treasury and NERSA make public their deliberations and time-frames and engage in frank and open discussions with stakeholders to remove uncertainty and conjecture from the process. A professional process, based on sound governance procedures, is important to establish credibility of the RE procurement process. This could include the publication for consideration of such items as the material conditions of the PPA and the non-financial selection criteria in advance of any procurement process to ensure that the RE development process best meets national objectives.

Signed and endorsed by members of the respective Boards on this 15th day of July 2011:

SAWEA:                                               SAPVIA SASTELA:

M Tanton (chair)                              C Haw (chair)                     P Ndebele (Chair)

D Ayling                                                D Chown                              P Gauche’

D Chown                                              V Bellini                                Y Afrane-Okese

I MacDonald                                       M Levington                       M Goldblatt

H Ramsden                                         R Nowak                               P Leopeng

N Rolland                                             T Vibert                                 L Olivier

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