Solar industry stands firm that REFIT is best way forward
June 15, 2011 – Amidst rumours that the hotly contested price-based competitive bid procurement process is about to be implemented, the South African Photovoltaic Industry Association (SAPVIA) stands firm in its view that a REFIT process is the better option for South Africa’s renewable energy industry.
While all of industry is eager for the procurement process to kick off, the critical question is which mechanism will be used to set the power purchase agreement (PPA) – a competitive bidding process or a REFIT process, and if REFIT is used, will the 2009 rates or the revised 2011 rates apply?
Dr. Chris Haw, Chairperson of SAPVIA, firmly believes that a REFIT process, if properly implemented, is the best way to create a platform for a long-term and sustainable industry that is cost-competitive.
“Feed-in-tariffs have an excellent track record for initiating rapid growth in a market for renewable energy but they need to be regulated closely to ensure that the growth does not over-burden the public or government that foots the bill for the subsidies,” states Haw.
SAPVIA encourages periodic reviews of the tariffs to ensure that they follow the trends in cost reductions for various technologies.
“We strongly encourage interaction between industry and government during this process and we have offered to share with government the results of our industry survey on costs and a financial modelling tool to help meet this objective.”
On the other hand, international experience has shown that competitive bidding processes, where the outcome is based on the lowest tariff tendered, have often resulted in under delivery, as projects could not meet returns.
“In a competitive bid, fewer companies are awarded licences and there is less opportunity for diverting revenue into local economic development and job creation activities.”
Up to now the industry has followed the only guidelines available to it, which describes a fixed price tender process where projects are evaluated on a range of criteria such as network integration ability and local economic development prospects. SAPVIA believes within its members more than R100 million has been spent by developers and investors preparing projects for the government’s program.
“If the government plans to change its method of procurement from what has been indicated up to now, we would expect an urgent and formal engagement with industry over the proposed altered procurement mechanism,” says Haw