“Urgently waive location rules for a cheaper energy supply”

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RMB CEO James Formby believes the cost of wind and solar power generation is increased by local material content rules and should be removed. Import tariffs, such as those on imported steel, make renewable energy even more expensive.

In a statement on Tuesday, he said steel tariffs, an important component of renewable energy projects, should be scrapped to help reduce the cost of solar and wind installations.

“It would be better to let the market decide where it sources materials for green energy projects rather than the government trying to prescribe the details of local manufacturing of key components,” Formby said.

“The more local inputs are needed, the higher the cost of energy production, which means consumers pay more for energy. Given the long-term nature of these contracts, these costs are embedded for many years. »

He said the components are generally cheaper when imported and can be 20% to 50% cheaper than parts made in SA, due to the scale of production and that making energy components renewable energy is largely automated, so fewer direct local jobs are created than one might think.

“South Africa urgently needs a megawatts first policy. The country faces the worst-case scenario of 100 days of power cuts this winter, according to Eskom’s recent statement.

Read: Shedding crisis as Eskom outages reach record highs

To address the severe generation shortfall that is expected to grow as old coal plans are retired, he said the goal of energy deregulation should be to get as much energy to the grid as quickly as possible. and that a reliable and cost-effective energy supply is the best way to build the economy and resilient local industries.

Micromanagement

According to energy analyst Chris Yelland, the problem remains with the government’s attempt to micromanage renewable energy projects when it “does not understand how local companies make manufacturing decisions”.

“I believe in locating where there is a competitive advantage. Localization shouldn’t be project driven, it should be market driven. »

Yelland says the government is “out of touch” and slowing down the delivery of energy projects by creating “senseless location edicts, which only create [fewer] jobs because local manufacturers employ few people. This ultimately affects the economy.

Reiterating the sentiments of Eskom CEO Andre de Ruyter,” Yelland said: “We need to cut red tape because this is an economic emergency. Unrealistic location goals only serve as stumbling blocks.

According to the Minister of Mineral Resources and Energy, Gwede Mantashe, the 25 renewable energy projects in the fifth tender window are expected to create a total of 13,903 years of employment. “Of these, 72% of the jobs will be for South African citizens – a total of 10,048 SA jobs, including 5,450 years of employment during the construction period and 4,598 during the operation period.”

Although encouraged by the deep progress of energy deregulation in South Africa over the past year, Formby says he hopes for further progress, particularly around access to local electricity distribution networks to connect private producers and consumers.

Read: Companies can generate up to 100MW of electricity – Ramaphosa

Nondumiso Lehutso is an intern at Moneyweb

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