Renewable energy

NERSA’s Flawed Feed-In Tariff Proposal?

NERSA sent out its proposal for a feed-in tariff (REFIT) on the 15th of Dec. 2008 and placed a deadline for comment by the 15th of Jan. 2009. This is a short and awkward public process, and there are significant problems to NERSA’s proposal.

A feed-in tariff is, perhaps, the one economic instrument that could change South Africa’s energy matriz and allow citizens to play a meaningful role in the production of energy. NERSA’s proposal falls short on several key points:

Earthlife Africa’s Submission Overview

Earthlife Africa’s submission applauds NERSA for examining REFIT and affirms the principle that REFIT is both a positive development for the economy and the environment. However, this proposal has ten distinct recommendations regarding REFIT and serious concerns about the tariff methodology. The recommendations are:

• Recommendation #1: NERSA to revise the REFIT proposal to include Solar PV and mini-hydro (less than 1MW).
• Recommendation #2: The contract life be revised to 25 years. This is in line with best practices and matches the modelling assumptions of RE plant life spans.
• Recommendation #3: NERSA, in consultation with the Minister, applies a licence exemption for REFIT generators, especially for those under 1MW.
• Recommendation #4: NERSA to apply a single REFIT Standard Contract instead of four options.
• Recommendation #5: REFIT should be modelled and implemented separately from CDM and other flexible mechanisms; i.e. it should be a “stand alone” financial instrument and separated, as much as possible, from market volatility.
• Recommendation #6: NERSA examines its tariff levels and methodology in light of the public hearings and provides a revised set of tariffs. This process should include an alternative set of consultants doing a separate modelling exercise, as system of checks and balances.
• Recommendation #7: The REFIT system should be based on Gross Production and not Net Production.
• Recommendation #8: NERSA should review REFIT annually at least for the first three years.
• Recommendation #9: There should be no limit to REFIT.
• Recommendation #10: NERSA should clearly indicate that RE Generators under REFIT have priority to the grid.

There seems to be three distinct flaws to the tariff methodology. These are the avoided cost of conventional power generation, lack of accounting of externalised costs, and lack of benefit to the economy calculations. All of these three issues have a direct influence on the financial viability (and hence tariff) of REFIT.

Download the entire submission here.