What are the Renewable Energy Development Zones all about and which potential benefits do they offer to investors?

Overview

On 17 February 2016, the Cabinet of the Republic of South Africa (Cabinet) approved the gazetting of Renewable Energy Development Zones (REDZs).

REDZs refer to geographical areas where wind and solar PV development can occur in concentrated zones, which will lead to:

  • a reduction of negative environmental consequences;
  • alignment of authorisation and approval processes;
  • attractive incentives; and
  • focused expansion of the South African electricity grid.

Cabinet further stated that the REDZs will, among others, accelerate infrastructure development and contribute in creating a “predictable regulatory framework that reduces bureaucracy related to the cost of compliance”.

The Department of Environmental Affairs’ media statement issued in respect of
the approved gazetting of the REDZs provided that 8 REDZs and 5 Power Corridors have been identified. The REDZs are located in Overberg (Western Cape), Komsberg (Western Cape), Cookhouse (Eastern Cape), Stormberg (Eastern Cape), Kimberley (Free State/Northern Cape), Vryburg (North West), Upington (Northern Cape) and Springbok (Northern Cape).

The 5 Power Corridors are planned as follows: The central corridor runs for the first time from the south of the country to the north.  Two corridors run along the east and west coasts, while the fourth and fifth include interconnections with Botswana, Namibia and Zimbabwe to accommodate current and forecasted imports and exports of electricity. Eskom estimates that the thousands of kilometres of transmission lines and infrastructure needed to create these corridors of power will take eight years to construct and cost approximately R213bn.

The REDZs and Power Corridors support 2 of the 18 Strategic Integrated Projects (SIPs), which were identified in the Infrastructure Development Plan which is aimed at promoting catalytic infrastructure development to stimulate economic growth and job creation.

Investor benefits

The gazetting of these areas means that projects within these areas will now only be subject to a Basic Assessment and not a full Environmental Impact Assessment (EIA) process. This change will accelerate the assessment process and accordingly save costs, as scoping level pre-assessments would have been undertaken. As such an application for an Environmental Authorisation should be completed in 147 days, instead of 300 days.

According to the media statement by government “these Renewable Energy Development Zones and Power Corridors are geographical areas where wind and solar Photovoltaic technologies can be incentivised and where ‘deep’ grid expansion can be directed and where regulatory processes will be streamlined”. Currently, one of the greatest challenges of the South African renewable energy development are constraints on grid infrastructure, and the resulting timelines for and costs of grid expansion.

The REDZs are anticipated to aid the future bidding rounds of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) in that regard.

Sources and further reading

The government’s media release: https://www.environment.gov.za/mediarelease/cabinet_gazetting_redz

Summary on the gazetted REDZs by Cliffe Dekker Hofmeyr (CDH): https://www.cliffedekkerhofmeyr.com/export/sites/cdh/en/news/publications/2016/projects/downloads/Projects-and-Infrastructure-Alert-25-February-2016.pdf

Summary on Eskom’s transmission development plans by Norton Rose Fulbright: http://www.insideafricalaw.com/blog/corridors-of-power-eskom-s-african-transmission-development-plans 

Further information on the Strategic Environmental Assessments (SEA) in the context of the REDZs: https://redzs.csir.co.za

Technical information on the selected REDZs: http://www.ee.co.za/wp-content/uploads/2015/06/Energize-RE-Vol-3-june15-p15-17.pdf

Map of the planned Power Corridors by Eskom: http://www.eskom.co.za/Whatweredoing/GCCAReport/Documents/GCCA2022SpatialMap.pdf re