Renewable Energy Subsidy System
The "Renewable Energy Finance and Subsidy Office" (REFSO), which was established by the Department of Minerals and Energy, is in charge of the management of renewable energy subsidies and provides advice to developers and other stakeholders on renewable energy finance and subsidies. In order to be eligible for funding under this system, projects have to use commercially proven renewable energy technologies and must be located in South Africa. The project must have undergone a feasibility study proving that the total capital cost of the project will not be more than R 100 million. This study has to indicate the capital cost per unit of installed capacity, the planned average production levels per year, and the planned number of direct jobs that will be created. The minimum project size is 1 MW (electricity). Additionally, a potential purchaser for the energy must be identified in advance and there must be a high probability that the project will reach financial close in the next 12 months. A 25% equity participation and active involvement in the project by historically disadvantaged individuals is also required. A positive record of decision has to be obtained for the project's EIA and the project must have reached financial closure. Evidence of existing off-take agreements with customers have to be available and indications that all necessary permits and licenses have been granted. There also has to be a high probability that the project will commence within a short period after contract signature and it must comply with section 38(1)(j) of the Public Finance Management Act. Funding is also depending on the availability of subsidy funds. If there are more projects that meet the criteria than what the available funds can support, the DME will use a points system, which takes into account capital cost per unit of installed capacity, planned average production levels per year and number of direct jobs that will be created, to rank the projects. The DME will consider other factors such as location in rural areas and technology diversity if projects produce the same rating. An once-off capital subsidy per project amounts to R 250/kW capacity for electricity and equivalents for other RE technologies. The minimum project size is 1 MW or equivalent implying a subsidy amount of R 250,000 which can never exceed 20% of total capital cost of project.