The Department of Energy (DoE) indicated on Wednesday that it would canvass the appetite of independent power producers (IPPs) to develop, finance, construct and operate three new Northern Cape solar parks, of between 400 MW and 700 MW in size, in partnership with State-owned companies (SoCs).
In a newspaper advert, the DoE indicated that an expression of interest (EoI) would be released on May 16 to determine private sector interest in being appointed as strategic partners for the projects.
The responses, which would need to be returned by June 20, would be used to inform procurement documentation, which would be “released in due course”. A similar procurement model was also envisaged for the development of a 600 MW gas-fired power plant, which was the subject of a separate EoI process.
The procurement process would be facilitated through a Ministerial determination for 1 500 MW of new solar capacity, which would be published by Energy Minister Tina Joemat-Pettersson.
Joemat-Pettersson, who confirmed the initiative in her Budget Vote address, said the parks would be developed in a clustered fashion, sharing common infrastructure and services such as access to land, water supply, feeder lines to the electricity transmission system, roads and support industries.
The Northern Cape, she argued, could become one of the world’s largest solar energy hubs. The province boasts the highest solar radiation intensity in the country, with 51 of the 58 solar projects procured under South Africa’s Renewable Energy Independent Power Producer Procurement Programme located within its boundaries.
The solar parks initiative would also open the way for direct SoC participation in the roll-out of renewable energy; a process that had hitherto been dominated by IPPs.
In fact, that advert stated that ownership of the sites, which would be identified by the government, would remain with the State and that the relevant government entity would enter into lease arrangements with the IPPs.
In other words, the solar parks would be developed and implemented by IPPs as majority strategic equity or development partners in partnership with one or more SoCs – most likely Eskom and/or Central Energy Fund associates.
“We have directed further that the IPP Office should in its structuring of the proposed projects or programmes ensure the involvement of one or more SoCs, taking into account the constrained economic and fiscal environment of the country. The intention remains the transfer of skills and the strengthening of balance sheets of the participating SoC’s, whilst leveraging private sector experience and financial strength through the participation of strategic equity partners,” the Minister outlined.
The greater involvement of SoCs in the deployment of renewables could prove contentious, but could also ensure greater alignment between project development and grid access, which had emerged as a key constraint, particularly in the Northern Cape.
The World Bank Group’s Multilateral Investment Guarantee Agency recently extended €698.9-million in guarantees to Eskom to support transmission infrastructure investments, while the New Development Bank (formed by the Brazil, Russia, India, China and South Africa bloc) had also extended $180-million to the utility to support South Africa’s renewables programme.
“Since 2010, significant development work has taken place including improvements to the grid infrastructure around the Upington transmission station, which has been augmented to enable the integration of the solar park. The area has been included in one of the newly promulgated Renewable Energy Development Zones,” Joemat-Pettersson said.
The DoE expected an increase in scale of demand for goods and services during construction and operations and indicated in the advert that it would, therefore, also be seeking to promote the establishment of solar technology manufacturing at one or more appropriate sites within the Northern Cape.
This was also in line with the latest Industrial Policy Action Plan, or Ipap 2016, which indicated that the scale and consistency of South Africa’s renewables demand would be a key driver of investment.
However, Ipap 2016 also indicated that the method of reporting on localisation in the sector would need to be revised and simplified, while including a “minimum threshold” for components and services that could be sourced domestically.
Envisaged is the inclusion of localisation incentives, including the possibility of awarding additional points to bidders that support new subsectors in the renewables value chain.