Energy Minister Tina Joemat-Pettersson’s recent unveiling of something of a road map for an upscaled and accelerated deployment of independent power producer (IPP) capacity has been widely welcomed. Besides plans to expand the hitherto successful Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), the Minister has also offered far greater visibility of South Africa’s near-term approach to IPP investment in other areas, such as coal, gas and cogeneration.

In area of renewables, serious momentum would be added through a proposed additional 6 300 MW allocation, over an above what had already been secured over the past four years. Following four competitive bidding rounds, 5 243 MW had been, or was in the process of being, procured from 79 mostly solar and wind projects, representing a collective private investment into the country’s electricity sector of R168-billion.

These procurements had been pursued in line with the Integrated Resource Plan (IRP) and facilitated by Ministerial determinations for around 7 000 MW of capacity. The Minister would now seek the concurrence of the National Energy Regulator of South Africa (Nersa) for the additional allocations, which would add much-needed certainty to the REIPPPP.

Joemat-Pettersson also indicated last month that, owing to the competitive nature of the 77 bids received during the fourth REIPPPP bid window, she would consider naming additional preferred bidders over and above the 13 selected on April 11. The 13 projects already identified were expected to reach financial close during the fourth quarter and should be operational by November 2016.

The Minister had requested the IPP Office to deliver a “firm report” on an additional allocation of megawatts from round four by month end, so that an announcement could be made by the end of May.

In addition, a ‘Request for Further Proposals’ would be released by early June for a further 1 800 MW to be procured under an accelerated programme, with bidding open to unsuccessful bidders from all previous bid windows. However, the Department of Energy’s Ompi Aphane stresses that bidding will also be open to those that had not previously made a submission under the REIPPPP.

Once those two mop-up processes were completed, the tender documentation would be redesigned ahead of a fifth bid submission phase, with the reworked request for proposals (RFP) documents expected to be ready for release in the second quarter of 2016.

Key aspects of the RFP that will be redesigned included the definition of local community, the mechanisms to ensure early, efficient and equitable benefits to the communities and the local content or industrialisation regime.

The new RFP would also take South Africa’s distribution and transmission system constraints into account – these constraints had been held up as being largely responsible for recent delays to the conclusion of bid windows three and four.

In fact, Aphane confirmed that, had the process not been tightened in recent rounds, Eskom would have run a real risk of having to contract with plants whose power could not have been evacuated. He also revealed that there had been at least one case during the REIPPPP where this risk had actually become a reality.

Joemat-Pettersson said the additional 6 300 MW determination was in line with the IRP 2010-2030 and that the allocation would “maintain the momentum of the programme, especially for future bid-submission phases”.

The Minister also said that the ‘Small Projects Programme’, which would seek to procure 50 MW from facilities ranging between 1 MW and 5 MW in size, was also under way, with 29 bids having been received totalling 139 MW. The evaluation of bids would be finalised during April.

Coal, Cogen & Gas
Significant progress was also confirmed outside of the renewables domain, with a tender for cogenerated power, for which preferred bidders would be named during the third quarter of 2015. In line with Gazetted determinations, government would be seeking to secure at least 800 MW of cogenerated capacity, but the Minister indicated that the allocation could be adjusted upwards should there be a strong response to the RFP.

She also revealed that a gas-to-power request for information (RFI) would be released during the course of this month, as a precursor to a process to procure 3 126 MW of gas capacity.

“Responses to this RFI will be used in designing the gas-to-power procurement programme. This programme is expected to stimulate a gas sector, which could contribute to the growth of the economy,” Joemat-Pettersson said, indicating that the IPP Office, which had run four successful renewable-energy bidding rounds, would oversee the process.

The IPP Office was also overseeing the ‘Coal Baseload IPP Programme’ to procure 2 500 MW from coal-fired power stations of a maximum size of 600 MW a project. The RFP was issued in December and the first coal IPP bid window will close in mid-2015, with preferred bidders to be announced before the end of the year.

The department had also been gathering information on the potential for demand reduction, load shifting and energy efficiency initiatives, having received 150 responses to an RFI by February 2.

“Twenty-seven of these responses were classified as ‘quick wins’, and 42 were identified as medium-term opportunities,” the Minister said.

“All the responses will be considered during the development of the procurement framework, including medium- to long-term initiatives related to energy efficiency and any other initiative with sustainable impact. The procurement programme is expected to be launched during the second half of 2015.”

The South African Wind Energy Association (Sawea) described Joemat-Pettersson’s announcement as “far reaching”, while the South African Photovoltaic Industry Association (Sapvia) said the announcement would “help regain the momentum” of the REIPPPP.

Sawea CEO Johan van den Berg arguing that the new allocation could mean that an additional 2 500 to 3 000 MW of wind power would be procured over the coming four years.

“This, once Gazetted, should give comfort to international investors to invest in local factories that can push the local content of wind farms to about 54%, with the upper 60’s in reach. Moreover, the money being put into local community development around wind farms will rise from the present R5-billion over the next 20 years, to at least R10-billion and perhaps much more.”

Van den Berg also added that prices for wind power in round four were understood to have fallen to an average of 62c/kWh, which is a market improvement on the prices of over R1/MW achieved during the first bid window.

“Renewable energy is coming just at the right time. There is a lot of it ready to be built immediately. Government is recog- nising this and has now communicated a vision that, given the volatility in our sector, is remarkable for its courage and perspicacity,” Van den Berg concluded.

Sapvia added that the proven ability to deliver projects on time and on budget provided the basis for its belief that the solar photovoltaic sector, in conjunction with other renewables technology, stood ready to bring additional generation capacity as part of the government’s five-point plan to address the current electricity shortages.