SA weighs appointment of more IPPs, as green-energy portfolio expands to R150bn

4th November 2013

By: Terence Creamer

Creamer Media Editor

  

Font size: - +

Energy Minister Dikobe Ben Martins says it is premature to say for certain that further renewable-energy projects will be added to the list of 17 preferred projects, collectively valued at R44-billion, already confirmed following a highly competitive third-bidding round. However, he stressed that the matter was receiving serious consideration and that a decision would be made in the not too distant future, following and internal assessment.

Speaking at a briefing hosted to confirm the identities of the bids that prevailed during the latest bid window held under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), Martins expressed pleasure at the competitive pricing that had been tendered. However, he stressed that he did not want to raise expectations, as the costs and benefits of extending the number of appointments had not been fully analysed.

In all, 93 bids were received by the August 19 submission date and the projects submitted had a collective capacity of 6 023 MW against an allocation of only 1 473 MW. The seven onshore wind, six solar photovoltaic (PV), two concentrated solar power (CSP), as well as the landfill gas and biomass projects selected collectively represented 1 456 MW of installed capacity.

64 PROJECTS NOW APPROVED

Should all the projects reach financial close, it will raise to 64 the number of renewables projects under construction across South Africa – projects that represent a collective investment value of R150-billion, with a combined installed capacity of  3 933 MW.

In addition, the REIPPPP has attracted leading international investors, notwithstanding the prevailing negative sentiment surrounding South Africa’s position as an investment destination, owing to industrial-relations unrest and changes to the country’s investment-protection framework.

In fact, just about all of the third-window projects are associated with a foreign direct investment, with the foreign portion of the funding (both equity and debt) estimated at around R15.6-billion.

Standard Bank executive VP for power and infrastructure Alastair Campbell told Engineering News Online that the round had also been characterised by the willingness of some foreign investors to fund projects off their own balance sheets in an effort to improve their competitiveness. Such corporate-financed deals were arguably a reflection of the growing credibility of the REIPPPP, which had already won plaudits globally for being fair and transparent and for offering the certainty required by foreign and domestic investors.

Campbell added that many of the other bids were highly competitive and argued that it could well be in the Department of Energy’s (DoE) interest to tap the opportunities presented by the intensified rivalry that was apparent during the third bidding round. The DoE was intending to make a further announcement regarding its decision on possible further appointments by November 20.

COMPETITIVE PRICING

Without question, the pricing associated with the third-bid window represented another solid improvement on those achieved during the earlier two rounds.

The six successful solar PV bidders, which shared an allocation of 435 MW, were particularly aggressive with their pricing. Fully indexed prices using April 2011 as the base year showed that the average solar PV price fell from R2.75/kWh in bid-window one to 88c/kWh in the third round.

The solar PV projects named included: the 75 MW Adams solar PV 2; the 60 MW Tom Burke solar park; the 75 MW Mulilo Sonnedix Prieska PV project; the 75 MW Electra Capital facility; the 75 MW Pulida solar park; and 75 MW Mulilo Prieska PV project.

Similarly, the price of onshore wind fell from R1.14/kWh in round one to 89c/kWh in round two and to only 66c/kWh in the latest round. A total of 787 MW was allocated across the seven wind projects, which included: the 110 MW Red Cap-Gibson Bay project; the 139 MW Longyuan Mulilo De Aar 2 North wind energy facility; the 87 MW Nojoli wind farm; the 96 MW Longyuan Mulilo De Aar Maanhaarberg project; the 138 MW Khobab wind farm; the 79 MW Noupoort Mainstream project; and the Loeriesfontein 2 wind farm.

Prices for the two 100-MW-apiece CSP projects (Xina CSP and Karoshoek) declined from R2.68/kWh in the first window to R1.46/kWh. But the latest round made it possible for CSP generators to receive a 270% premium on that base price if they were able to dispatch power during South Africa five peak-demand hours.

The 18 MW Johannesburg Landfill gas-to-electricity venture also prevailed, with a price of 83.7c/kWh, while the 16 MW Mkuze biomass project was appointed with a bid price of R1.24/kWh – all prices are fully indexed, using April 2011 as the base year.

Martins stressed that there had also been a progressive increase in the local-content levels across all of the technologies and reported that the socioeconomic spin-offs from the latest projects would be R4.4-billion. Across all 64 projects, the socioeconomic investment was estimated at R9-billion.

He added the REIPPPP had made South Africa one of the most attractive investment destinations for renewables investors globally, while government was particularly pleased by the fact that most of the projects were located outside of the ‘golden triangle’ of Johannesburg, Cape Town and Durban.

“This is important, as it decentralises development in South Africa,” he added, arguing that the REIPPPP was taking industry, job creation and skills transfer to “the most remote corners” of the country.

Edited by Creamer Media Reporter

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION