Solar body urges DoE to allocate more capacity in light of competitive bids

8th November 2013

By: Terence Creamer

Creamer Media Editor

  

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The South African Photovoltaic Industry Association has urged the Department of Energy (DoE) to take up the opportunity to extend the list of preferred bidders arising from the highly competitive third bid window, arguing that the projects offer good value and could also help to consolidate gains being made in the area of green-economy manufacturing.

Chairperson Davin Chown believes there is potential to appoint further solar photovoltaic (PV) bidders collectively representing up to 500 MW of capacity, which would be over and above the six projects, representing 435 MW, selected on October 29.

Energy Minister Dikobe Ben Martins has indicated that government is giving serious consideration to adding to the list of preferred bidders across all the technology platforms, having received 93 bids by the August 19 deadline and having only appointed 17 preferred bidders. A decision is likely to be made by the end of November.

Besides the six solar PV projects named, seven onshore wind, two concentrated solar power, as well as a landfill-gas and a biomass project were appointed, collectively representing 1 456 MW and raising the number of projects approved since the start of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) to 64.

These projects – 47 of which are already at various stages of construction – represent a collective investment of R150-billion and more than 3 900 MW of installed capacity. The overall allocation to solar PV is 1 484 MW after the three bidding rounds.

Chown believes it would be opportune for the DoE to take up some of the additional allocation that has been made available for subsequent bid windows as a result of a December 2012 Ministerial determination. This determination indicated that South Africa could procure a further 3 200 MW of renewables capacity in addition to the 3 725 MW initially sanctioned.

He is supported in this view by Standard Bank executive VP for power and infrastructure Alastair Campbell, who says that many of the other bids were also highly competitive and that it could be in South Africa’s interest to make further appointments across the technology platforms.

Similarly, SunEdison South Asia and sub-Saharan Africa VP Pashupathy Gopalan has indicated that the group is still hopeful that some of its projects will be added to the list, given that none of its bids were listed among the six solar PV projects appointed. However, the New York Stock Exchange-listed company does have three projects under way, having prevailed with two in the first round and one in the second.

Chown says that, under the REIPPPP’s value-for-money criteria, adding to the list “makes sense for the country and for the industry”. This proposition was supported by the low prices bid, as well as by the fact that the portfolio of round-one and -two projects was generally being delivered on or ahead of scheduled. He is, thus, optimistic that the DoE would “make the right decision”.

The prices associated with solar PV projects fell materially during the third round, partly as a result of lower module prices globally, but also because some projects were being financed using corporate balance sheets rather than debt. 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.

But Chown stresses that all developers had “put shoulder to the wheel” and it makes sense to take immediate advantage of the factors that resulted in such competitive bids – factors such as the favourable cost-of-funding environment, as well as oversupply conditions in the PV module market, which is currently normalising.

“We are hoping that government will say: ‘you [the industry] have heeded our call for greater value for money, we are heeding your call for more megawatts.”

A DoE analysis of the remaining allocation indicates that a further 2 808 MW of renewables capacity can still be procured, of which 1 041 MW has been allocated to solar PV.

“From a solar PV perspective, there is at least another 400 MW to 500 MW that is there and ready to go,” Chown says.

Doing so will not only send the right signal to developers, but would also support those manufacturers that have been gearing up to supply local projects.

“There has been significant investment from manufacturers, which have listened to government and have established facilities to supply into the renewables programme. We need to work together with government to ensure that the hand of manufacturers is strengthened.”

Edited by Creamer Media Reporter

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