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1 000 MW gas-to-power cap placed on Richards Bay for first gas procurement round

TNPA recently selected a preferred bidder for a 25-year LNG terminal concession in the Port of Richards Bay's South Dunes precinct

TNPA recently selected a preferred bidder for a 25-year LNG terminal concession in the Port of Richards Bay's South Dunes precinct

18th January 2024

By: Terence Creamer

Creamer Media Editor

     

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While ‘location agnostic’, South Africa’s inaugural 2 000 MW gas-to-power (GtP) procurement round is limiting the development of facilities in the City of uMhlathuze, where KwaZulu-Natal’s deep-water Port of Richards Bay has been earmarked as a future gas hub, to 1 000 MW – a threshold that will be breached only if the remaining allocation it not taken up elsewhere in the country.

Besides this restriction, the first bid window (BW1) of the Gas Independent Power Producer Procurement Programme (GIPPPP) states that facilities can be located anywhere within the borders of South Africa and must be land based.

However, a further 1 000 MW of GtP has also been specifically reserved for deployment in the Eastern Cape’s Coega Special Economic Zone, to be procured through a two-phase process that is expected to be launched before the end of March, when a request for qualifications will be published ahead of a request for proposals.

No immediate explanation was provided for the restriction placed on the City of uMhlathuze during GIPPPP BW1. But the decision follows the granting, last year, of a Ministerial determination to Eskom for the construction of a 3 000 MW GtP facility in Richards Bay, which would also require land in close proximity to the port.

Planning is well advanced for the creation of a liquefied natural gas (LNG) import terminal at the Port of Richards Bay, where volumes will be ramped up progressively over time.

Transnet National Ports Authority (TNPA) recently selected a consortium comprising Vopak and Transnet Pipelines as the preferred bidder for a 25-year LNG terminal concession in the port’s South Dunes precinct.

The terminal is currently scheduled for commissioning between March and June 2027 and bidders within uMhlathuze not making use of the terminal would have to enter into a separate agreement with TNPA for port access for storage and regasification, as would be the case with other projects located in other ports.

IPP Office head Bernard Magoro confirmed during a virtual bidders’ conference that the GIPPPP BW1 bid submission date remained August 30 and indicated that preferred bidders would be named following a three- to four-month evaluation phase.

They would then have six months to achieve financial close and 36 months thereafter to progress their projects to commercial operation.

GREENFIELD ONLY

GIPPPP BW1 also limits bidders to the construction of greenfield facilities, ruling out the conversion of the diesel-fuelled Avon and Dedisa open-cycle gas turbines to gas.

Projects can, however, share infrastructure with existing facilities, but such infrastructure must have unconditional and irrevocable rights in the shared infrastructure.

Plants of between 300 MW and 1 000 MW in size will be considered and they will be expected to operate at a maximum load commitment of 65% and a minimum of 40%, with Eskom to dispatch the facility in line with an agreed monthly load commitment.

The facilities, which will sell electricity to Eskom for a period of 20 years, will be compensated for capacity, energy, and ancillary services.

As with the other public procurement programmes under way for renewables and battery storage, a 90/10 evaluation methodology will apply for the GIPPPP, with 90 points for price and 10 points for the economic development aspects.

While economic development components are not a qualifying criteria, compliant projects must include 49% South African entity participation.

Compliant bids also require environmental, water-use and land authorisations, and bidders also need to apply to Eskom by February 29 for grid-connection cost estimate letters.

Bidders are also required to provide detailed term sheets with their natural gas suppliers, detailing the origin of the fuel, the delivery point, as well as confirmation that the supplier has sufficient gas for the 20-year duration of the facility.

Edited by Creamer Media Reporter

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