The Department of Mineral Resources and Energy (DMRE) has clarified that it is aiming to release bid documentation for the so-called fifth bid window (BW5) of South Africa’s renewable-energy procurement programme in December, following receipt of the regulator’s concurrence with a Ministerial determination that clears the way for the resumption of procurement.
The Section 34 Ministerial determination has not yet been formally published in the Government Gazette, but the DMRE indicated to Engineering News & Mining Weekly on Monday that it intended Gazetting the document “before the end of next week”, having received the National Energy Regulator of South Africa’s concurrence on September 2.
On September 11, the Political Task Team on Eskom, which is chaired by Deputy President David Mabuza, stated that the DMRE would open-up various bid-windows, including BW5, and that the “process will be completed in December 2020”.
Besides a procurement allocation of 6 800 MW for onshore wind and solar photovoltaic generators, the determination also caters for 3 000 MW of gas to power, 1 500 MW of new coal and 513 MW of energy storage. In total, the determination opens the way for the procurement of 11 813 MW.
In response to an Engineering News & Mining Weekly enquiry, the department indicated that it was targeting the release of the bid documentation “not later than the end of December 2020”.
“This is all dependent on finalisation of discussions with the buyer,” a spokesperson said, while confirming that government still envisaged Eskom playing the role of buyer.
In a statement, Eskom CEO Andre de Ruyter welcomed the determination, saying that additional generation capacity was "urgently required, and will be an important contribution towards ending load-shedding".
Eskom, De Ruyter added, was looking forward to collaborating with the DMRE and the Independent Power Producer (IPP) Office to enable an accelerated execution to bring additional capacity on to the grid in the shortest possible time.
Through the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) bid windows to date, government’s IPP Office has already overseen the procurement of 6 422 MW of renewables capacity, built by 112 IPPs at a cost of R209.7-billion.
In all previous instances, Eskom has been the buyer, with funding secured through the multiyear price determinations. There has been some debate, however, as to whether Eskom should continue to play the single-buyer role in light of its perilous financial position.
IPP OFFICE HAS CAPACITY
The DMRE also expressed confidence that the IPP Office had the capacity to oversee this procurement in parallel with the current Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), currently under way.
The RMIPPPP is the first procurement process initiated since the so-called ‘Expedited Round’ of the REIPPPP in 2014/15, which was never completed after Eskom refused to enter into new power purchase agreements.
Even the 27 projects procured in 2014 under Bid Windows 3.5 and 4 stalled for years, with the logjam eventually unblocked in 2018, when then Energy Minister Jeff Radebe oversaw the signing of the agreements for projects that have a combined capacity of 2 300 MW.
“The IPPO operations are mainly based on the use of external Technical Advisors,” the DMRE noted.
Through the RMIPPPP, government aims to procure 2 000 MW of dispatchable power to address a supply gap identified when the IRP 2019 was published in October last year.
Analysis by Eskom and the Council for Scientific and Industrial Research estimates the gap to be between 5 000 MW and 8 000 MW, however, depending largely on the performance of Eskom’s unreliable and undermaintained coal fleet.
Eskom said in a statement that, while 2 000 MW of additional capacity was a "step in the right direction", at least 3 000 MW of additional capacity was immediately required to help ease the supply constraints.
"As Eskom has often stated, enabling the emergency procurement of 5 000 MW of additional generation capacity is critical to keep the lights on and help power the rebuilding of an economy decimated by the Covid-19 pandemic. Bringing in additional generation capacity will also help take the pressure off Eskom and create space for the maintenance of its ageing power stations."
The RMIPPPP bid documentation was made available online on August 23 and a bid submission deadline has been set for November 24. Preferred bidders should be announced on December 15 and financial close for selected projects was anticipated by April 30, 2021.
Projects procured under the RMIPPPP are expected to be fully operational by no later than the end of June 2022.
There is currently some concern in the market about the technical specifications in the bid documentation, which some observers believe favour expensive fossil-fuel-based solutions.
The IPP Office has committed to hosting a bidders conference prior to the bid submission date to clarify its requirements and has indicated that the conference will be held on a “virtual teleconferencing platform”.