South Africa’s Department of Energy (DoE), which has invited potential coal independent power producers (IPPs) to register their prospective projects by July 25, plans to use the information to gauge alignment between the location of the proposed projects and Eskom’s capacity to connect the plants to the grid.
Following an analysis of the register, the department intends issuing a formal Request for Proposals (RFP) under what is being dubbed the Coal Baseload Independent Power Producer Procurement Programme.
The long-awaited programme is likely to operate along similar lines to the much-praised Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which has had three bid windows, with a fourth bid-submission date set for August 18.
Engineering News Online understands that financial close for the third REIPPPP bid window, which is set down for July 30, will be staggered over several weeks – a departure from past practice where all projects closed simultaneously. However, there is still not much clarity on how the proposed extension to the third bid-window allocation (known as Bid Window 3.5) will be managed.
Macfarlanes partner Scott Brodsky, who is energy and projects specialist, says that, as with the REIPPPP, the coal programme could be divided into separate bid windows. Bidders, he adds, will need to specify a tariff and outline economic development commitments.
The DoE could release the coal baseload RFP documents as early as August and has indicated that, while it would prefer projects to be registered by July 25, a failure to submit would not disqualify an IPP from bidding.
Instead, the Request for Registration (RFR) is being undertaken primarily to improve the identification of possible connection constraints, as bottlenecks have emerged with increasing numbers of renewables projects being connected.
It is understood that no project will be specifically precluded from bidding where connection is either difficult or is associated with high costs. But it is likely that coal-fired projects situated near to existing connection capacity will have a better chance of being named as preferred bids.
Norton Rose Fulbright director Jackie Midlane says the release of the RFR indicates that government is, at last, gearing up to start procuring much-needed baseload capacity from IPPs. “For a long time it was ‘if’, but now I’m delighted that we’ve moved to ‘when’,” she adds.
The details of the RFP are not yet known, but the allocation is likely to based on the December 2012 Ministerial Determination, which indicated that the DoE would seek to procure 2 500 MW of baseload coal for connection to the grid by 2024. However, a single-project capacity limit of about 600 MW is likely to be stipulated.
The 2012 determination also indicated that 2 652 MW of gas power will be procured, along with 2 609 MW of imported hydropower. However, the baseload coal procurement will proceed ahead of those programmes, possibly in parallel with a cogeneration procurement programme.
Should the baseload-coal bid documents be released in August, the bid-submission date is likely to be during the first quarter of 2015.
Besides grid connection, Eskom’s financial stabilisation is also likely to be critical to ensure that the coal and cogeneration projects reach financial close, as the State-owned utility remains the single buyer of any electricity produced by IPPs. However, it is possible that the coal bidders could submit multiple-buyer projects and cross-border proposals.