The IPP Office has announced a new timetable for the upscaled sixth bid window (BW6) of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) through which government will be seeking to procure a whopping 5 200 MW of new wind and solar photovoltaic (PV) capacity during a single bidding round.

Proceeding with the full allocation hinges, however, on the Department of Mineral Resources and Energy (DMRE) securing the National Energy Regulator of South Africa’s (Nersa’s) concurrence with a new Ministerial determination expanding the procurement envelope for solar PV beyond that catered for under the existing Ministerial determinations.

Mineral Resources and Energy Minister Gwede Mantashe has already indicated that he intends Gazetting a new determination under the Electricity Regulation Act to absorb the full renewables allocation included in the Integrated Resource Plan of 2019 (IRP 2019), but which is not yet included in the determinations with which Nersa has concurred.

The IRP 2019 includes 14 400 MW of wind generation to be introduced by 2030 and 6 000 MW of solar PV, but the Section 34 determination published in 2020 is for only 6 800 MW of both wind and solar PV.

IPP Office head Bernard Magoro tells Engineering News that a new determination has been submitted to the regulator to “mop up” the remaining allocations, as the solar PV allocation under the current determination has been “exhausted”.

“If it's approved on time, it will allow us to add the additional 1 000 MW of PV,” Magoro explains. If not, the IPP Office will have to decide whether to delay the bid submission date again or proceed with 4 200 MW instead of 5 200 MW.

Following President Cyril Ramaphosa’s July 25 announcement of the Energy Action Plan, which includes the enlarged BW6 allocation, the DMRE shifted the bid submission deadline from August 11 to September 22.

The IPP Office is also awaiting confirmation from Eskom, which remains the single buyer of any electricity procured under the REIPPPP, that it is able to buy the electricity arising from the enlarged bid window, with a board decision on the matter said to be pending.

Nevertheless, Magoro reports that the IPP Office is proceeding on the basis that both approvals will be secured, particularly given the prominence that the expansion of the BW6 allocation received in Ramaphosa’s announcement to tackle growth- and confidence-sapping power cuts.

The size of the bidding round is significant, with the IPP Office having procured a total of 6 323 MW since the inception for the REIPPPP in 2011, a period that admittedly includes a seven-year disruption, from 2014 to 2021, precipitated by a refusal of the previous Eskom leadership to conclude new power purchase agreements.

Eskom’s leadership at the time claimed that the utility had returned to a surplus supply position, while the current supply/demand gap is estimated to be between 4 000 MW and 6 000 MW.

Having already postponed the bid submission deadline to accommodate the larger allocation, the IPP Office has now also confirmed September 15 as the last date for compulsory bid registration, including payment of the bid registration fee.

Magoro tells Engineering News that the announcement of preferred bidders is scheduled to take place about two months after the September 22 bid submission deadline, with the IPP Office confident that its transaction advisers have the capacity to conduct their evaluations within that timeframe.

Commercial close for BW6 will follow about six months later, with the long stop date for financial close set for a month after that milestone.

The IPP projects that achieve financial close will have a maximum of 24 months thereafter to complete construction and to enter commercial operation.

Magoro is confident that there is still market appetite for BW6, despite the opportunity that had been created by the lifting of the 100 MW licence-exemption cap for distributed projects linked to mines, farms and factories, and recent BW5 delays.

DELAYED BUDGET QUOTES

He reports that efforts are also being made to ensure that the round is not as disrupted as BW5 by the slow issuance of grid connection Budget Quotes by Eskom’s Grid Access Unit.

None of the 25 BW5 projects has reached financial close to date, despite an initial end of April deadline for that milestone, which was subsequently shifted to the end of July for the first 14 projects and the end of September for the remaining 11.

Magoro reports that only three projects have progressed to a point where financial close can be said to be imminent and that some projects have not yet received final Budget Quotes from Eskom – by the end of June, 14 projects had their Budget Quotes and by the end of July the figure had risen to 20.

Some projects have also received Budget Quotes that differ materially from their initial Cost Estimate Letters from Eskom and are having to redesign their self-build grid connections and secure new environmental authorisations.

He reports that Eskom has confirmed that all the remaining BW5 Budget Quotes will be issued before the end of August and expressed confidence that projects could close within four to six weeks of receiving a Budget Quote.

“To address these delays in future, there will be an obligation, from BW6 onwards, for the preferred bidders to finalise their designs and hand them to Eskom for approval within a specific time, rather than leaving it to Eskom and the bidders to deal with on their own,” Magoro reports.

Delays relating to local content have been eased following the Department of Trade, Industry and Competition (DTIC) providing an exemption lowering the local-content threshold for solar panels from 100% to 35% for BW5.

The department has also indicated that it is willing to consider further exemptions during BW6 if the 50% threshold set currently proves too much of a constraint to projects proceeding.

“The DTIC made it clear in their communication that they will continue to monitor this space, especially now that we are increasing the capacity to be procured under BW6.”

Magoro refuses to be drawn on whether all BW5 projects will close considering significant cost changes for renewables components and services since the projects were first bid at tariffs that have been described as “aggressive” by several commentators.

The solar PV projects bid have a weighted average price of 42.9c/kWh, while the wind projects came in at a weighted average price of 49.5c/kWh.

“The request for proposals was very clear.

“There's only two adjustments that can be made and that's for foreign exchange and interest rates and we don't have any leeway to make any other adjustments,” Magoro says.