Mineral Resources and Energy Minister Gwede Mantashe finally ended a destructive near seven-year disruption to the procurement of renewable energy in South Africa, when he announced the names of 25 wind and solar preferred bidders on Thursday night.
The bidders are expected to build 2 583 MW of new generating assets, and introduce these into the country’s power-stressed grid within the coming 36 months.
The projects have a combined investment value of R50-billion and the weighted average price across both wind and solar photovoltaic (PV) projects came in at an impressive 47.3c/kWh, the lowest yet to be achieved in South Africa.
The solar PV projects had a weighted average price of 42.9c/kWh, while the wind projects came in at a weighted average price of 49.5c/kWh.
Some projects with tariffs well below the overall weighted average were not selected, however, owing to there being no grid capacity to accommodate them, with the Northern Cape and Western Cape grids said to have been “saturated”.
The projects, which are expected to reach financial close within six months, were procured under bid window five (BW5) of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which was officially launched in April.
By the bid-submission closing date of August 16, 63 solar PV bids and 39 onshore wind projects were submitted, with a combined capacity of 9 644 MW.
This represented a significant over-subscription relative to the 1 000 MW allocation for solar PV and the 1 600 MW allocation for onshore wind under BW5.
Some commentators suggested that the high level of over-subscription was an opportunity for government to procure more than the 2 600 MW allocated to BW5, to help ease the country’s supply constraints and to lock-in prices bid ahead of supply-chain pressures that had since placed upward pressure on key components.
However, Independent Power Producer (IPP) Office CEO Bernard Magoro said that the procurement was always bound by the allocation outlined in the bid documentation and no consideration was, thus, given to procuring above that allocation.
“The documents were very specific,” Magoro said, noting that government limited itself to the 25 projects as adding even one more would have resulted in the 2 600 MW threshold being breached.
Mantashe added that government looked forward to more competition and reduced prices in BW6, when another 1 600 MW of onshore wind and 1 000 MW of solar PV would be sought.
The following projects were named as preferred bidders:
- Coleskop Wind Energy Facility;
- San Kraal Wind Energy Facility;
- Phezukomoya Wind Energy Facility;
- Brandvalley Wind Farm;
- Rietkloof Wind Farm;
- Wolf Wind Farm;
- Beaufort West Wind Facility;
- Trakas Wind Facility;
- Sutherland Wind Facility;
- Rietrug Wind Facility;
- Waaihoek Wind Facility;
- Dwarsrug Wind Facility;
- Grootfontein PV 1;
- Grootfontein PV 2;
- Grootfontein PV 3;
- Grootspruit Solar PV Project;
- Graspan Solar PV Project;
- Sannaspos Solar PV Project;
- Du Plessis Dam Solar PV 1;
- Kentani Solar Facility;
- Klipfontein Solar Facility;
- Klipfontein 2 Solar Facility;
- Leliehoek Solar Facility;
- Braklaagte Solar Facility; and
- Sonoblomo Solar Facility.
An analysis shows that six of the solar PV projects will be developed by Mainstream, three apiece by Scatec and Engie and one by Mulilo.
Likewise, Mainstream was a big wind winner, securing six projects, with EDF and Red Rocket receiving three wind projects each.
“A noticeable development is that we have preferred bidder projects in provinces not in previous renewable-energy bid windows,” Mantashe said, highlighting that eight of the projects are located in the Free State and one in KwaZulu-Natal.
The other projects are split between the Northern Cape (seven), the Western Cape (seven) and the Eastern Cape (two).
LONG WAIT & MORE DELAYS
The 25 projects are also the first to be procured under the REIPPPP framework since 2014, when 27 IPP projects were last formally procured.
Those developments did not reach financial close until 2018, however, after Eskom’s then leadership refused to sign the required power purchase agreements (PPAs) on the basis of a claim that the utility had returned to a surplus operating position.
Eskom, which remains the single buyer of the electricity procured under the REIPPPP, currently estimates the supply deficit to be between 4 000 MW and 6 000 MW.
The utility’s current leadership has, thus, called for new capacity to be added urgently to reduce the risk of power cuts and to create time and space for the maintenance of its increasingly unreliable coal fleet.
Government’s most recent previous attempt to procure capacity through an emergency procurement process, known as the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), has run into legal and environmental snags.
Amid calls for the entire scheme to be abandoned, the deadline for financial close on the 11 RMIPPPP projects, including three controversial power ships, has instead been shifted twice. Initially from the end of July to the end of September and, more recently, to the end of January next year.
In the meantime, the energy availability factor from Eskom’s coal fleet has slumped to below 65%, well short of the utility’s 70% target and even significantly below the 67.9% reported for the same period to the end of September 2020.
Mantashe, therefore, made the IPP announcement against the bleak backdrop of ongoing load-shedding, which has not only disrupted businesses, schools, traffic flows and households, but has also triggered widespread anger among potential voters ahead of municipal elections on November 1.
The latest round of load-shedding has made 2021 the worst year yet for rotational power cuts, with yet-to-be-verified figures pointing to 924 hours of load-shedding by October 27; up from the 859 hours recorded for the whole of 2020.
The BW5 projects have themselves been somewhat delayed relative to the initial timelines announced.
A target date of September had been set for the launch of BW6, but that failed to materialise after the evaluation of BW5 took longer than expected.
Mantashe announced that BW6 would now be launched only in January.
He also indicated that BW7, which was initially proposed for January, would be launched before the end of 2022.
The Minister also indicated that the IRP 2019, which is widely acknowledged to be out of date, was being prepared for "revision" and that proposals would be sought from stakeholders.