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Risk Mitigation Independent Power Producer Procurement Programme, South Africa – update

Image of solar, wind and BESS energy sources

29th July 2022

By: Sheila Barradas

Creamer Media Research Coordinator & Senior Deputy Editor

     

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Name of the Project
Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).

Location
South Africa.

Project Owner/s
Department of Mineral Resources and Energy (DMRE).

Project Description
The RMIPPPP, also known as the ‘emergency’ procurement round, is a response to the short-term electricity supply gap identified in the Integrated Resource Plan 2019.

The objective of the RMIPPPP is to not only alleviate the current electricity supply constraints but also reduce the use of diesel-based peaking electrical generators.

The programme aims to procure 2 000 MW from a range of energy sources and technologies.

The DMRE issued a request for proposal for the RMIPPPP in August 2020.

Mineral Resources and Energy Minister Gwede Mantashe released the names of the eight preferred bidders on March 18, 2021:

  • the 150 MW ACWA Power Project DAO – a hybrid facility comprising solar photovoltaic (PV) and a battery energy storage system (BESS);
  • a 450 MW Karpowership SA Coega facility – a gas-to-power plant based on imported liquefied natural gas (LNG);
  • the 450 MW Karpowership SA Richards Bay facility – a gas-to-power plant based on imported LNG;
  • a 320 MW Karpowership SA Saldanha facility – a gas-to-power plant based on imported LNG;
  • the 198 MW Mulilo Total Coega facility – a hybrid plant employing solar PV and imported LNG;
  • the 75 MW Mulilo Total hydra storage project – a hybrid facility comprising solar PV and a BESS;
  • the 128 MW Oya Energy hybrid facility – a hybrid facility comprising solar PV, wind and a BESS; and
  • the 75 MW Umoyilanga Energy – a hybrid facility comprising solar PV, wind and a BESS.

In June 2021, the DMRE announced the appointment of three additional preferred bidder projects following the completion of “value for money” negotiations with Norwegian renewables power producer Scatec.

The Scatec projects will comprise three hybrid plants with solar PV technology and BESSs, in the Northern Cape.

To meet the dispatchable profile demanded under the RMIPPPP, the three projects – Kenhardt 1, Kenhardt 2 and Kenhardt 3 – will together produce 540 MW solar and 225 MW/1 140 MWh battery storage.

Scatec has indicated that the projects are the only ones selected under the RMIPPPP that rely exclusively on renewable energy, making the three-project portfolio arguably one of the biggest single-site solar-storage hybrids in the world.

The projects will include average local content of 50% during construction, South African entity participation of 51% and black ownership of 41%.

Potential Job Creation
Not stated.

Capital Expenditure
The combined investment value of the initial eight projects is estimated at R45-billion.

Planned Start/End Date
The initial eight projects were expected to reach financial close by no later than the end of July 2021 and be connected to the grid from August 2022.

Latest Developments
Renewable-energy solutions provider Scatec is optimistic that its R16.4-billion solar-battery project in the Northern Cape will finally address long-standing questions about the so-called “intermittency” of renewables.

The project, which achieved financial close recently, will couple 540 MW of solar PV generators to lithium-ion batteries with a capacity of 225 MW/1 140 MWh to provide 150 MW of dispatchable power into South Africa’s grid under a 20-year power purchase agreement.

Renewables companies typically refer to the production profiles of their plants as variable, rather than intermittent, given that intermittency implies the type of unpredictability that is more in keeping with the current performance of Eskom’s breakdown-prone coal fleet than wind and solar PV plants whose production, while weather dependent, is more predictable. Variable renewables plants, however, are often still referred to as intermittent.

In a briefing following the financial-close announcement, Scatec sub-Saharan Africa GM Jan Fourie said he expected the project, which will begin delivering electricity into the grid in 15 months, will lay the intermittency debate to rest.

The massive facility, which will comprise three collocated projects on a 10-km-by-10-km site in the Northern Cape, will be able to dispatch electricity into the South African grid between 5:00 in the morning and 21:30 at night – a profile that is akin to so-called conventional fossil-fuel-type plants.

Nevertheless, the architecture of the RMIPPPP, under which Scatec’s Kenhardt projects are still the only ones to have progressed to financial close, has been criticised.

The request for these plants to be able to dispatch electricity from morning to night has been described as heavily weighted towards gas solutions, while failing to take account of system needs and the energy and capacity potential that such large renewables-storage projects could offer.

Fourie confirmed that there would be periods when the electricity produced from the solar plants would be curtailed – this despite the fact that South Africa’s electricity supply industry faces the constant threat of load-shedding.

“We had to over install on the solar PV side .  .  . to cater for seasonality,” Fourie explained, adding that the design was finalised after an analysis of 20-years-worth of hourly solar data. The final design is premised on meeting the dispatch requirements during a “bad year”.

There have been calls for the architecture of the programme to be adapted to ensure that South Africa is able to benefit from that surplus energy, as well as to lower the tariff, which was bid at 188c/kWh.

Scatec has been widely hailed for finding a way to meet the requirements of the programme, as well as for using projects to show what is possible using a combination of solar PV generators and battery storage.

Scatec will own 51% of the equity in the project, with black economic-empowerment company H1 Holdings owning the 49% balance.

Scatec will be the engineering, procurement and construction provider and provide operation and maintenance as well as asset-management services to the power plants.

Fourie said Scatec’s supply-chain team was alive to current market challenges and that “all the necessary contingency plans are in place to be able meet our timelines”.

He acknowledged that there had been some challenges in meeting the local-content requirements for the PV panels, but said it was sometimes underestimated just how much other local content can be secured in South Africa.

It was possible, for instance, to secure local solar trackers, cables and transformers, as well as construction services.

Meanwhile, in a statement confirming the financial close of Kenhardt 1, 2 and 3, the DMRE said the remaining eight projects under the RMIPPPP were “at varying stages of preparation to sign their agreements, and announcements for further project closures will be made in due course”. 

Key Contracts, Suppliers and Consultants
None stated.

Contact Details for Project Information
DMRE, Natie Shabangu, email natie.shabangu@dmre.gov.za; or Thandiwe Maimane, email thandiwe.maimane@dmre.gov.za.

Edited by Creamer Media Reporter

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