Cheap South African solar projects face cost challenge to close
Solar projects in South Africa’s latest renewable power procurement round may have difficulty reaching financial close due to issues including rising supply chain costs, according to people familiar with the details.
Some of the bids are experiencing trouble ahead of a deadline to complete financing arrangements, according to the people who asked not to be identified because the information is not public. South Africa’s Department of Mineral Resources and Energy (DMRE) expects the projects to close in April.
Supply chain issues have emerged for the photovoltaic plants as shipping costs surge, according to one of the people. As an example, freight costs out of China increased 476% and polysilicon prices climbed 365% during the period between January 2020 and November 2021, according to a BloombergNEF report.
Mainstream Renewable Power, backed by billionaire Kjell Inge Rokke’s Aker ASA, is developing 450 MW of the solar projects picked last year in the fifth round of South Africa’s auctions for clean power from private developers. Their six projects were the cheapest at R374.79/MWh.
“We haven’t had any formal submission from preferred bidders over those concerns,” a DMRE spokesman said. “Our intention is for the fifth-round projects to reach financial close as planned.”
Mainstream didn’t immediately respond to emails seeking comment.
Any delay in the projects would mean an additional lag in South Africa’s effort to add generation capacity to a grid that currently fails to meet demand that resulted in record power cuts last year. Plans to expand renewable auctions and bring more power plants online have fallen behind schedule.
In the fifth round, 1 000 MW of solar projects with a weighted average price of R429/MWh were chosen, along with 1 600 MW of onshore wind projects at R495/MWh.
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