During a virtual bidder's conference in preparation for Bid Window 6 (BW6) of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) on July 7, participants and the broader renewable energy industry were heartened by the bullish environment and strong indicators of rolling procurement rounds, further signalling a healthy uptake in this clean power technology, says industry body the South African Wind Energy Association (SAWEA).
In particular, the imminent release of the 513 MW storage request for proposals before October, and the announcement of another procurement round, BW7, before the end of this year, were positive.
“Our country is urgently in need of this accelerated uptake in new generation capacity, which will help stabilise the country’s energy supply, so that we can move away from our ongoing struggle with power shortages.
“The sector relies on rolling procurement to attract the necessary market investment, unlock economic benefits and support the local industrialisation of the industry across the value change,” says SAWEA CEO Niveshen Govender.
The country can expect to see larger utility-scale wind farms, as the contracted capacity range has been increased to between 50 MW and 240 MW. This is a significant increase from the 140 MW maximum project capacity that had been in place since BW1 more than a decade ago.
This change takes into account the lifting of the cap allowing private sector projects up to 100 MW to proceed without licensing, which came into effect in 2021, Govender notes.
"The bidder’s conference addressed all pressing issues raised by the wind sector. These engagements between the Independent Power Producer Office (IPPO) and industry are increasingly important to have a common understanding of new requirements added to the bidding documents.
“We encourage more and better engagement to clarify matters of concern so that we can work together to achieve more," he adds.
SAWEA confirms that the industry remains confident in its ability to build new renewable energy generation capacity, while meeting economic development objectives, and reiterates that it has no doubt that the sector will respond positively.
The association’s engagements with the Department of Mineral Resources and Energy, the Department of Trade, Industry and Competition (DTIC) and the other key sector stakeholders have strategically mapped the way forward to deliver on the just energy transition mandate, Govender says.
Further, in line with the National Development Plan, the REIPPPP continues to deliver more than clean power generation, as it is designed to stimulate investment and deliver economic and socioeconomic benefits for the country.
Hence, the around 800 participants were reminded that bidders will be required to demonstrate South African entity participation of at least 49%, at least 30% shareholding by black people in the independent power producers (IPPs). This is in addition to 25% ownership by black people, and in particular 10% ownership by black women, in construction and operations contractors.
Additionally, the BW6 local content threshold has been retained at 40%, in line with previous rounds, with designated local content, which, over and above the threshold, requires bidders to procure certain specified components locally.
Should these components be unavailable, bidders can apply for exemption, which needs to be lodged with the DTIC.
"While the wind industry has always achieved beyond the local content thresholds, reaching 47% in previous bid windows, a coordinated plan, with guiding policy and local incentives, needs to be developed to promote more local manufacturing to achieve industrialisation.
“This would be a positive development as it facilitates augmented job creation and skills development as the economy recovers from the Covid-19 pandemic and looks to accelerated economic growth," Govender pointed out.
The IPPO, under the leadership of Bernard Magoro, highlighted the risk of concentration and noted the trend in BW5 of similar participants dominating a large number of bids.
While the IPPO explained that members are restricted from participating in more than one set of “sister bids", the definitions of "members" and "sister bids" remain unclear.
What is clear is the IPPO’s attempt to increase competitiveness, reduce the potential of anti-competitive behaviour and encourage the introduction of new players, Govender says.
Meanwhile, for the first time in REIPPPP history, ancillary services to support grid stability in addition to energy provision were introduced. The performance parameters for instantaneous and regulation reserves have been unpacked for better understanding.
"IPPs will need time to understand the impact this will have on the design of the generation plant and the associated cost implications," he notes.
"Further, the wind industry continues to raise the concern on the forecasting penalty. While we understand the rationale for better and more accurate forecasting to support the grid operator to balance and manage the system, research has shown that there is limited development in forecasting solutions and weather models creating a serious need for capacity and capability improvements.
"This translates to IPPs employing the best available solution and still facing heavy penalties.
“The industry is advocating for a fair and durable compromise of applying penalties from six hours before real time, as opposed to the 12-hour requirement and compared with the international best practice of one hour for wind projects," Govender highlights.