Engineering News

The Department of Mineral Resources and Energy (DMRE) has moved to clarify a statement made by Minister Gwede Mantashe that a Bid Window Five (BW5) project under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) had reached financial close earlier this week.

Mantashe made the statement in response to a question posed during a briefing held to provide an update on the implementation of the Economic Reconstruction and Recovery Plan, which includes energy security as a priority intervention.

In response to an Engineering News enquiry regarding the identity of the project in question, the DMRE made the following statement:

“The Minister was referring to confirmation received from the first cohort of projects under BW5 in relation to signing the project agreements by the end of the month.”

“The BW5 projects are currently preparing for legal close, to be followed by commercial and ultimately financial close.”

In October last year, Mantashe announced the names of the 25 wind and solar projects that emerged as preferred bidders following BW5; the first bidding round to be held following a seven-year disruption to the REIPPPP after Eskom refused to enter into contracts to buy electricity from projects procured in 2014.

At the time, there was an expectation that the projects would reach financial close by the end of April at the latest.

Progress was hindered, however, by slow delivery of grid connection Budget Quotes from Eskom, as well as difficulties solar projects had in meeting the local-content stipulation placed on photovoltaic (PV) panels.

Initially, all PV panels were required to have 15% local content. a stipulation that was later relaxed so that only 35% of PV panels procured needed a 15% local content, while 65% of panels procured may be fully imported.

The viability of the projects, which were bid at an average tariff of 47.3c/kWh, was also rocked by component and input inflation, which arose as a result of supply-chain disruptions associated with Covid lockdowns in China and which was further amplified following Russia’s invasion of Ukraine.

The IPP Office initially announced that the financial-close deadline had been shifted to the end of July for the first 14 BW5 projects and to the end of September for the remaining 11.

After the July deadline was missed it was confirmed that the projects had until the end of September to reach financial close.

However, DMRE’s latest statement indicates that this too is unlikely, referring only to “signing the project agreements by the end of the month”, without specific reference to financial close.

In the meantime, the IPP Office is gearing up for BW6, which has been enlarged from 2 600 MW to 4 200 MW as part of a larger plan announced in July to tackle intensifying load-shedding and close an estimated 6 000 MW supply gap.

President Cyril Ramaphosa initially announced that BW6 would be expanded to 5 200 MW.

However, the National Energy Crisis Committee reported on September 11 that the decision to proceed with a 4 200 MW round instead had been made to ensure that the procurement process was not delayed by the fact that the energy regulator still needed to concur with a Ministerial determination opening the way for the procurement of more solar PV.

On September 16, the National Energy Regulator of South Africa’s public comment period closed in relation to it providing concurrence with Ministerial determinations allowing for the procurement of an additional 18 791 MW of new electricity capacity, including 14 791 MW of new ‘Storage’, ‘PV’ and ‘Wind’.

The BW6 submission deadline, meanwhile, is now October 3, having been shifted initially to September 22 from August 11 following the announced enlargement of the round.

The National Energy Crisis Committee said government may still seek to procure the full 5 200 MW, but that BW6 would proceed with a 4 200 MW allocation so as to ensure that the round was not delayed.