DoE gets set to launch coal, cogen procurement processes in April

25th March 2014 By: Terence Creamer - Creamer Media Editor

DoE gets set to launch coal, cogen procurement processes in April

Photo by: Duane Daws

South Africa’s Department of Energy (DoE) expects to finalise procurement documents for coal and cogeneration independent power producers (IPPs) before the end of this month and says the requests for proposals (RFPs) should be published in April, once internal governmental approvals have been secured.

In a response to questions posed by Engineering News Online, the DoE confirmed that RFPs would be based on the Ministerial Determinations published in December 2012.

Under the baseload determination, 2 500 MW had been allocated for coal-fired IPP projects, 2 652 MW for baseload or mid-merit natural gas capacity and 2 609 MW for domestic and imported hydro-electricity prospects. In addition, the DoE planned to procure 474 MW from near-term natural gas projects as outlined under the Medium-Term Risk Mitigation Plan, which also included a further 800 MW allocation for cogeneration capacity, arising from biomass, industrial waste and combined heat and power sources.

However, the DoE also revealed that the procurement process for gas IPPs would need to be guided by a Gas Utilisation Master Plan, which should be published in June 2014. For this reason any gas IPP procurement programme would only be initiated thereafter.

A dedicated website would be established for the coal and cogeneration new programmes, as was the case with the successful Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Prospective bidders would be required to register and pay the registration fee before downloading the RFP documents.

The urgency of the procurement programmes was underlined early in March, when South Africa relapsed into 14 hours of load shedding for the first time since early 2008.

The March 6 incident resulted in major business, travel and societal disruptions and reaffirmed the vulnerability of the country’s constrained power system to major unplanned cuts. The load shedding was precipitated by the loss of four units at Eskom’s Kendal power station, when wet, fine coal clogged the logistics system linking the plant to BHP Billiton’s Khutala colliery, effectively stranding the units from their fuel source.

In the aftermath of the blackouts, there were renewed calls for the introduction of additional IPP capacity, particularly IPP capacity that could be introduced relatively quickly.

The DoE acknowledged that it would be helpful to have the new IPP capacity introduced “as soon as possible”, but said it was difficult to offer precise timelines, while it was unlikely that any of the projects would reach financial close before the end of 2014.

“Bidders need sufficient time to prepare the bids before submitting to the department. Under normal circumstance, bidders need more that six months from the announcement of the preferred bidders to prepare for signing of the contracts,” the DoE outlined, adding that government and Eskom would also require time to secure the necessary approvals before entering into long term agreements.

“The RFP will outline the different timeframes relating to the baseload programme including, but not limited to, the bid submission date, announcement date of the preferred bidders, signing date and the maximum time allowed from the signature date to reach financial close.”

The procurement model to be pursued is likely to be similar to that used under the REIPPPP, but the requirements would be different, as renewables plants are different from baseload generation facilities.  The department would launch two RFPs – one for coal-fired power plants and other one for cogeneration.


Meanwhile the DoE said it would issue a statement soon, with regards to its decision on whether or not to extend the REIPPPP bid-window-three allocation for wind and solar, in light of having received several highly competitive bids.

But it remained committed to the August 18 bid submission date for bid window four, under which it still intended to procure 1 000 MW of mostly wind and solar capacity.

It was also preparing to receive bids at the end of March for a 200 MW concentrated solar power-only (CSP-only) bidding round.

The CSP-only procurement process was being pursued owing to the DoE’s view that the technology was well placed to assist in alleviating South Africa’s current electricity constraints, especially during the peak time.

The RFP provides for a higher tariff to CSP producers generating energy during peak time and the separate bid window for CSP had been designed to speed up the procurement of peaking power into the system.