Bidding for renewables finally opens as power ship-heavy ‘emergency’ projects are unveiled
Mineral Resources and Energy Minister Gwede Mantashe released the names of the eight preferred bidders – including three power ship projects – selected as part of government’s 2 000-MW ‘emergency’ procurement programme and also launched the much-anticipated fifth bid window (BW5) for the procurement of new wind and solar.
However, he resisted growing calls for a raising of the license-exemption threshold for distributed projects at mines, smelters, factories and farms from 1 MW to 50 MW, indicating instead that the cap would be increased to only 10 MW. This despite arguments that a liberalization of South Africa’s convoluted licensing regime was the cheapest and quickest way to unlock at least 5 000 MW of new capacity within five years.
At the briefing in Pretoria, hosted primarily to announce the eight bidders selected as part of the 2 000-MW Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), Mantashe unveiled the following preferred projects:
Three other “eligible bids”, with a combined capacity of 150 MW, could still be awarded under the RMIPPPP at a later stage, subject to a value-for-money re-assessment.
The exact capacity of each project, along with the tariffs bid, were not immediately provided, with the Minister indicating only that their combined capacity was 1 845 MW and that the tariffs bid ranged from R1 468/MWh to R1 885/MWh.
The projects would have a combined investment value of R45-billion.
IPP Office CEO Bernard Magoro reported that the three power ships had a combined capacity of 1 220 MW and would generate electricity using liquefied natural gas (LNG).
Two projects, with a combined capacity of 225 MW were hybrid solar photovoltaic (PV) and battery storage facilities, while two others, with a combined capacity of 203 MW, were hybrid solar PV, wind and battery storage plants. The final 197-MW project was a hybrid LNG and solar PV plant.
The dominance of the power ships in the group of preferred bidders was no surprise, with many commentators having argued that the design of the RMIPPPP was heavily skewed in their favour.
All of the independent power producer (IPP) projects would receive 20-year power purchase agreements (PPAs), including the power ships, even though such vessels were typically meant to be used as stop-gap emergency solutions.
The projects were expected to reach financial close by no later than the end of July and be connected to the grid from August 2022.
Mantashe said the projects would include average local content of 50% during construction, South African entity participation of 51% and black ownership of 41%.
RENEWABLES BID WINDOW OPENS
The bid documentation for BW5 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), meanwhile, was released at 12:00 on March 19 and would seek bids for 1 600 MW of wind and 1 000 MW of solar PV.
The closing date for the bid submissions had be set as August 4, with REIPPPP BW6 to also be launched in August.
As with the RMIPPPP, Eskom would be the single buyer of the wind and solar electricity produced, again under 20-year PPAs.
Magoro confirmed that the economic development components of the bid-evaluation criteria had been adjusted for REIPPPP BW5 when compared with BW4, which was issued all the way back in 2014.
The new criteria insisted on 10% black-women ownership, greater black management control, more skills development and the establishment of a decommissioning fund. The local-content rules, meanwhile, recognised that manufacturing capacity had been lost during the long interval between REIPPPP bids, but still sought to match government's industrialisation ambitions.
The South African Wind Energy Association immediately welcomed the resumption of the REIPPPP, with CEO Ntombifuthi Ntuli saying that it "marks the rebirth of the wind energy industry, as the last bidding round took place almost seven years ago, in 2014".
“With supporting policy and smooth procurement rounds, expected to include the announcement of Bid Window 6 during the course of 2021, as reiterated by the Minister today, the renewable power sector certainly has a key role to play in re-building the country as a significant catalyst of economic growth, and investors have a big role to play in making that a reality,” Ntuli added.
The resumption of renewables bidding was in line with a Section 34 Ministerial Determination published in September last year opening the way for the procurement of 11 813 MW of new IPP capacity.
The determinations, which reflected three years of allocations contained in the Integrated Resource Plan of 2019, or IRP 2019, included: 4 800 MW of wind, 2 000 MW of solar PV, 1 500 MW of new coal, 3 000 MW of gas and 513 MW of battery storage.
“We intend to release four more requests for proposals within the next 12 months,” Mantashe said, without offering schedule specifics.
STAY IN YOUR LANE
The Minister also argued that his department was working with “the necessary speed to review the licensing threshold for increased embedded generation”.
However, he rejected the 50 MW threshold proposed, and later supported by Eskom CEO Andre de Ruyter, arguing that the license-exemption cap would be raised to 10 MW instead.
De Ruyter supported further regulatory reform on the basis of a need to close what Eskom estimated to be a 4 000 MW supply deficit, which would persist for the coming five years and make the system vulnerable to load-shedding even once the utility had improved the reliability of its fleet through its maintenance campaign.
Mantashe said “Eskom should stay in its lane", while noting the regulations already catered for self-generation projects of any size, so long as the electricity was consumed on-site and did not require wheeling through the network.
EDITED BY: Creamer Media Reporter