Bidding Delayed for South African Independent Power Projects

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Grid connection problems have caused contenders in Round Three of South Africa's Renewable Energy Independent Power Producer Procurement Program (REIPPP) to hold their bids and financial closure until March 2015.

The REIPPP had been hailed as a success in creating almost $10 billion in private investments for the sector and relieving the country's power supply problems. But Eskom (Johannesburg), South Africa's national power utility, is experiencing serious grid restraints that are hindering the development of some Round Three projects. The easier projects have been absorbed by the first wave of the program, and it has now become difficult and costly to connect some of the proposed projects.

The initial target of 3,725 megawatts (MW) of renewable generation capacity has seen 48 bidders, accounting for 2,460 MW. There even has been discussion of raising the program target a further 2,000 MW.

Contractors and developers in the independent power producers (IPPs) grouping appear to be unsurprised by the Department of Energy's request for delays, saying that they would prefer to see a resolution of technical issues, which will allow the industry to progress on a sustainable base.

As debate continues in South Africa on the preferred path to increase power generation, with nuclear, gas, coal, hydro and renewables all in the mix, there has been a call during the past few years for IPPs to be allowed to develop more of the base load power system, with Eskom's monopoly on generation and transmission being unbundled. The official response to this has been mired in politics and avoidance of priorities.

But now, the government is requesting bids from international and domestic advisers, who have the expertise to design, develop and implement programs for the procurement of energy from IPPs.

The Development Bank of Southern Africa (DBSA) (Midrand) has issued the request for proposals on behalf of the Department of Energy and the National Treasury. This move is seen as having the potential to extend the government's project procurement reach beyond renewable energy-based projects.

The request for proposals (RFP) refers to the 2012 statement by the energy minister, which outlined South Africa's intention to procure electricity generated from renewables, natural gas, coal, co-generation plants and hydropower in South Africa and the region.

Under the medium-term risk-mitigation (MTRM) plan, the government looks to procure 800 MW of cogeneration capacity from biomass, industrial waste and combined heat and power (CHP) sources, and 474 MW from natural gas.

For base load power, 2,500 MW has been allocated to coal-fired IPP projects, 2,652 MW to base-load and/or mid-merit natural gas capacity, and 2,609 MW to domestic and imported hydropower. Renewable-sourced power will increase to 6,725 MW.

The IPP tender for "Transaction Advisers, Programme Management...Project Managers/Officers and Specialist Advisers" closes on January 20, 2015. Successful bidders will be included in a panel at the DBSA for the purposes of advising on IPP procurement. Individuals and firms can bid for all, or part of, the RFP components listed in the documents, which were released December 1.

For related information, see June 4, 2014, article - South Africa's Renewable Independent Power Producer Pipeline Reaches Strong Operational Phase.

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