South Africa Opens Up to Independent Base Load Power Projects

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--South Africa's coal-base load independent power producer (IPP) program is, at last, achieving some clarity for the horde of would-be local and international potential project developers. The program is aimed at helping South Africa stabilize and improve its power supply through private investments.

The country's Department of Energy (DoE) says that 51% of the equity in qualifying projects should be held by South Africans. This is a significant increase over the 40% stipulation in the country's renewable energy program, and will become a subject of discussion and contention before project finality is reached.

The request for proposals (RFP) specifies that a minimum of 30% of project shares must be owned by black South Africans. It also sets a price cap of 82 RSA cents (US 7.1 cents) per kilowatt hour (kWh) for the first submission phase, which has a June 8 deadline. The DoE requests prospective bidders to register and pay a non-refundable fee of RSA 200,000 (US$17,400) to receive RFP documentation.

IPPs also will be required to make a bid guarantee of RSA 150,000 (US$13,000) for every megawatt (MW) of proposed installed capacity, with a 600-MW maximum capacity threshold on projects. Interested parties have until May 11 to notify the DoE of their intention to bid.

Successful bidders will have a 30-year power-purchase agreement with the national power utility, Eskom (Johannesburg), backed by the South African government.

The intention to secure 1,600 MW of capacity in the first bid submission, with 1,000 MW from domestic sources and 600 MW from cross-border projects, is seen as a low target. Upward adjustments are expected, as has been seen with the renewable program, which now stands at about 4,000 MW.

Facing the extreme challenges in the power supply system, "crisis" is the word used by the DoE, whereas Eskom spun it to "a series of problems."

For related information, see January 14, 2015, article - South Africa Feels the Strain of Uncertain Power Supplies.

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