South Africa Pushing Renewable Independent Power Producers to 6,300 Megawatts

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--After a period of crisis for South African national power utility Eskom (Johannesburg), with rolling blackouts (load shedding) and capacity addition targets being moved further into the future, the Energy Ministry has put a more positive spin on the future. Two new bidding rounds have been launched for renewable power projects and a number of initiatives that will put independent power producers (IPPS) in the running for new cogeneration, gas-fired and coal-fired projects.

The country's Renewable Energy Independent Power Producer Procurement Program (REIPPPP) has obtained the go-head for 79 projects totaling 5,243 megawatts (MW). These mostly are solar and wind projects, and represent a total of about $14 billion of private investment. Some of the projects already are operational.

Energy Minister Tina Joemat-Pettersson announced plans to expand the renewables program and will ask the National Energy Regulator of South Africa (NERSA) for the go-ahead to bring the total of additional power to more than 6,300 MW.

Now in the fourth bidding round of the REIPPPP, the Department of Energy (DoE) has accepted a further 13 projects to add 1,121 MW. These were selected from a highly competitive list of 77 proposals. The successful bids have an overall investment value of $2 billion, and could create 7,000 jobs during the construction phase and 1,000 permanent operational jobs. Over a 20-year period, 27,000 jobs are expected to be created.

Financial closure on the fourth-round projects is expected in the fourth quarter of this year, and the first projects are expected to be commissioned in late 2016.

The DoE said that a request for further proposals (RFP) would be released in early June for a further 1,800 MW to be procured under an accelerated program. Bidding will be open to unsuccessful bidders from the previous four rounds. Bidding also will be open to first-time bidders. Distribution and transmission system constraints will be covered in the RFP as problems in those sectors were largely responsible for delays in the closing of bids in rounds three and four.

In round four, onshore wind power was allocated 676 MW (out of 1,121 MW); solar photovoltaic (PV) power was allocated 415 MW; biomass was allocated 25 MW; and small hydro and other sources were allocated 47 MW. About 62% of the projects are sited in the Northern Cape Province, including all the solar PV projects and two of the five wind projects. Eastern Cape Province gained the largest share of onshore wind projects, with about 33% of the total projects.

Of even greater importance to the middle and long term, regarding the security of the national power system, was the news from the minister that an RFP covering cogeneration power projects is set for imminent release, and preferred bidders will be named in the third quarter of this year.

Initially, the government will look to secure a minimum of 800 MW of base load cogenerated power capacity, and if there is a strong response to the RFP, the allocation could be adjusted upward. The minister also said that a request for information (RFI) will be released, which will lead to a procurement process for 3,126 MW of gas-fired power capacity. The independent power producer (IPP) office, which has run the four successful REIPPPP rounds, will manage the process.

The IPP office also will handle the coal base load program to procure 2,500 MW of coal-fired capacity with projects of not more than 600 MW. This RFP was issued at the end of 2014, and the first coal IPP bid window will close in mid-2015. Preferred bidders will be named before the end of 2015.

The DoE also has been gathering information on the potential for demand reduction, load shifting and energy efficiency initiatives, with 150 responses received by the beginning of February. The minister said that 27 of the responses were classified as "quick wins" and 42 as medium term opportunities.

For related information, see December 2, 2014, article - South Africa's Eskom Battles Murphy's Law at Mega Projects, and January 16, 2015, article - South Africa Opens Up to Independent Base Load Power.

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