South Africa's 3,725-Megawatt Renewables Roll-Out Could Bring More than $12 Billion in Investments

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--South Africa's Department of Energy (DoE) has reported that the country's renewable energy independent power producer (IPP) program has so far attracted about $8.5 billion of foreign direct investment (FDI) over a 12-month period.

The National Energy Regulator of South Africa (NERSA) has confirmed that all the 28 projects named as preferred bidders in December 2011, the first window of the program, have been approved for generation licenses.

The next date in the progress of the projects is financial closure by June 19, the conclusion of power purchase and power connection agreements with the national utility Eskom and the implementation agreements with the DoE. Not all bidders will be in a position to make financial closure by the deadline.

In December, Energy Minister Dipuo Peters named as preferred bidders 18 photovoltaic (PV) projects with a total capacity of 631.53 megawatts (MW) and two concentrating solar projects with a combined capacity of 150 MW. Also listed were eight onshore wind projects with a capacity of 633.9 MW.

In May, a further 19 projects with a total capacity of 1,043.9 MW were named as preferred bidders in the second bid window. The total capacity of 47 first- and second-window preferred bids stands at 2,459.4 MW, toward the total 3,725 MW targeted in the overall program.

As the full second-window allocation of 1,275 MW had not been taken up, the next bid window might include capacity that could become available should the first window of preferred bids fail to reach financial closure. Judging by current progress, the full three-window program could attract investments of more than $12 billion in the period between 2012 and 2016.

Solar PV is seen as the program winner to date, according to pv.insider, which says that despite the substantial growth in PV projects, many experts have raised concerns over the South African government's aims to boost industrial development and economic growth.

Under the local content requirements, specific terms were set out for project developers. Under these, the industry committed to a minimum local content level of 35% for the initial project roll-out. However, with local content defined as the total costs attributed to projects, this figure is not restricted to key plant components, but also includes a range of products and services needed when developing large-scale plants. Consequently, developers are continuing to import the majority of their components from cheaper suppliers in Europe and Asia, as modules and inverters are not yet manufactured on a large scale in South Africa.

The South African Photovoltaic Industry Association (SAPVIA) is working closely with government to collectively develop a roll-out program to increase the local content for PV technologies, which will further strengthen the value of solar PV. SAPVIA is also working with Eskom on ways to initiate a large-scale solar rooftop program.

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