Response to South Africa's Renewables Scheme Yields 53 Bids Worth 2,100 Megawatts

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--South Africa's Department of Energy (DoE) was pleased with the response to the first bidding window from independent power producers (IPP) for projects in the country's 3,725-megawatt (MW) renewable energy development drive. A total of 53 bids with a potential generating capacity of 2,100 MW were received. Wind projects accounted for 50% of the total, with 48% from solar, covering both photovoltaic (PV) and concentrating technologies. The balance of 2% was from small hydro projects.

The bidding process could have as many as five windows, with the next round due to close on March 5, 2012. Forthcoming windows are expected to involve other technologies, such as biogas, biomass and landfill gas. These would be catered for by small projects tenders, which will have lower entry thresholds and will apply only to projects with less than 5 MW of capacity.

Director General Nelisiwe Magubane said that discussions were taking place with the Department of Environmental Affairs, as there was some difficulty processing all the environmental authorizations required for the next round. The March date might be eased, as the absence of environmental approvals was seen as an immediate deal breaker.

Ompi Aphane, the deputy director general for DoE, said that there had been significant interest among international investors. "The bidders are, however required to comply with different thresholds for broad-based economic ownership, job creation, preferential procurement and socio-economic development," he said. "Each and every bid is receiving special attention. The scoring is divided into 70% price and 30% economic development."

If all the capacity offered in the first window is developed, it would total about $875 million, with half coming from foreign investors. A minimum of 40% of a project must be owned by South Africans to be considered compliant. With project evaluation now in progress by legal, financial, technical and economic development teams, the outcome of the process will be estimated by the end of the month or at the COP 17 environment summit in Durban in early December.

Aphane said that a six-month period would be allowed for developers to reach financial closure, which would include signing a power purchase agreement with Eskom. He said that the first capacity from projects could be in 2012, and most of the power from the first window should be available by the end of 2013. For related information, see September 2, 2011, article - More than 400 Companies Provide Strong Response to South Africa's 3,725 Megawatt Renewables Bid Package.

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