Renewable energy independent power producers (IPPs) are set to inject R45 billion into the South African economy.
So said Gwede Mantashe, minister of mineral resources and energy, yesterday when he finally announced the much-awaited opening of Bid Window 5 of the Renewable Energy Independent Power Producers Procurement Programme, which will procure a further 2 600MW of renewable energy from IPPs.
The opening of the new bid window comes at a critical time when state-owned entity Eskom is facing critical challenges in supplying electricity in the country. With the power utility failing to keep the lights on, it has had to resort to load-shedding, much to the detriment of the South African economy.
“Energy security of supply is the backbone of any economy. It acts as a stimulant and catalyst to economic growth and development,” said Mantashe.
“Our country has become accustomed to intermittent electricity supply. Along with that is the continued rising pricing structure. Both these factors have an adverse impact on the ability of the economic sectors to deliver optimal production as well as the ability of the citizens to access electricity for household use.”
He added that the Integrated Resource Plan (IRP) 2019 identifies the necessary generation mix of technologies to respond to the demand for electricity.
“We are here today to announce the preferred bidders for the Risk Mitigation Independent Power Producer Procurement Programme and to provide an update on the procurement of additional power in line with IRP 2019,” the minister said.
The Risk Mitigation IPP Procurement Programme (RMIPPPP) was released to the market in August 2020. The aim was to alleviate the electricity supply constraints and reduce the extensive utilisation of diesel-based peaking electrical generators in the medium- to long-term.
The Bid Submission closed on 22 December 2020 and attracted a total of 28 bid responses, with a potential contracted capacity of approximately 5 117MW, Mantashe said.
“This clearly demonstrates a sustained private sector interest in participating in the South African energy landscape.”
He added the Risk Mitigation IPP Procurement Programme succeeded in attracting project proposals featuring a variety of technology combinations.
“The quantity and quality of the bid responses and potential megawatt of contracted capacity allowed for a competitive price evaluation. All compliant bids were subjected to local and international benchmarking, which is necessary to ensure we receive value for money as required by the legislation.”
According to Mantashe, the evaluation process has resulted in the selection of eight preferred bids totalling 1 845MW and a further three eligible bids totalling 150MW.
The chosen ones
The eight preferred bidders in alphabetical order are:
- ACWA Power Project DAO
- Karpowership SA Coega
- Karpowership SA Richards Bay
- Karpowership SA Saldanha
- Mulilo Total Coega
- Mulilo Total Hydra Storage
- Oya Energy Hybrid Facility
- Umoyilanga Energy
Said Mantashe: “The solutions provided by these preferred bidders are from a combination of a range of technologies that include solar PV, wind, liquified natural gas and battery storage.
He noted the prices for the proposed solutions range from R1 468 per MWh to R1 885 per MWh. The weighted average price is R1 575 per MWh.
“These eight projects will inject a total private sector investment amount of R45 billion to the South African economy, with an average local content of 50% during the construction period,” said the minister.
He also pointed out that the South African entity participation from these projects is 51%, with black ownership at 41%.
“About 3 800 job opportunities will be created during the 18-month construction period and a further 13 500 during the 20-year power purchase agreement term," said the minister.
Renewed hope
Meanwhile, the renewable energy industry has welcomed the opening of the new bid window.
“The announcement by the minister to open Bid Window 5, calling for proposals from IPPs, marks the rebirth of the wind energy industry, as the last bidding round took place almost seven years ago, in 2014,” says Ntombifuthi Ntuli, CEO of the South African Wind Energy Association (SAWEA).
SAWEA notes this procurement window will add the vitally-needed power capacity to the country, which continues to struggle with strangled energy supply, an ongoing crisis that is economically crippling and has seen SA buckling under the strain of load-shedding for the last few years.
“With supporting policy and smooth procurement rounds, expected to include the announcement of Bid Window 6 during the course of 2021 as reiterated by the minister, the renewable power sector certainly has a key role to play in rebuilding the country as a significant catalyst of economic growth, and investors have a big role to play in making that a reality,” adds Ntuli.
Environmental activist group Greenpeace also lauded the development. Thandile Chinyavanhu, Greenpeace Africa climate and energy campaigner, says: "Greenpeace Africa welcomes the opening of Bid Window 5 for the procurement of 2 600MW of renewable energy, along with the names of the eight preferred bidders.
"South Africans are accustomed to intermittent energy supply. As South Africa opens up and expands its renewable energy sector, investments in coal − which has failed to power the economy and locked the country into a coal addiction − need to be reduced in order to comply with our Paris Agreement ambitions."
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