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South Africa to release new-look renewables bid window in November

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South Africa to release new-look renewables bid window in November

Photo by Dylan Slater
Energy Minister Jeff Radebe

1st June 2018

By: Terence Creamer
Creamer Media Editor

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Energy Minister Jeff Radebe announced on Friday that South Africa would launch a fifth Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) bid window in November with the aim of procuring a further 1 800 MW of renewable energy from independent power producers (IPPs).

Addressing energy stakeholders in Johannesburg on Friday Radebe said the auction would include similar technologies to those included under the so-called ‘Expedited Bid Window’, which was launched in 2015 in an effort to allow IPPs a second chance to improve the competitiveness of projects bid, but not procured, during the first four REIPPPP bid windows.

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The Expedited Bid Window has not yet been concluded, despite the fact that the prices bid for solar photovoltaic and onshore wind fell to a new REIPPPP low of 62c/kWh. As with bid windows 3.5 and 4, the auction stalled after Eskom indicated in 2016 that, having returned to a surplus operating position, it was no longer willing to enter into power purchase agreements with renewables projects.

Although the Expedited Bid Window has not officially been cancelled, it is now most likely to be superseded by Bid Window 5, which will proceed on the basis of revised procurement documents that will include far higher transformation, localisation and community upliftment requirements.

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Radebe said the new bid window would provide government with an opportunity to accelerate its transformation agenda. “Please take note that the intention is to enhance local manufacturing to ensure investment and economic growth, as well as the opportunity to encourage opportunities for black industrialists and the development of black IPPs.”

There would also be a specific requirement for participation by women- and youth-owned businesses and for IPP socioeconomic and enterprise development expenditure to be more coordinated and integrated with the needs of the surrounding communities.

The bid window was expected to secure renewable-energy IPP investments to the value of between R40-billion and R50-billion and contribute further to government’s stated goal of ensuring that the energy sector contributes $25-billion of the $100-billion investment target set by President Cyril Ramaphosa for the coming five years. The Minister had already banked the R56-billion contribution associated with the 27 renewable-energy IPP projects singed in April, following more than two years of Eskom-related delays.

The government was also giving priority attention to finalising programmes for imported liquefied natural gas and gas-to-power plants. However, bid documents for the gas programmes would only be released after the finalisation of the latest iteration of the Integrated Resource Plan (IRP).

IRP TO BE RELEASED FOR COMMENT SOON

Radebe reiterated his intention to have the IRP approved by Cabinet in mid-August and again promised that the draft IRP would be released for public comment and consultation well ahead of that Cabinet meeting. In fact, the Minister said that the document could be released “within days”, but also invited stakeholders to submit written representations to his office prior to its release.

The intention was to finalise the IRP, the broader Integrated Energy Plan, as well as master plans for gas and liquid fuels before year-end so as to bring to an end a protracted period of policy uncertainty.

Several participants in a panel discussion welcomed Radebe’s commitment to finalising the IRP and the other energy plans, with Eskom executive Ayanda Noah stressing the importance of the plan for guiding “appropriate” investment not only into generation assets, but also into grid infrastructure.

Professor Anton Eberhard of the University of Cape Town’s Graduate School of Business said finalising the IRP by August was the best way to provide much-needed investor certainty, as it would “lay out the vision in the power sector of what the mix is”. It would also spell out the pace, timing and scale of future energy investments, which would allow the private sector to begin preparing for those investments.

Eberhard said the beauty of the timing of the new IRP would be that the least-cost scenario would meet all of government’s requirements for reliability, job creation, lowering environmental impacts and increasing prospects for manufacturing. This scenario had been demonstrated in the leaked 2017 IRP document, which was “unfortunately never taken to Cabinet”.

Other participants also supported the renewed effort to bring policy certainty, by finalising the IRP. However, Fossil Fuel Foundation director Professor Rosemary Falcon urged the department not to overlook the role of coal, which she argued could produce electricity far more cleanly than was the case previously.

Meanwhile, Nuclear Industry Association of South Africa CEO Knox Msebenzi called for ideological positions to be set aside when the IRP was drafted and for an equitable allocation to be granted to all available technologies.

Radebe agreed that policy certainty was key for long-term investment. “Be rest assured that concerted efforts are under way in the department to review some of our legislation to remove unwarranted regulatory hurdles and provide much needed certainty on the country’s energy infrastructure build programme and also restore investor confidence that South Africa is well prepared to supply reliable energy to grow the economy.”

Besides renewable energy, gas projects appear likely to feature strongly in the updated IRP, with Radebe emphasising that South Africa intended taking a regional perspective on the gas opportunity.

“Southern Africa has huge natural gas reserves in Tanzania and Mozambique, and within South Africa, Zimbabwe and Botswana [there is] gas in the form of coalbed methane. Furthermore, South Africa has potential shale gas.”

Energy and water ministers within the Southern African Development Community would be meeting soon to discuss a regional gas development strategy.

“I am also planning to visit Mozambique very soon to engage with our neighbour as to the possibilities of a regional approach for the development of the natural resources in our respective countries,” Radebe said, adding that, as with the IRP, South Africa’s gas strategy would be released for consultation with the market during July and August.

Government would also be pushing ahead with the procurement of two coal IPP projects, with a combined capacity of 864 MW. “[These] will bring another R40-billion of investment to the country and at least 5 000 jobs during construction.” 

The construction phase for the two plants – the 300 MW Khanyisa project and the 557 MW Thabametsi project – would be between 48 and 60 months and Radebe stressed that the first electrons would not enter the grid before the 2022/23 financial year.

The Minister was far less equivocal about the prospects for additional nuclear energy, but offered an optimistic prognosis for entrenching South Africa’s position in the area of nuclear medicine.

“South Africa is a key global manufacturer and supplier of medical radioisotopes, generating valuable foreign exchange and contributing to economic growth while providing a strong foundation and support for local industrialisation, skills development and retention, and job creation.”

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