Renewable procurement picks up steam with opening of new bid window

Request for proposals launched.
The latest bidding round calls for 1 600MW of onshore wind energy and 1 000MW of solar photovoltaic (PV) power plants. Image: Mike Hutchings, Reuters

Stakeholders gave a collective sigh of relief on Wednesday after the Department of Mineral Resources and Energy (DMRE) formally invited bids for renewable energy in the sixth bid window of its Renewable Energy Independent Power Producers (Reippp) Programme since 2011.

The bids have to be in on August 11 and are expected to come online within 24 months after financial close.

The move for the procurement of 2 600 megawatts (MW) of additional generation capacity was expected in March and the delay raised fears that the procurement programme would once again stall.

Equally, the March deadlines for financial close on the 25 projects in bid window 5 and the 11 risk mitigation projects were missed and extended to April 30.

Read: Renewables peak at 19% of SA’s electricity supply

Three significant events

Professor Anton Eberhard, energy expert at the University of Cape Town’s Power Futures Lab, pointed to these three significant events this month:

The DMRE’s Independent Power Producers (IPP) office invited prospective bidders to register on its website to get the request for proposals, which will be made available after payment of R25 000 per project.

In a statement on its website, the IPP office disclosed that Bid Window 6 is calling for 1 600 MW of onshore wind energy and 1 000 MW of solar photovoltaic (PV) power plants.

The South African Wind Energy Association (Sawea) welcomed the announcement as “another step towards addressing energy security and further stimulating the role of the wind sector in South Africa’s development objectives”.

Bid Window 5 represents another almost 2 600 MW and the risk mitigation programme 2 000 MW.

If all three of the projects materialise, they will go a long way to closing the current supply gap Eskom puts at 6 000 MW.

Eskom confirmed on Wednesday afternoon that its board has in principle given the green light for the signing of the power purchase agreements in Bid Window 5. According to Engineering News the weighted average price across both wind and solar PV projects came in at 47.3c/kWh – the lowest yet to be achieved in South Africa.

It is estimated that Bid Window 5 will bring foreign investment of around R50 billion to South Africa.

Eskom’s position paves the way for financial close.

Risk mitigation

Whether the risk mitigation programmes will also meet the deadline at the end of April is less certain.

Read: SA’s $6.5bn in power plans delayed again

The three Karpowership projects that make up the bulk of the allocation and plan to moor floating power stations in the harbours of Coega, Richards Bay and Saldanha Bay, still require environmental approval and permission for the use of the harbours.

Furthermore, there is wide concern about the cost of power procured from these vessels, because the risk of fluctuations in the gas price as well as exchange rate lies with Eskom as the buyer and will be passed on directly to the consumer.

Read: Powerships: Consumers will carry the risk

Against the background of the war between Russia and the Ukraine the international gas price has skyrocketed and it is not yet clear whether Eskom will be prepared to sign the power purchase agreements and thereby accept that risk.

DNG Energy, which was disqualified from the procurement process, will be allowed to appeal the earlier dismissal of its challenge to the risk mitigation procurement process.

This casts a shadow over the whole process.

Sawea CEO Niveshen Govender said Bid Window 5, which was launched last year, and the latest launch of Bid Window 6 signals the “rebirth of the wind energy industry, following a hiatus of almost seven years”.

This refers to Eskom’s refusal to sign a number of power purchase agreements in bid rounds 4 and 4.5, which brought government’s highly successful and internationally recognised Reippp Programme to an abrupt stop. Eskom later signed, but procurement only resumed last year with Bid Window 5.

Govender emphasised that the wind energy industry is dependent on policy tones set by government and thanks various government departments for implementing procurement-enabling policies over the last few years.

“Policy shifts indicate a clear direction in terms of plans to procure new generation capacity on an ongoing basis, in line with the energy roadmap, which sees 14.4 GW of new wind power over the next decade,” he said.

“With consistent procurement facilitated by supporting regulations, the opportunities to increase local manufacturing is hugely positive.”

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“ Furthermore, there is wide concern about the cost of power procured from these vessels, because the risk of fluctuations in the gas price as well as exchange rate lies with Eskom as the buyer and will be passed on directly to the consumer.”

The gas price is one crazy part.

The biggest faud in the powership mess is something that was disclosed by accident when documents were not fully redacted. If Eskom falls for this scheme, they will pay for 6300 hours per year of availability even if they only use it for peak demand period hours to avoid diesel – about 1600 hours per year. The powerships are NOT intended to be baseload, which the 6300 hours assumes!

It means that ignoring the undeterminable variable gas charge per hour, Eskom pays about 4.5 times what we were told. AND it must buy this “emergency” supply for 20 years!!

We should all pray Eskom is not stupid enough to sign the powership deal : powerships will cost more than diesel peakers.

End of comments.

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