Green Light for the third Renewable Energy Bidding Round

Local news is not yet dominated by reports of rolling black-outs, but instead by the rolling renewable energy procurement programme, which has gained further momentum with another 19 projects reaching financial close yesterday and with the tender documentation for the third bid window having also been released into the market. The projects of the second bidding round – identified as preferred bids in May last year under South Africa’s increasingly acclaimed Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) – comprise wind, solar and mini-hydro projects collectively representing 1 044 MW of capacity. In fact, there are nine solar photovoltaic (PV) projects with a combined allocation of 417.1 MW, seven wind projects selected, representing 562.6 MW, two small hydropower projects of 14.3 MW each and one 50 MW concentrated solar project (CSP). The average prices offered by the solar PV developers in the second round fell from 275c/kWh to 165c/kWh, while wind prices fell from 114c/kWh to 89c/kWh and CSP prices fell slightly from 268c/kWh to 251c/kWh.

Collectively the projects should result in capital investments of more that ZAR 28bn and will include participants from North America, Europe and Asia. With the second bid-window close there are currently 47 renewable-energy projects being implemented in South Africa, with the 28 first-window solar and wind projects, collectively representing 1 416 MW, all well into their construction phases. These projects will attract collective direct investments of around ZAR 47bn.
The request for proposals (RFP) documentation for the third bid window has also been released and Energy Minister Dipuo Peters indicates that while local content and economic development thresholds have been increased, process lessons from the first two rounds have also been incorporated in a bid to ensure that there are no further delays to bid submission and financial closure deadlines. 19 August 2013 has been set as the third bid-window-submission deadline, with preferred bidders to be named by 29 October 2013. Under the current schedule, power purchase, connection, direct and implementation agreements should be finalised on 30 July 2014.

The technology allocations and the new price caps were not immediately available, but it is understood that the onshore wind allocation will be around 653 MW, followed by solar PV with 401 MW, with 60 MW allocated to small hydropower, 25 MW to landfill and 12.5 MW each for biogas and biomass. It is understood that CSP will also feature, but a forecast for the allocations has not yet been provided.

Department of Energy (DoE) Deputy Director General Ompi Aphane says the allocation will draw from the remaining 1 165 MW allocated under the first determination, which stated that 3 725 MW of renewables capacity would be procured. However, it could be supplemented by the more recent December determination, which set aside a further 3 200 MW for procurment by the South African government. He also indicates that a RFP for small-scale projects of less than 5 MW will be released in the coming months, with the documentation nearly finalised. The aim is to continue with a number of renewables procurement rounds and for South Africa to procure about 1 GW yearly over a sustained period. However, this target could be adjusted once the new Integrated Resource Plan (IRP) for electricity is published later this year.

DoE Director General Nelisiwe Magubane says that the intention is to first finalise the Integrated Energy Plan (IEP) as a road map for electricity and liquid fuels and the align the new IRP to that blueprint. The IEP document will probably be presented to Cabinet before the end of May, whereafter the DoE will undertake “extensive” stakeholder consultation on the plan. The new IRP will follow and should be completed before the end of the year.

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