23 May 2012
The names of 19 bidders – who have been selected as the preferred bidders for Window 2 of the Renewable Energy Independent Power Producers (IPP) programme that will contribute to South Africa’s energy mix – were announced on Monday.
The bidding for window 2 closed on 5 March with the total 79 bids received. These bids amount to 3 255MW while the cap was at 1 275MW.
“In this window, the department received 79 bids of which 51 met the qualification criteria as per the Request for Proposals. Given the megawatts limitation and competition, only 19 bidders were selected as preferred bidders for Window 2,” Energy Minister Dipuo Peters said in Pretoria on Monday.
Integrated Resource Plan
The Integrated Resource Plan (IRP2010) places specific emphasis on broadening electricity supply technologies to include gas, imports, nuclear, biomass, renewables (wind, solar and hydro), in response to both the country’s future electricity needs as well as reduce its CO2 emissions.
South Africa wants to procure 3 725MW of renewable energy through this process.
According to the IRP2010 – which is a 20-year projection on electricity supply and demand – about 42% of electricity generated in South Africa is required to come from renewable resources. The department has set aside 100MW of the 3 725MW for smaller projects of less than 5MW.
The department has noted that under window 2, the level of commitment to economic development has improved compared to window 1. “More communities will benefit through employment or as shareholding in these projects,” said the minister, adding that most bidders in window 2 will establish community trusts aimed at developing surrounding communities.
Of the selected bidders, nine were selected for the solar photovoltaic technology, seven for wind, two for small hydro and one for concentrated solar thermal (CSP).
For Solar photovoltaic 417MW have been taken up by bidders with the maximum MW allocated for round 2 at 450; for wind 562.5MW has been taken up with the maximum allocation at 650MW.
For small hydro 13.3MW has been taken up from a maximum allocated for round 2 at 75MW while for CSP the allocated maximum 50MW has been taken up. In the 2nd window a total 1 043.9MW has been taken up by bidders.
Japser Power Company, Solar Capital De Aar 3 and Sishen Solar Facility were among the bidders selected for solar photovoltaic technology; while West Coast 1 and Grassridge form part of the 7 selected for wind and Stortemelk Hydro (Pty) Ltd and Neusberg Hydro Electric Project A were selected for small hydro. For CSP Bokpoort CSP project was selected.
A full list of bidders is available on the Independent Power Producers programme website.
Growing the economy
Peters said government saw the programme as an opportunity to grow the economy given the numbers of unemployed people while the procurement of alternative energy is also aimed at alleviating energy constraints.
The programme also seeks to make provision for local content in the provision of alternative energy sources while the bids were evaluated by technical, financial, legal and international reviewers.
What the department had noted, said Director General Nelisiwe Magubane, was that there were “significant” changes in several areas like pricing whereby in solar photovoltaic in window 1 on average was at about 2.75 per kWh. “We’ve seen a significant reduction in price of about R1.65 per kWh for window 2,” she said.
Additionally there have been significant increases in the local content from 28.5% in window 1 to 47.5% in bid window 2 in solar photovoltaic technology.
“Job creation per province, we’ve seen a small reduction from bid window 1 but the bidders have indicated that on the total 7 059 jobs created in the construction period and 328 jobs created in the operation of the life of the plant,” said Magubane.
In the first window some of the challenges faced by bidders were that they had trouble reaching the financial close, of which June is the financial close for window1 project proposals.
Appeal to financial sector
Peters appealed to the country’s financial sector to provide financing to bidders.
“The success of renewable energy hinges on the financial sector,” she said, adding that bidders that were having trouble before the financial close to speak up. “I would want to appeal to those bidders that are already experiencing challenges to come to the fore. It is an appeal for the benefit of the number of jobs that will not be realised if there’s no financial support,” said Peters.
The minister said there had been informal conversation regarding companies experiencing financial strain. “With them not coming to the fore this would mean that we’re not going to deliver on the megawatts that we want,” she said.
Last year, the Department of Energy announced 28 preferred bidders, out of a total of 53 applications for the IPP bid process in the first window.
Ompie Aphane, Deputy Director General for Electricity, Nuclear and Clean Energy at the department said the department was not sure of the amount of projects that were in financial strain.
In December, the Industrial Development Corporation (IDC) announced that it will finance 12 of the 28 preferred bidders to contribute to the country’s energy mix. The financing will be to the tune of R5.2-billion. Meanwhile, Peters said the department has started talking to financial institutions.
The minister called on prospective bidders for the remaining three windows that they need not necessary own the land on which projects will operate on. Bidders could co-exist. “We don’t want to lose arable land,” said Peters adding that bidders could share the same piece of land with farmers.
The department has yet to decide on when bidding will commence for projects to take part in window 3.