Minister of mineral resources & energy Gwede Mantashe has announced the winning bidders for emergency power procurement that may generate about R45bn in private sector investment and ease the country’s chronic power shortages.
The announcement, which included the opening of calls for bids for the fifth round of renewable power procurement, came as SA remains in the grip of an energy supply crisis that has seen the country endure a week of load-shedding.
While it is a welcome step towards realising the government’s long-held promise to reform the sector, energy-intensive industries will be disappointed that their calls for the licensing cap for self-generation to be lifted from 1MW to 50MW appear to have fallen on deaf ears. Such a move could free up about 5,000MW of demand from the national grid, but Mantashe said the licence cap would only be lifted to 10MW.
Eskom CEO André de Ruyter has said that power generation by independent producers is essential for energy security. Even as large parts of the economy were closed in 2020 due to lockdowns to slow the spread of Covid-19, SA had 859 hours of load-shedding, equating to almost 10% of the year, according to the Council for Scientific and Industrial Research (CSIR).
Unreliable supply and above-inflation price increases have been identified to be among the biggest risks to an economy that shrank in 2020 by the most since the Great Depression almost a century ago.
The programme for risk mitigation independent power producers (IPP) procurement, an emergency power initiative, was released to the market in August with the aim of alleviating electricity supply constraints and reducing the use of diesel-based, peaking electricity generators in the medium to long term.
The winning bidders are ACWA Power Project DAO; Mulilo Total Coega; Mulilo Total Hydra Storage; Oya Energy Hybrid Facility; and Umoyilanga Energy, while Karpowership SA has won bids for its Coega, Richards Bay and Saldanha projects. The solutions provided by these bidders involve combinations in a range of technologies that include solar photovoltaic (PV), wind, liquefied natural gas, and battery storage. Mantashe said the prices for the proposed solutions range from R1,468/MWh to R1,885/MWh, with a weighted average price of R1,575/MWh or R1,575/kWh.
The new wind and solar PV from the previous renewable energy bid round came in at R0.71/kWh, while Eskom’s diesel-guzzling open cycle gas turbines cost R3.42/kWh.
The eight projects are expected to deliver 1,845MW to the power system as of August 2022. They are required to reach financial close by the end of July.
“Due to the urgency to bring power on line, this date is not negotiable,” Mantashe said. “It is for the preferred bidders to manage all the risks to reach financial close.”
Three eligible bids totalling 150MW have not been announced as they remain subject to value-for-money assessment.
“The quantity and quality of the bid responses and potential megawatt of contracted capacity allowed for a competitive price evaluation,” Mantashe said. “All compliant bids were subjected to local and international benchmarking, which is necessary to ensure that we receive value for money as required by the legislation.”
The eight projects will inject a total private sector investment of R45bn into the SA economy, and have an average local content of 50% during construction. SA 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.
Mantashe further announced that a request for proposals for the procurement of 2,600MW under the procurement programme bid window 5 would be released to the market at midnight on Thursday.
Of the 2,600MW, 1,600MW will be from wind and 1,000MW from solar PV.
The closing date for these bid submissions is August 4 2021.
Mantashe said the government intends to release four more requests for proposals within the next 12 months. These will include another 2,600MW from renewable energy, 3,000MW from gas, 1,500MW from coal, and 513MW from battery storage.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.