Bid window 7 will have ‘reserve bids’ to secure grid capacity

The Independent Power Producers (IPP) Office will introduce reserve bids for window 7 of the Renewable Independent Power Producer Programme (REIPPP) if preferred bidders aren’t able close their projects on time.

Bernard Magoro, who heads the office, told prospective bidders at a virtual conference on Wednesday the reserve bids will be leveraged as backup to avoid delays in adding capacity to the grid.

“We will be able to call on those reserve bidders to step in and close the [delayed] projects so we do not delay this much-needed capacity on the grid,” Magoro said.

Officials from the office announced plans at the briefing to procure 3,200MW-5,000MW of wind and 1,800MW of solar PV power, with project sizes ranging between 50MW and 240MW. More than 500 delegations are said to have registered for the conference.

The seventh REIPPP bid window was launched in December after some delays related to bid window 5 projects and challenges with the grid. Eskom will remain the buyer for the bid window. The IPP Office has 6.35GW of renewable energy and another 1GW of open-cycle gas turbines already operational through the programme, and a further 1.6GW under construction. 

Magoro said the office spent much of last year dealing with grid challenges and introduced interventions including a curtailment regime to bolster the power procurement initiatives, but some are still subject to regulatory approval from Nersa.

“We have spent most of last year dealing with the grid issues. I think most people are aware of all the initiatives that came out of that. [The] curtailment regime was one of them. The rules for issuing of BQs [budget quotes] ... came out of those initiatives,” he said.

“We also came up with the concept of [a] gating approach [and] Eskom is now engaging the regulator to implement that. We were hoping that by the time we released this bid window, this initiative would have been approved by the regulator, but unfortunately, that process is still ongoing,” Magoro added.

He acknowledged that 1GW of bid window 6 experienced delays but said the projects should reach close by the end of the second quarter of 2024. Government guarantees afforded to IPPs in case of its default or Eskom’s failure to pay would be reduced, he added.

“We have been engaging the market on this and the government guarantee has been reduced from 100% to 80%. I must mention that this is purely in the case of government default or Eskom’s failure to pay [and] we have not had such a scenario to date.

“In case of government termination through legislation or expropriation, this guarantee remains at 100%. So it’s a very minor change from the regime we’ve always had in the past,” he said.

The conference aims to share the request for proposal content expectations the IPP Office has of bid responses. The office has drawn more than R300bn in investment over the past 13 years.