Not a single wind project was awarded preferred bidder status in the seventh bid window (BW7) in the government’s Renewable Energy Independent Power Producer Procurement (REIPPPP) programme when the names of the successful bidders were announced on Monday.
Instead of the 5,000 MW of generation capacity government targeted with the release of a request for proposals (RfP) a year ago, consisting of 1,800MW of solar and 3,200MW of wind generation, it awarded only 1,760MW of solar generation.
This is a repeat of bid window 6 that was announced two years ago, also without the expected wind allocation, that left 23 wind projects stranded due to lack of grid capacity.
When he made the announcement, electricity and energy minister Kgosientsho Ramokgopa said eight wind bids were received. Only four were compliant, but they were too expensive.
He did not provide any information on what the tariffs were that were bid.
Government will now enter negotiations with these four bidders on an acceptable tariff, and will also consider switching some of the initial wind allocation to solar.
This comes as no further grid access is available in the Western, Eastern and Northern Cape where the wind resources are best.
Energy regulator Nersa must still finally approve the curtailment framework that is expected to free up 3,700MW of capacity for new projects in those regions. Nersa’s electricity subcommittee did last week recommend its approval, but the Energy Regulator must still give the final nod.
Eskom has not yet finalised the grid access rules. Once finalised, it will also have to go to Nersa for approval.
Niveshen Governor, CEO of the SA Wind Energy Association (SAWEA), told Business Day that the industry was expecting this outcome as it did not make sense to proceed with the procurement of wind projects until there is certainty about curtailment and grid access rules. “There needs to be urgency,” he said.
According to the government, project development is getting off the ground in other regions, some of which did submit bids in bid window 7. But they will be more expensive than earlier Cape-based projects as wind resources elsewhere in SA are not as good.
The wind resources in the Cape regions are estimated to be up to 10% more that in elsewhere in the country.
He said he was not surprised to hear the bids in bid window 7 were considered to be too expensive.
Ramokgopa emphasised the urgency of grid expansion and said the government’s Independent Transmission Programme (ITP), which will invite bids from the private sector for the construction and management of specific transmission lines for fixed periods, is crucial, as Eskom does not have the funds for the aggressive grid expansion that the country needs.
The government recently issued arequest for information to gather market information, and plans to launch a pilot programme early in the new year before embarking on a full-scale ITP.
The IPP office received 40 bids for solar PV, of which 30 were found to be compliant. From these eight preferred bidders were appointed.
The big winner was Infinity Power Holdings, which got five projects. Mulilo and Scatec got one each. Three projects will be in Limpopo, two each in North West and the Free State and one in Mpumalanga.
Total investments from the eight solar PV preferred bidders is R31.4bn and it has 49% SA equity participation across all the project as well as 46% average BEE participation the ministry said in a statement.
At the same event the preferred bidders for the second bid window in the Battery Energy Storage IPPPP were also announced. These were site-specific and are critical to provide the ancillary services required by the power system, and to increase the available grid capacity in the North-West, Gauteng and Free State.
Bid window 2 was designed to procure 615MW of storage capacity, energy and ancillary services to Eskom. Eight preferred bidders were appointed out of 31 bidders, and they represent a total investment of R12,8bn.
The big winner was Mulilo with five projects. AMEA got two and EDF one.
The ministry said the BESIPPPP BW2 round was highly competitive, with a marked increase in the number of bids relative to bid window 1 , resulting in a 35% decrease in the average evaluation price,
“The eight preferred bidders have committed to 41% black shareholding in the IPP project companies, up to 27% shareholding by construction contractors and up to 36% in operations contractors.”
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.