South Africa reopens window for renewable energy boom

South Africa is trying to ensure additional electricity production in a number of ways, but speed is key.

The Department of Mineral Resources and Energy (DMRE) launched the Independent Renewable Energy Producer Supply Program (REIPPPP) tender window 5 in March.

It will end on August 16, 2021. Bidders may submit written questions about the round – asking for clarification on the Request for Proposal (RFP) until July 16. Offers must be registered by July 26.

Interested companies must pay a fee of R25,000 ($ 1,720) to access more details.

In previous cycles, the time between selection and financial close was nine months, with construction expected to take 24 to 36 months.

“This has been shortened, in accordance with the rules defined as part of the risk mitigation procurement cycle. Now there are four months left for financial close and a maximum of two years for construction, ”said Ashen Jugoo, Fasken partner in Johannesburg.

“Even though these are not emergency tenders, the pressure is to get hold of them as quickly as possible. Projects should be online within 28 months.

Modification of terms

The REIPPP program has been around for some time. The first round took place in 2011. The fourth round took place in 2015, but progress then stalled.

Despite this shutdown, South Africa has accumulated a lot of goodwill and certainty on the part of project developers.

Actis energy and infrastructure partner Barry Lynch described South Africa’s renewable energy program as “the best in the world” in the early years, while noting that things have changed. recently faltered.

“It’s such a clear and transparent process, it attracts the big guys and there is a lot of competition. It’s great for South Africa.

Lynch noted the strength of the market in South Africa, with strong financial backing. “The rules are dead and they make a lot of sense. They have everything investors want, ”he said.

“It will be very competitive. The winner will be South African consumers, ”said the head of Actis.

“There have been some changes since Round 4 of REIPPPP, in the form of a Power Purchase Agreement (PPA), shifting some risks off the table to the private sector,” said Lara Bezuidenhoudt, partner of Fasken.

“If this had happened in the first round of REIPPPP it might have been unacceptable, but the government has built confidence in the previous four rounds and most of these differences are likely to be accepted by the private sector. .

Local needs

Jugoo said the government learned lessons from the risk mitigation procurement cycle in 2020.

“Empowerment score has been reduced from 30% to 10%, while price now counts for the remaining 90%. All other criteria are now qualifying criteria – you have to meet certain technical and legal factors to get into the score, ”he said.

In addition, the South African shareholding requirement has been increased to 49% and the participation of black women is to be 5%. “This concerns both the contracting authority and the contractors. This is a new and positive requirement, ”continued Jugoo.

The new documentation also puts more emphasis on compliance. “The efforts to combat corrupt practices have been greatly expanded,” he said.

Lynch noted the economic benefits of local manufacturing and local ownership. Actis is involved in “big projects” in rural areas of the country where unemployment is high.

To win

The supply window is in line with the ministry’s plan, which it presented in September 2020. The DMRE aims to subscribe a total of 11,813 MW from various sources, including renewables, storage, gas and coal. .

Within the framework of the offer window 5, the ministry aims to obtain 2,600 MW of electricity. This will cover 1,600 MW of onshore wind and 1,000 MW of solar photovoltaic (PV). The projects will be a minimum of 1 MW and up to 140 MW for onshore wind and 75 MW for solar photovoltaic.

One of the attractive factors is the range of opportunities in South Africa, said Lynch. The amount offered means that a developer has a better chance of winning work.

“It is necessary to balance the grid, too much wind for example could cause chaos,” said Bezuidenhoudt. “The challenge with producing charcoal was that it had to be distributed from an area northeast of Johannesburg to the rest of the country. Solar and wind provide an opportunity for a disaggregated grid.

Despite the new conditions, the interest is obvious.

“Only advanced projects will be put on the market during this fifth cycle. There are a lot of projects that have been built in the last four rounds that are in various stages of development. Some of these projects have even already been tendered, ”she said.

Jugoo agreed. “Despite the changes, we still hear about a large number of projects being tendered. Some developers are looking to bid on more than 10 projects. There are more than enough projects to resume the allocation of solar and wind power.

Stream search

South Africa needs electricity and the industry clearly wants to participate in the opportunities that present themselves. The lack of auction windows since 2015 – with the exception of the emergency cycle – has caused some problems.

“The new generation could be much more valuable to the country if there was a constant flow of IPP tours. When the REIPPPP started, new businesses were created and jobs were created. Due to the slowdown in the various rounds entering the market, some of these companies could not survive and jobs were lost, ”Bezuidenhoudt said.

Regular rounds to secure developers would help South Africa face its energy challenges. Neighboring countries could benefit from these lessons learned, such as Botswana, Lesotho, eSwatini and Namibia, she continued.

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