The recently launched Request for Proposals for the fifth Bid Window (BW5) in the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), calls for proposals from independent power producers (IPPs) to develop 2 600 MW of new generation capacity: 1 600 MW from onshore wind energy and 1 000 MW from solar photovoltaic (solar PV) power plants, in line with the government’s aim to increase generation capacity and ensure a secure energy supply for the country.
REIPPPP BW 5 calls for 2 600 MW of new generation capacity: 1 600 MW from onshore wind energy and 1 000 MW from solar PV power plants.
Ahead of the Bidders’ Conference, expected to be hosted virtually by the Department of Mineral Resources and Energy (DMRE) during May 2021 – to provide more information on the qualifying criteria and bid submission expectations – the South African Wind Energy Association highlights two key aspects of BW5.
Ntombifuthi Ntuli, CEO of SAWEA, notes the local content requirements, and the bid evaluation weighting, which has now shifted in line with government’s standard procurement norms, as important considerations.
Local content
The BW5 local content threshold has been retained at 40%, in line with previous rounds. The difference in this round is that there is no local content target, only the threshold is prescribed. Furthermore, for the first time, the REIPPPP introduces designated local content, which, over and above the threshold, requires bidders to procure certain specified components locally. Should these components be unavailable, bidders can apply for exemption, which needs to be lodged with the Department of Trade, Industry and Competition (DTIC).
The wind industry consulted extensively with the IPP Office and DTIC prior to the issuing of the BW5 RFP, specifically on local content requirements and what the industry can achieve in the short and medium terms.
Critically, to achieve a successful localisation programme with incremental local content thresholds, a consistent procurement pipeline needs to be established. This would be a positive development as it would facilitate greater job creation and skills development as the economy recovers from the Covid-19 pandemic and looks to accelerate economic growth.
“Consecutive bidding rounds will enable local manufacturing facilities to be re-established and the potential expansion of already operating manufacturers, which is crucial in creating long-term sustainable jobs” Ntuli said.
SAWEA has cautioned, however, that stop-start procurement and delays between bid windows had severely damaged the meaningful momentum gained pre-2015, which had established new manufacturing capacity within the wind and solar value chains in South Africa. Significant manufacturing capacity was lost in the delay between BW4 and BW5 which forced many companies to shut down as they were unable to carry the cost of overheads indefinitely.
Looking at the recovery of the manufacturing sector and the possibility of re-investment, Ntuli commented, “While we wholeheartedly celebrate the new impetus, one must be mindful that regaining investor confidence will not be an overnight process. To enable the required quantity and, very importantly, quality, of components will require at least two to three years of investment and development. It is therefore crucial that there are no further interruptions or delays. A controlled rollout of procurement will allow all aspects of the value chain, and not only the manufacturing sector, to expand.”
SAWEA confirms that the industry remains confident in its ability to meet local content requirements and reiterates unreservedly that the sector will respond positively. The association has facilitated conversations between the DMRE, DTIC and other key sector stakeholders, to align strategically and map the way forward to deliver on increased local content requirements.
“The wind industry has further submitted its vision to practically increase local content in the next few years and remains fully supportive of growing the local manufacturing sector,” Ntuli said.
The association is further heartened by the South African Renewable Energy Masterplan (SAREM), which is set to contribute to fast-tracking the establishment of local manufacturing capacity. This framework is intended to provide a blueprint from which government departments such as the DTIC and the DMRE can provide incentives for investment in local manufacturing.
This is again important for future bid windows and the renewable energy sector’s ability to deliver jobs and investment, in the post-Covid-19 recovery period.
“SAREM represents an opportunity to identify jobs and investment in our sector linked to the country’s resource plan, as well as to clearly outline how job creation and investment might be enhanced if impediments are removed and replaced rather with supportive policy,” Ntuli added.
Bid evaluation weighting
A noted change in BW5 is the evaluation weighting in terms of price:economic development, which has shifted from a 70:30 weighting to a 90:10 weighting, indicating a stronger emphasis on tariff. Black Women Ownership in the project company is a new requirement and has a 5% threshold; otherwise all other Economic Development requirements have been retained as in BW4.
The 70:30 (price: economic development) weighting used in previous rounds of the REIPPPP, attached higher priority to Economic Development objectives than the typical government structure of 90:10 at the time.
SAWEA notes too that the DMRE’s statement in issuing the RFP indicates that given the energy challenges the country is facing, the qualification criteria have been developed to promote the participation of projects that are fully developed and will be able to be constructed and connected to the national grid as soon as twelve months from financial close, and not later than twenty-four months post financial close.
For more information visit: www.sawea.org.za
