The Minister of Mineral Resources and Energy, Gwede Manatshe announced the preferred bidders in the Fifth Bid Window (BW5) of the Renewable Energy IPP Procurement Programme (REI4P) on 28 October – before the end of October as he had committed to do when the Request for Proposals was issued in April of this year (2021).
Noting that it was unfortunate that the announcement was made at a time when the country was again experiencing load shedding due to the unavailability of some Eskom power generation units, Mantashe said, since the promulgation of the first IRP in 2011, the DMRE has undertaken a number of programmes to supplement the power generation supply from Eskom.
“To date, we have procured and signed agreements with 93 Independent Power Producer Projects totalling 7 308 MW. Eighty-nine of these projects, including Bid Window 4 projects signed in 2018, are already connected to the grid and supplying 6 855 MW, which is equivalent to two of Eskom’s six-pack coal-fired power stations. These include 86 renewable energy projects, two diesel-fired peaking plants, and five small power plants in the form of hydropower, landfill gas and biomass.
“In addition to the projects mentioned, we have selected 11 Preferred Bidder projects, to deliver 1 995 MW under the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP). Power from these projects is expected to be connected to the grid within 18 months after the signing of commercial agreements – currently set for the end of January 2022.
“The department is also in the process of procuring about 160 MW from existing renewable energy IPPs.”
Regarding generation for own use, Mantashe said, “Since 2017 NERSA has registered 438 projects totalling 206 MW. Projects totalling 44 MW are under consideration. In 2021 NERSA also issued three power generation licences totalling 59 MW. We are yet to see registration applications for large projects following the increase in the threshold to 100 MW but we are hoping to see these within the next few months.”
Returning to the announcement of preferred bidders in BW5 of the REI4P, Mantashe said Bid Window 5 aimed to procure a total of 2 600 MW, including 1 600 MW from onshore wind and 1 000 MW from solar PV plants. The programme attracted 102 bids, with capacity totalling 9 644 MW.
The outcome of the evaluation process conducted by a team of independent transaction advisors, overseen by the IPP Office, resulted in the selection of the 25 Preferred Bidder Projects, to deliver a total of 2 583 MW.
Interestingly, the weighted average price of the Preferred Bidder Projects, including wind and solar PV, is R473/MWh (or 47.3c/kWh). The weighted average price for wind is R495/MWh (or 49.5c/kWh) and for solar PV R429/MWh (or 42.9c/kWh).
Mantashe noted that a number of Preferred Bidder Projects are in provinces that had not featured in previous renewable energy bid windows. Seven of the selected projects are in the Free State, and one in KwaZulu-Natal. Other projects are in the Northern Cape, Western Cape, and Eastern Cape.
The 25 Preferred Bidder Projects will see a total private sector investment of about R50 billion into the South African economy – and will create close to 14 000 (13 900) job opportunities.
As with all the IPP Procurement Programmes to date, BW5 set out a number of key Economic Development targets to be achieved by the bidders. In this regard, the 25 selected projects have achieved South African Entity Participation of 49.2%, against the target of 49%; and a 34.7% shareholding by black people in the IPPs, against the target of at least 30%. The DMRE stipulated participation by black South Africans at project level and across the entire renewable energy value chain. The selected Preferred Bidders committed to 25% black participation in companies that will be building the different projects. While most of the subcontracting will be during construction, the Preferred Bidders committed another 28% ownership by black South African subcontractors during operation.
“For the first time, we introduced a target of five percent ownership by black women in projects, and it is very encouraging that we have already achieved a seven percent commitment through this bidding round,” Mantashe said.
In an effort to re-stimulate local manufacturing and production in the renewable energy value chain, the RFP required projects to commit to at least 40% local content during construction. The Preferred Bidders committed about 44% local spend during construction. This is in addition to the use of designated components as determined by the Department of Trade, Industry and Competition. For the first time, the RFP also required bidders to commit to local content during operation. In this regard, the Preferred Bidders undertook to spend about 41% of their committed budget during operations towards the purchasing of products that are locally produced and meet the requirements for local content.
These projects will continue to make a difference in the lives of people in those communities in the vicinity of the proposed power plants, who will own 2.5% of the projects, and they have further committed a total of R 2.7 billion towards socio-economic development and enterprise and skills development initiatives over the 20-year lifespan of the projects.
The Preferred Bidder Projects include 12 onshore wind projects and 13 solar PV projects. They were announced by Minister Mantashe as follows:
Coleskop Wind Energy Facility
San Kraal Wind Energy Facility
Phezukomoya Wind Energy Facility
Brandvalley Wind Farm
Rietkloof Wind Farm
Wolf Wind Farm
Beaufort West Wind Facility
Trakas Wind Facility
Sutherland Wind Facility
Rietrug Wind Facility
Waaihoek Wind Facility
Dwarsrug Wind Facility
And solar PV
Grootfontein PV 1
Grootfontein PV 2
Grootfontein PV 3
Grootspruit Solar PV Project
Graspan Solar PV Project
Sannaspos Solar PV Project
Du Plessis Dam Solar PV 1
Kentani Solar Facility
Klipfontein Solar Facility
Klipfontein 2 Solar Facility
Leliehoek Solar Facility
Braklaagte Solar Facility
Sonoblomo Solar Facility
The Department will now pursue financial close on all the projects within the next six months, which is a key milestone for the signing of the agreements. The Minister congratulated all the successful bidders. He said the Department aims to release Bid Window 6 by the end of January 2022. This will again include 1 600 MW of onshore wind and 1 000 MW of solar PV power in line with the Integrated Resource Plan 2019.
For more information visit: www.dmre.gov.za