Tuesday, October 30, 2012

All systems go for Nov 5 signing of first R47bn in renewables projects

Following several delays, government confirmed on Monday that the framework is now in place for the first 28 wind and solar projects, identified as preferred bidders under South Africa’s Renewable Energy Independent Power Producer Programme (REIPPP) in December 2011, to move to financial closure.

Energy Minister Dipuo Peters apologised for the delays, but said that preferred bidders should be prepared to begin signing the final agreements from November 5.

The contracts associated with all 28 projects would have to be concluded in a single day, rather than over several days as originally envisaged.

Peters indicated that the big-bang November 5 signing approach was not a "Guy Fawkes [Day] thing", but had rather emerged as a legal requirement. Each preferred bidder would be allocated a slot to initial the necessary contracts with the Department of Energy and Eskom.

The signing of the power purchase, implementation and financial agreements would open the way for the construction of projects representing a collective investment value of around R47-billion and a collective renewables capacity of 1 415 MW.

In the first round, 632 MW were allocated to 18 solar photovoltaic (PV) projects, while 634 MW were designated for eight wind farms, and a further 150 MW to two concentrated solar power (CSP) projects.

Under the original schedule, these first-bid-window projects were expected to reach financial closure by mid-June. But the process was delayed to enable government to finalise a support framework for Eskom, which would purchase the power produced by the independent power producers (IPPs).

Finance Minister Pravin Gordhan said last week that the “required concurrence” for the first 28 IPP projects had been finalised.

The wind and solar PV projects were expected to be integrated into the national grid during 2014, while the CSP projects had until 2016 to reach commercial operations.

Financial close for the 19 second-bid-window preferred bidders, initially set for December 2012, was now scheduled to take place between March 18 and 28, 2013, while the third bid-window submission date had been delayed to May 7, 2013.

The 19 second bid-window projects were expected to attract projects valued collectively at R28-billion.

Through the REIPPP, government was initially planning to procure 3 725 MW of renewables capacity, collectively valued at around R100-billion. That would have left only 1 165 MW still to be allocated during the third bid window, with the first 47 preferred bidders having absorbed 2 460 MW collectively.


However, Peters confirmed that the REIPPP would be extended into a rolling procurement programme, with an additional allocation of 3 200 MW to be added for projects that could be developed by 2020.

That meant that a total of 4 360 MW of capacity would be available for allocation during future REIPPP bidding rounds.

The 3 200 MW had been divided as follows: 1 470 MW for onshore wind, 400 MW for CSP, 1 075 MW for solar PV, 47.5 MW for biomass, 47.5 MW for biogas, 60 MW for small-scale hydro, and 100 MW for small renewables projects.

The Ministerial determination dealing with the additional REIPPP allocation had been sent to the National Energy Regulator of South Africa for its concurrence, which had been received.

Details would be promulgated in an upcoming Government Gazette, which would be published during November.

A procurement process, incorporating lessons learned during the first bid window, would follow.

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