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Tuesday, October 30, 2012

Major milestone for IPPs and renewable energy in SA, but at what cost?

by Chris Yelland, EE Publishers

A significant milestone for renewable energy in South Africa was reached on 29 October 2012 when the minister of energy, Dipuo Peters, announced financial closure for some 1425 MW of renewable energy projects for the first bid window of the renewable energy independent power producer procurement programme.

The minister indicated that after delays of about three months, the Department of Energy (DoE) had now obtained Government and Treasury approval under the Public Finance Management Act to enter into long-term, 20-year agreements with 28 preferred independent power produces (IPPs) for the supply of renewable energy (RE) into the Eskom grid.

The 28 preferred bidders for the first bid window were initially announced by Minister Peters at COP17 in Durban on 7 December 2011. Now that financial closure and government approval has been achieved, the final contracts and implementation agreements will be signed by the DoE, Eskom and the individual bidders on 5 and 6 November 2012.

The projects under this first bid window represent a capital investment by the renewable energy IPPs of R47-billion.

Eskom CEO Brian Dames indicated last week that all necessary arrangements such as grid access and power purchase agreements between the renewable energy IPPs and Eskom were finalised, and that there were no impediments to progress from Eskom's side.

In a second window, bids for a further 1040 MW of renewable energy projects closed on 5 March 2012, and financial closure for this second window is scheduled for 15 March 2013. A further three bid windows planned will bring the total installed capacity of renewable energy generation capacity to 3625 MW by 2017, with an expected investment by renewable energy IPPs of some R100-billion.

Dr. Wolsey Barnard, deputy director general at the DoE responsible for implementation programmes and projects, indicated that the average bid prices for the supply of energy in the first bid window for the various renewable energy technologies were:

Concentrating solar power (CSP): R2,69 per kWh
Solar photo-voltaic (PV): R2,76 per kWh
Wind: R1,14 per kWh

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