- South Africa’s Independent Power Producer Procurement Office (IPPO) and the Department of Mineral Resources and Energy (DMRE) under which it falls, has repeatedly missed their own legal and commercial close deadline set for 12 outstanding projects named as preferred bidders in the country’s Renewable Energy Independent Power Producer Procurement Programme Bid Window 5 (REIPPPP BW5) plus the outstanding projects in the Risk Mitigation procurement programme which includes the three controversial Karpowership gas to power floating plants totalling 1220MW.
- The projects for REIPPPP BW5 were awarded back in October 2021 and the risk mitigation projects were awarded preferred bidder status in March 2021.
- The IPPO set a hard stop date for 31st December 2023 for both programmes.
- Yesterday in his weekly press briefing on the status of South Africa’s energy sector, Minister of Electricity in The Presidency for electricity, Dr Kgosientsho Ramokgopa, confirmed that there had been representations from certain bidders asking for an extension and ‘could not say with any degree of certainty that government will still stick to that date’. Link to video of full briefing HERE
- The ongoing babysitting of preffered IPP bidders with suspect BBBEE partners and projects that were clearly not ready for bid or whose bid tariffs are clearly not bankable, has caused massive reputational damage to the country’s once globally respected renewable energy procurement programme. Read more
The DMRE along with the IPPO is responsible for energy procurement in the country. Since the Independent Power Procurement Office (IPPO) was seconded to the Central Energy Fund in 2017 and then purged in 2019 to fall under the Department of Mineral Resources (DMRE), the ability of the country to procure new generation capacity has declined dramatically. Read more
Mr Gwede Mantashe was appointed Minister of Mineral and Energy Resources in May 2019. That same year Mantashe was credited for promulgating the country’s Integrated Resource Plan (IRP) which seeks to procure 35348MW of a mix of generation technologies by 2030. The following year he gazetted a Sector 34 determination to procure 11813MW of power by 2022.
Since Mantashe’s appointment, three energy procurement programmes have been implemented namely; the Risk Mitigation Independent Power Producer Programme (RMIPPPP) which seeks to procure 2000MW of new generation capacity (launched in September 2020), and the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Bid Window 5 which seeks to procure 2500MW of new generation wind and solar capacity (launched in April 2021). A third procurement programme, REIPPPP Bid Window 6 which seeks to procure 2600MW of solar and wind capacity, was launched in April this year and updated to procure 4200MW.
In total, 8700MW is to be procured under the three programmes yet to date only 150MW is feeding electrons into the grid at the end of Q4 2023.
IPPO has delivered a knee-jerk reaction by trying to address the skewed outcome of Bid Window 5 with updated criteria for Bid Window 6 but the reputational damage is evident in the response to Bid Window 6 where the number of bidders has dropped by around half compared to Bid Window 5. Read more
The outcome of Bid Window 5 has been unprecedented globally in any renewable energy procurement tender so much so that allegations of tender rigging have emerged. Taking a closer at the outcome there are also several standouts which differ from previous successful bid windows in South Africa:
- One international IPP, Mainstream Renewable Power, won 12 of the 25 projects and all 12 projects have not reached financial close.
- 21 of the 25 preferred bidders have the same BBBEE partner in H1 Holdings – Mainstream Renewable Power (12 projects) , Scatec (3 projects) and EDF (3 projects) and local IPP Red Rocket (3 projects).
- 15 of the 25 projects were won by Norwegian IPP’s.
- The tariffs bided were unsustainably low and not bankable. The average weighted price bid for solar comes in at (R) 42.9c kW/h while the average bid for wind is (R) 49.5c kW/h. Read more
- The majority of the projects who won preferred bidder status were not shovel-ready and had outstanding development works activities including CEL, EIA and other permitting.
South Africa is in a massive energy crisis. Rotational load shedding is getting worse and the cost to the economy is a massive R950 million a day. According to a report presented by the University of Capetown, if 5GW of renewable energy was rolled out before 2021, the country would not be experiencing load-shedding. Read more
Author: Bryan Groenendaal