- South Africa’s Independent Power Producer Procurement Office (IPPO) and the Department of Mineral Resources and Energy (DMRE) under which it falls, has missed their own legal close deadline set for 22 outstanding projects named as preferred bidders in the country’s Renewable Energy Independent Power Producer Procurement Programme Bid Window 5 (REIPPPP BW5).
- The DMRE appears to have extended the deadline now for the third time, the last one being 31st October, to a date still to be announced.
- Last month South Africa’s Mineral Resources and Energy Minister, Mr Gwede Mantashe, announced that the government is considering reopening REIPPPP Bid Window 5 citing that only one bidder with three wind projects had reached sign-off.
- The ongoing babysitting of preffered IPP bidders with projects that were clearly not ready for bid or whose bid tariff is not bankable, has caused massive reputational damage to the country’s once globally respected renewable energy procurement programme.
The DMRE set a third deadline for legal closure for the remaining 22 bidders in REIPPPP BW5 for 31st October 2022 which has come and gone. No press statement or communication has peeped out of the DMRE on the subject. Unconfirmed reports suggest that the projects are still being evaluated and some projects may reach legal closure this month still.
Only three wind projects developed by French IPP EDF has reached legal close in BW5 thus far.The contracts were signed on 23rd September and unconfirmed reports indicate that EDF will announce financial close success during the course of this week.
Related news: Preferred bidders in REIPPPP Bid Window 5 must shoulder blame for the delays
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 ( 3 x 50MW projects) has reached financial close and is expected to feed 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.
- 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
