South Africa Renewables Developers Impatient for New Bidding Opportunities in 2021

  • Dec 28, 2020
  • Greentech Media

South African independent power producers (IPPs) are hoping for the return of a national procurement program next year following a stop-gap auction ending this month.

Offers to cover 2 gigawatts of "risk-mitigation" IPP capacity were due by Dec. 22, after an original Nov. 24 deadline was extended.

The emergency procurement round, for dispatchable generation due online by mid-2022, has raised hopes that a long-awaited fifth round of the country’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) will be opened up soon.

But exactly when is unclear. During a debate on the country's economic recovery plan earlier this year, Minister of Mineral Resources Gwede Mantashe indicated that the fifth bid window of the REIPPPP would be issued in December 2020.

With the end of the year rapidly approaching, this now seems unlikely. Instead, the wind sector is “geared up for a new procurement round in the first quarter of 2021, or as some are predicting, as early as January,” the South African Wind Energy Association stated.

Thandiwe Maimane, director of communications for the South African Department of Mineral Resources and Energy, said in an email that there are "currently no updates" on procurement plans beyond what has already been posted on the government website.

"The program has been plagued by delays and no real commitment from the government," Kevin Robinson, South Africa's representative within the Africa Solar Industry Association, said in an email. "Realistically, I personally don't see anything happening before March."

Similarly, the South African Wind Energy Association is "geared up for a new procurement round in the first quarter of 2021, or as some are predicting, as early as January," according to a December press release.

The continuing delay in renewables procurement is frustrating for a sector that has been warning since spring that South Africa must restart bidding to meet an integrated resource plan target of 1.6 gigawatts of new wind and 1 gigawatt of solar by 2022.

There is slight consolation in that the South African government has at least made headway in tackling some of the issues that have stalled procurement for the last couple of years, industry observers say.

“The biggest challenges to date have been government delays with procurement of new generation,” as well as state utility Eskom’s “conflict of interest with its own generation fleet and IPPs,” said Chris Ahlfeldt, an energy analyst at Blue Horizon in Cape Town, in an email.

Ongoing crises at Eskom led the government to propose breaking up the utility in 2019. There are also now plans to establish an independent transmission system and market operator and to procure roughly 20 GW of new utility-scale wind and PV by 2030, said Ahlfeldt.

“[The] government and Eskom have already begun to implement the roadmap and make reforms to the electricity supply industry, although it's taking longer for Eskom to resolve legal separation of its core business units than initially planned,” he said.

In another sign of improving fortunes for renewable power developers, Eskom’s management has gone from dragging its feet over signing new power-purchase agreements to openly welcoming more clean energy on the grid.

“Eskom's current CEO acknowledged the vital role IPPs play in the market and even requested more wind and solar capacity be procured to address supply shortfall and the low probability that new coal or new nuclear will be built,” said Ahlfeldt.

Renewable IPP representatives figured prominently among the more than 1,100 attendees to a September risk-mitigation bidders’ conference held by the Department of Mineral Resources and Energy. That’s despite the fact that the technology-agnostic procurement round was for dispatchable capacity and thus likely to favor fossil-fueled power plants.

Companies attending the conference included Mainstream Renewable Power, ACWA Power, Enel Green Power and EDF Renewables, among others.

Although “developers and investors are already engaging with potential local partners and making plans for projects as part of Round 5, it also makes sense for IPPs to take a longer view on the growth of the South African market and to pursue other project opportunities like the 2 GW risk mitigation IPP program," Ahlfeldt said.

Every day that the government drags its feet over restarting the REIPPPP adds to the feeling that the administrative challenges that have plagued the program before are yet to be resolved.

"I don't believe the government has the skill set or willingness to put measures in place to ensure a sustainable utility-scale renewable energy sector," said Robinson at the Africa Solar Industry Association.

Instead, commercial and industrial-scale projects have "gained a lot of traction, and I believe that except for some of the larger developers, this is where the future really lies," he said. "There is a large market for embedded generation projects, especially within the mining sector."