The South African government is actively considering significant changes to the public procurement process for Independent Power Producer (IPP) generation capacity. These changes aim to accelerate the deployment of renewable energy while addressing the country’s grid constraints and fostering green industrialization.
Key Changes Under Consideration
- Increased Renewable Capacity: The government plans to facilitate the procurement of an additional 10 GW of renewable energy capacity. This includes reallocating capacity from previous bidding rounds where projects were either not selected or did not progress to construction.
- Streamlining Procurement Processes: Electricity and Energy Minister Dr. Kgosientsho Ramokgopa emphasized the need to adapt procurement processes due to recent project failures in advancing to financial close. This includes:
- Collaborating with Eskom to reduce timelines for issuing grid connection cost estimates.
- Conducting bidding rounds specifically for projects that have received grid connection estimates from Eskom.
- Finalizing a curtailment framework to unlock grid capacity in areas currently deemed full.
- Implementing regional procurement bid windows in areas identified as having immediate capacity for new generation.
- Reconfiguring Bid Windows: The government is considering separate procurement rounds for wind and solar PV projects, as well as technology-agnostic bid windows that could include collocated generation technologies and storage solutions.
- Transition to Online Auctions: To expedite the bidding process, the government is exploring the possibility of transitioning to online auctions.
- Addressing Local Content: Minister Ramokgopa indicated that while a premium may be necessary to support higher levels of local content, investments should be cautious in areas where South Africa may not compete effectively with manufacturers in China.
Current Status of IPP Projects
As of now, approximately 8.2 GW of IPP capacity from 107 projects is either operational or under construction, with a combined investment value of about R272 billion. However, challenges remain, including the failure of several projects to reach financial close, which has prompted the IPP Office to take action against bidders who did not meet their commitments [1].
Conclusion
The proposed changes to the public procurement process for IPP generation capacity reflect the South African government’s commitment to enhancing renewable energy deployment while addressing existing challenges. By streamlining processes and increasing local content, the government aims to create a more stable environment for investment in the renewable energy sector.
Learn more:
- South Africa – Energy
- Mineral Resources and Energy on three new bid windows released under the Independent Power Producer Procurement Programme (IPPPP), calling for renewable energy, gas and battery energy storage technologies | South African Government
- Transforming South Africa’s energy landscape | PFI
