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South Africa's government launched its latest renewable
electricity capacity solicitation and under-fire monopoly utility
Eskom its first as decarbonization of the country's power
generation sector took another couple of steps forward in recent
days.
Unveiled 6 April, bid window 6 of the
government's Renewable Energy Independent Power Producers
Procurement Programme (REIPPPP) seeks 2.6 GW of capacity, of which
1.6 GW will be onshore wind projects and 1 GW photovoltaic solar.
Bids are due 11 August and the solicitation is the latest in a
series of government initiatives to diversify the coal-dominated
generation stack and shore up overall supplies.
The requests for proposals (RFP) coincide with winning bids in
the government's 2021 2.6-GW renewable power solicitation
approaching financial close.
Meantime, Eskom on 12 April sought to attract developers
interested in leasing land across some of its many sites for
constructing renewable power generation. The company, whose
creaking fleet of mainly coal-fired plant accounts for 86% of
domestic capacity, has borne the brunt of criticism as load
shedding—as rolling blackouts are known locally—regularly
hamstrings segments of South African life and the country's
economy.
Eskom is offering access to existing generation sites in
Mpumalanga province—east of the country's administrative
capital of Pretoria and bordering Mozambique—that already have
transmission connections. It hopes as much as 4 GW of capacity can
be added over time. Each facility where land will be leased will be
limited to 100 MW of capacity.
The company said it hoped the leases could "give impetus to
collaborative efforts to resolve South Africa's electricity
crisis," although bidders only have until 29 April to submit their
proposals. The RFP is part of Eskom's Just Energy Transition
program.
This week's debut solicitation from Eskom comes with load
shedding in the spotlight again.
Eskom's latest load shedding began at 5
pm local time (1600 GMT) 12 April and will continue through 5 am
local time 13 April after three generation units broke down. The
company said it currently has 4.8 GW of capacity on planned
maintenance and nearly 14.5 GW of capacity shut due to unplanned
repairs. South Africa's installed power generation capacity is just
over 58 GW.
The RFP would increase security of supply for a grid and economy
beset by the regular blackouts. Eskom first began load shedding in
2007, when it said the blackouts would continue for five to seven
years.
Renewables aid creaking grid
Run by the Department of Mineral Resources and Energy (DMRE),
the 6 April and 2021 RFPs are part of government plans to ease the
pain of chronic power supply instability in Africa's third biggest
economy by GDP.
The 2021 RFP known as REIPPPP bid window 5 attracted 102 bids
from potential project developers, DMRE data revealed. Of the 102 bids, 63
involved PV projects and 39 onshore wind proposals.
A total of 25 preferred bidders were announced 28 October 2021. Of the 25, 13 were
wind and 12 solar PV. The DMRE set a financial close schedule of
six months. The ministry was unable to respond to Net-Zero
Business Daily by S&P Global Commodity Insights inquiries
13 April on how many projects had reached financial close. A source
close to the situation said some projects would miss the end of
April deadline for closing.
Mainstream Renewable Power declined to say if the Irish
pure-play renewables developer would meet the deadline, but is
"firmly" on track to reach financial close for the 1.27 GW of wind
and solar projects it won government approval for in bid window 5,
a spokesman said 13 April. The group, controlled by Norwegian
industrial group Aker, already has 850 MW of capacity online in
South Africa that it bid into previous REIPPPP rounds, he told
Net-Zero Business Daily.
The level of interest in last year's RFP exceeded expectations,
and bidding into this month's solicitation is again expected to be
oversubscribed, which could lead to even lower prices than those
achieved in bid window 5.
South African National Energy Association Chairperson Kiren
Maharaj told Net-Zero Business Daily 12 April many
developers have projects that are ready to be bid into the RFP,
adding that work on capacity for commercial and industrial power
users is soaring too.
Fanele Mondi, CEO of Energy Intensive Users Group of Southern
Africa, said in a 12 April email that the latest RFP could build on
the back of a successful bid window 5. "We hope bid window 6 will
be as competitive and deliver further reduction in prices while
closing our grid energy deficit," he said.
The lowest successful bid into the 2021 RFP was 34 South African
cents/kWh (2.34 US cents/kWh), while the average cost was 49 South
African cents/kWh, which is 25% of South African Wind Energy
Association (SAWEA) CEO Niveshen Govender's current residential
power bill rate, he said during an interview with local media.
Mondi said the decrease in prices in the 2021 RFP was part of a
wider trend. "Granted, the procurement program started at high
prices but over the succeeding bid windows these prices have seen a
dramatic decline," he said.
"We would like to see these lower prices drive towards a lower
rate of increase," in Eskom's prices too, Mondi said. Prices for
commercial customers more than tripled over the past decade,
according to company data (see graph below).
Source: Eskom
Mondi added that the short lead times for adding generation
capacity were to be applauded.
A further encouraging sign in the development of the
solicitations was the addition of energy storage and ancillary
services as part the program, Mondi said.
Bid window 5 was key for both established parts of the
renewables sector and the emergence of new facets, sources say.
"The opening of bid window 5 a year ago heralded the rebirth of the
wind energy industry, following a hiatus of almost seven years," a
SAWEA spokeswoman told Net-Zero Business Daily in a 12
April email.
And there is room to build on that, SAWEA CEO Govender said in a
statement following the launch of bid window 6. "South Africa can
address fundamental challenges of energy access, energy security
and climate change through the deployment of renewable energy. We
can harness our abundant potential of increasingly cost-competitive
renewable energy to service the growing demand for electricity and
avoid a potential fossil-fuel lock-in, in addition to local and
foreign investment," he said.
S&P Global Commodity Insights expects 560 MW of new South
African utility-scale solar PV additions on average annually
through 2050 and 700 MW of new wind installations, along with more
than 400 MW a year of residential and small commercial systems.
South Africa's government in September 2021 approved plans for a more
ambitious GHG emissions target for the coming decade than
previously expected in a submission to the UN Framework Convention
on Climate Change.
The South African renewable generation push will not be unique
in Africa. S&P Global Commodity Insights expects renewables to
account for at least 35% of the continent's generation stack by
2050. Such changes are necessary because climate change affects
Africa, especially Sub-Saharan nations, disproportionately.
Miners secure supplies
The government and state-owned enterprises aren't the only
entities looking to add renewable electricity generation.
In March, top tier miner Anglo American signed a memorandum of
understanding with France's EDF Renewables to develop a "regional
renewable energy ecosystem" in South Africa.
That ecosystem—involving as much as 5 GW of wind and solar
generation, as well as storage capacity—is expected to meet
Anglo American's operational electricity requirements in South
Africa through renewable electricity by 2030.
Anglo American is aiming for carbon neutral operations by 2040,
and it said the EDF deal is designed to abate the largest single
source of its Scope 2 emissions—South Africa. Scope 2 emissions
refers to the emissions released through purchases of heat and
power for its operations.
Also, in February, EDF's French rival Total Eren signed an agreement with
African energy company Chariot to develop a 40-MW PV project in
South Africa for platinum group metals producer Tharisa.
Silvia Macri, Africa and Middle East team leader with S&P
Global Commodity Insights' Global Power & Renewables team,
recently noted on the EnergyCents
podcast that many mining companies, especially in remote
locations, have been shifting to renewable generation from diesel
in the past few months. A particular focus has been on hybrid solar
and storage systems, she said.
Solar and storage are much cheaper than diesel generators,
especially for remote locations, even if they are more expensive
relatively than a larger fossil fuel-fired facility, Macri's
S&P Global Commodity Insights colleague and energy storage
specialist George Hilton added.
And as Mondi told Net-Zero Business Daily, these
projects and those built under the government solicitations will
not only stabilize the grid, but will also provide Eskom with the
spare capacity needed to carry out the major repairs its generation
fleet has long required.