The Department of Mineral Resources and Energy (DMRE) told lawmakers on Tuesday that the postponement of financial close on 25 wind and solar projects selected as preferred bids in October was the result of delays in the issuance of budget quotations from Eskom for connection to the grid.
Bid window five (BW5) of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) was scheduled to close at the end of April, but the decision to delay the signing of power purchase and implementation agreements was confirmed by the IPP Office on April 28.
In an update to bidders, the IPP Office indicated that financial close had been delayed to “accommodate the issuing of budget quotations by Eskom”.
It added that, in line with Eskom timelines, the first 14 projects were now scheduled to close by the end of July, while the remaining 11 would reach financial close only at the end of September, which would be after the closing date for submissions under BW6.
The BW6 request for proposals (RFP) was released on April 6.
Eskom, which has been calling for the introduction of between 4 000 MW and 6 000 MW of new capacity to reduce the ever-present risk of load-shedding, did not immediately respond to a request for comment on the reasons for the delay in the issuance of budget quotes.
In response to a question posed by the Democratic Alliance’s Kevin Mileham regarding confirmation of yet another delay to the conclusion of the more controversial Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), deputy director-general Jacob Mbele noted that the RMIPPPP was not the only postponement, with BW5 of the REIPPPP having now also been delayed.
“What is pending is for Eskom to sign the contracts with the IPPs in both programmes,” Mbele said, adding that the most recent delay to the signing of RMIPPPP contracts had been at the request of Eskom.
A signing ceremony had initially been scheduled for the end of March, following three prior postponements.
Despite a new legal application to have licences granted by the National Energy Regulator of South Africa (Nersa) to three Karpowership projects selected under the RMIPPPP reviewed and set aside, Mbele expressed optimism that the new deadline of the end of May would be met.
This, despite ongoing warnings over the flawed design of the RMIPPPP, which critics warn will tie consumers into exorbitant contracts for the coming 25 years.
Regarding concerns that several of the RMIPPPP and BW5 projects were being held up as a result of difficulties in meeting local content commitments, Mbele said that the bidders were well aware of the processes that they needed to follow to resolve such difficulties.
“They made a commitment to meet the requirements as per the RFP and if they hit a problem, they know the process that they have to follow, which is to consult the project officer.
“And they also know the process that they have to follow at the Department of Trade, Industry and Competition to apply for exemptions [from local content].”
Mbele and several other officials, including acting director-general Patricia Gamede, were responding to questions posed following DMRE’s presentation of its 2022/23 Annual Performance Plan (APP) and its Budget Vote to the Parliamentary Portfolio Committee on Mineral Resources and Energy.
Lawmakers were told that the APP included the following planned targets for electricity:
- the issuance of an RFP for 513 MW of energy storage;
- an RFP for 2 600 MW of additional renewable energy under BW6;
- the development of an RFP for 1 600 MW of renewable energy under BW 7;
- the issuance of an RFP for 1 500 MW from new coal;
- the release of an RFP for 3 000 MW of gas to power;
- securing concurrence from Nersa for a Section 34 determination in line with the Integrated Resource Plan of 2019 (IRP 2019);
- Approving the Renewable Energy Sector Master Plan;
- Electrifying 15 000 additional households through non-grid technology
- monitoring and verification of the implementation of the grid electrification of an additional 200 000 households by Eskom and contracted municipalities; and
- developing electrification master plans for KwaZulu-Natal, Eastern Cape, Gauteng, Limpopo, Mpumalanga and North West.
The DMRE listed the implementation of the IRP 2019 as a key priority but did not include any details in its presentation regarding updating the document, which is widely recognised as being sorely out of date.
When questioned about possible regular revisions, deputy director-general Ntokozo Ngcwabe reported that the department had limited capacity to conduct the necessary modelling, even though it had set an internal target of revising the IRP every two years.
Two modellers had been employed recently, but those individuals would only be in a position to turn their attention to the IRP once they had completed ongoing work on the Gas Master Plan, Ngcwabe revealed.
She stressed, however, that the DMRE was aware that the assumptions contained in the IRP 2019 were “totally different today”.
Meanwhile, the finalisation of the governance framework for the coordination of the nuclear new build programme and multipurpose reactor were outlined as priorities, as was the issuing of an RFP for the procurement of 2 500 MW of new nuclear.
The department’s Budget allocation for 2022/23 is R10.3-billion, with transfer payments to public entities, implementing agencies and municipalities comprising R8.3-billion, or 79.9%, of that amount.