Eskom

Eskom aiming to unlock 1 000 MW through Mpumalanga land lease bidding process

12TH APRIL 2022

BY: TERENCE CREAMER

original article here

State-owned electricity utility Eskom has initiated a bidding process for the leasing of generation land in Mpumalanga to independent power producers (IPPs) and CEO André de Ruyter indicates that there is sufficient grid capacity available to support renewables projects with a combined capacity of about 1 000 MW.

Speaking following the resumption of load-shedding on April 11, De Ruyter said the request for proposals (RFP) documentation had been issued on April 8, with a closing date for submissions of April 29.

The land release, he added, was part of Eskom’s response to the current shortage of generation capacity, which, until addressed, placed the country at an ongoing risk of rotational power cuts. The generation shortfall is estimated to be between 4 000 MW and 6 000 MW.

It was also aligned with a recent reform allowing sub-100 MW private generation projects to proceed without a licence, including projects that will sell electricity to non-related third parties and used the grid to wheel power. Eskom expects the reform to yield about 4 000 MW in the coming few years.

The land being made available through the RFP was adjacent to Eskom’s power stations in Mpumalanga and where there was “sufficient grid connection capacity” to connect potential wind and solar projects.

Grid connection capacity has emerged as a key constraint, with capacity having been all but exhausted in the Northern, Eastern and Western Cape provinces, which are also home to some of the country’s best wind and solar resources.

“This is the first-of-its-kind-type of process that we are running [and] we anticipate that we will get some 1 000 MW as a consequence of this process,” De Ruyter said, indicating that the first new capacity could be introduced in about 18 to 24 months.

Eskom estimates the potential generation capacity for the different land parcels being made available to be 0.45MW/ha and confirms that high-level grid access capacity studies have been conducted for the different sites, which surround Majuba and Tutuka.

De Ruyter also confirmed that the first battery energy storage system (BESS) contracts had been awarded at the end of March for 199 MW/832 MWh of capacity across eight sites.

The R5-billion BESS investments are being supported with finance provided by the World Bank and the projects have been licensed by the National Energy Regulator of South Africa.

“We are really looking forward to those projects proceeding and that will also help us significantly with grid stability going forward.”

De Ruyter said that the enquiry for Phase 2 of the BESS roll-out would also proceed, together with efforts to build additional pumped hydro storage.

Both storage solutions, he added, would play an ever-increasing role in the electricity supply industry as a complement to higher levels of variable renewable energy.

PROCUREMENT PROGRESS?
De Ruyter also welcomed the progress being made by the Department of Mineral Resources and Energy (DMRE) and the IPP Office in procuring new capacity, including through the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) and the much-delayed Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP).

The 25 wind and solar photovoltaic (PV) projects named as preferred bids in October from REIPPPP bid window five (BW5) could add nearly 2 600 MW of additional capacity in 2023/24, should they reach financial close at the end of April as scheduled.

There are concerns, however, that some of the BW5 projects may not be in a position to close on time, owing to pricing and supply-chain difficulties that have arisen since the projects were bid and which have intensified recently as a result of Russia’s invasion of Ukraine, which has increased demand for renewables components elsewhere, and recent Covid lockdowns in China.

De Ruyter said he could not comment on whether all the projects would close but reinforced the critical importance of introducing new capacity as soon as possible, particularly in light of the unreliability of undermaintained coal fleet.

Eskom would provide its winter system outlook in the coming weeks but is already warning that there will be bouts of load-shedding. Under a worst-case scenario, there could be as much as 100 days of load-shedding over the period.

De Ruyter, therefore, also welcomed the recent release of the BW6 RFP for another 2 600 MW of wind and solar PV, which he said could, all going to plan, begin coming online in 2024/25.

There were, however, still “some documentary and legal issues” to be resolved before Eskom could sign power purchase agreements for the controversial RMIPPPP projects, for which De Ruyter expected a resolution within six weeks.

Financial close for the ‘emergency’ projects had already been delayed three times and the six-week timeframe outlined by De Ruyter fell outside of the revised end-April deadline announced recently by the IPP Office.

When approached by Engineering News to confirm the new deadline, the IPP Office said that the department was “engaging legal counsel and all stakeholders to fully understand the implications of [a recent] judgment and will communicate next steps in due course”.

DNG Energy, which lost its legal bid to overturn the award of RMIPPPP preferred bidder status to Karpowership, has since been granted the right to partially appeal the ruling.

“Eskom as an entity has a fiduciary duty to ensure that when it signs a contract, any contract, but in particular power purchase agreements, that we protect the interests of the entity–  that is the duty of our board of directors, and that’s a duty that they take very seriously,” De Ruyter said.

“We are, therefore, very carefully scrutinising the [RMIPPPP] documents and where we see risks that could adversely affect Eskom as an entity, we require certain assurances from the IPP Office and/or the bidders.

“I don’t want to elaborate and I don’t want to negotiate these in public, but we do have a duty of care to ensure that we can do not enter into unduly onerous contracts that will cause financial hardship to Eskom in the long run.”

The duty to protect the consumer resided primarily with the policy department, he said, when asked about the high cost of the RMIPPPP tariffs. 

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