IRP News

Clarity on emergency procurement of 3 000 MW expected only by end Feb

Clarity on emergency procurement of 3 000 MW expected only by end Feb

8TH JANUARY 2020

BY: TERENCE CREAMER
CREAMER MEDIA EDITOR

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Hundreds of potential respondents to a request for information (RFI) – issued in December by the Department of Mineral Resources and Energy (DMRE) for supply and demand solutions to South Africa’s prevailing power deficit – descended on Centurion on Wednesday for a briefing ahead of the submission deadline of January 31.

In what became an almost standing-room-only affair, senior representatives from the Independent Power Producer (IPP) Office – Maduna NgobeniPervelan Govender and Lena Mangondo – urged potential developers to provide fresh  and detailed information on short-term, as well as medium- to long-term, projects that could assist in helping to close an immediate supply shortfall of some 3 000 MW and, in time, restore system stability.

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Acting IPP Office head Advocate Sandra Coetzee was not at the briefing, owing to illness.

The responses, Govender said, would be evaluated during February and would be used to guide future Ministerial determinations opening the way for both an emergency ‘Risk Mitigation Power Purchase Programme’ and possibly other IPP procurement programmes.

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The evaluation was likely to take a full month to complete, after which a report would be delivered to the DMRE. The department would then decide on the approach that would be taken to procuring much-needed generation capacity.

The IPP Office will release clarification responses in the coming weeks following several enquiries that had been received since the release of the RFI on December 13 but indicated that there would be no extension to the January 31 submissions deadline.

“The period of evaluation will probably be around a month. Thereafter, a submission will be done to the department for direction on the way forward with regards to procurement. So hopefully by the end of February we will have direction,” Govender said at the briefing.

Ngobeni added that any procurement model adopted would be aligned with South Africa’s Public Finance Management Act, which stipulates that any public procurement be premised on fair, equitable, transparent and competitive bidding. For this reason, the DMRE and the IPP Office would not contemplate a feed-in tariff model to help accelerate project implementation.

He also stressed that the scope of the IPP Office was confined to the procurement of electricity generation capacity on behalf of the DMRE and did not include addressing prevailing regulatory obstacles to self-generation. He indicated, however, that the emergency procurement process was but one initiative under way to address the electricity crisis, which has resulted in a return to periods of load-shedding since December.

In an opinion article published by Daily Maverick, President Cyril Ramaphosa said that government was “determined to remove the bureaucratic constraints to self-generation and have those users with the capacity producing their own power”.

Currently, distributed generation plants of above 10 MW require specific Ministerial permission to proceed. Plants below 10 MW are able to proceed in the absence of such permission, but require either registration (sub-1 MW) or licensing with the National Energy Regulator of South Africa (Nersa).

The South African Photovoltaic Industry Association estimates that up to 2 000 MW of small-scale capacity can be added to the energy mix over the next 12 months should the blockages be cleared.

ALL TECHNOLOGIES

Govender said all technologies would be considered in the RFI process, but that priority would be given to those projects that could be grid connected in the shortest time and at the least possible cost.

Projects not submitted as part of the RFI would also not be excluded from bidding once a request for proposals (RFP) was issued. However, Govender indicated that the only way to influence the content of the RFP would be to make an RFI submission.

The officials stressed that the Risk Mitigation Power Purchase Programme was accommodated for in the Integrated Resource Plan 2019 (IRP 2019) through an open-ended allocation for the period 2019 to 2022, determined by “the extent of the short-term capacity and energy gap”. Thereafter, the yearly allocation would be limited to 500 MW for such solutions.

The officials said that the emergency procurement programme would not displace other longer-term procurement programmes, including the much-anticipated fifth bidding round of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

They also encouraged RFI respondents to submit projects with longer gestation periods, such as those selected in 2015 as preferred bids following the so-called ‘Expedited Round’ of the REIPPPP, which has since expired.

Ngobeni refused to be drawn on the nature of the power purchase agreements (PPAs) that could arise under the Risk Mitigation Power Purchase Programme, nor did he confirm whether South Africa’s financially-distressed utility, Eskom, would act as the single buyer as has been the case for all previous utility-scale procurement programmes.

“We are in a process to deal with some of these issues and we are engaging with Eskom and Nersa to make sure that we clear up these issues. Obviously, we had an impasse in the past where we signed up certain projects and it is important that we learn from that and we deal with the issues that cause that impasse,” Ngobeni said, referring to Eskom’s previous refusal to sign PPAs for 27 renewable-energy projects procured by the IPP Office in 2014.

The officials also refused to be drawn on the tariff envelope being sought for the emergency projects, arguing that the RFI is designed not only to provide it with visibility of the options, but also an indication of what these options would cost. 

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