Legalbrief – IRP progress

Energy: Ramaphosa promises transparency in procurement process

SA’s additional electricity, which is crucial to driving economic growth, will be procured through a transparent tender process that prioritises competitiveness and cost-effectiveness, President Cyril Ramaphosa said last week. According to a Cape Times report, in his weekly newsletter, Ramaphosa said the new energy – to be procured from diverse sources including solar, wind, gas, coal and storage – would, while meeting the country’s needs ‘well into the future’, also help meet its international obligations to reduce carbon emissions. This month, Mineral Resources and Energy Minister Gwede Mantashe published a gazette paving the way for the procurement of 11 813MW of electricity and storage from independent power producers. The plan, for which the National Energy Regulator of SA (Nersa) gave the green light a couple of months ago, will see the generation of 6 800MW of solar and wind energy, 3 000MW of gas generation, 1 500MW of coal generation and 513MW of storage. ‘Our fleet of coal-fired power stations is ageing, vulnerable to breakdowns and incurs significant maintenance costs,’ Ramaphosa said. ‘It is therefore vital that we significantly, and speedily, increase our electricity generation capacity.’ New generation projects that could be connected to the grid as soon as possible would be given priority, he said. The government would soon initiate various procurement bidding windows, including opening bid window five of its Renewable Energy Independent Power Producer Programme. Draft amendments to regulations that would enable municipalities in good standing to procure their own power from independent power producers (IPPs) would soon be gazetted, he added.

Full Cape Times report (subscription needed)


Eskom CEO Andre de Ruyter has expressed support for the determination, adding that some 5 000MW of new capacity was required to help address the electricity crisis and lower the risk of load-shedding. An Engineering News report notes that Eskom’s support is seen as crucial, as its previous hostility towards the procurement of renewable energy led to the programme stalling for four years. Nevertheless, industry observers believe that the new IPP projects will be bankable only if the National Treasury provides guarantees that it will stand behind Eskom as the buyer, as it has done previously. Such guarantees have reportedly been put in place for the 2 000MW currently being procured under the urgent Risk Mitigation Independent Power Producer Procurement Programme. Ramaphosa said stabilising state-owned enterprises was an important part of the reform process and addressing financial, structural, managerial and operational challenges at Eskom would take place alongside ‘fundamental structural reforms to assure the future of our energy supply’. Business Leadership SA CEO Busisiwe Mavuso described the gazetting of the Ministerial determination as a major step in resolving the country’s energy crisis. She welcomed the recent progress made to unlock procurement, adding that SA was ‘finally at the cusp of a real change in energy security and a potentially vibrant new economic cluster’.

Full Engineering News report


The City of Cape Town, which has been pushing for the right for municipalities to procure electricity directly from IPPs for several years, is compiling what it describes as a ‘mini’ integrated resource plan (IRP) to guide its future procurement decisions and actions. According to an Engineering News report, energy and climate change executive director Kadri Nassiep said the city has contracted the Council for Scientific and Industrial Research to develop the mini IRP, which should be completed within six to eight months. Speaking during a webinar organised by the Italian-South African Chamber of Trade and Industries, Nassiep stressed that the procurement of electricity from large-scale IPPs remained a key objective, despite the prevailing legal and regulatory constraints preventing municipalities from doing so. The city took the matter to court recently after the National Energy Regulator of SA (Nersa) said it could not licence an IPP to establish new generation capacity in the absence of a specific determination catering for such capacity from the Mineral Resources and Energy Minister. On 15 August, Judge Leonie Windell referred the dispute back to the parties, including Nersa, the Minister and the City of Cape Town, for resolution. Nassiep indicated that the city was concerned that the most recent Ministerial determinations still listed Eskom as the sole buyer. The city wanted the right to procure from IPPs as part of a broader plan to diversify its electricity supply away from Eskom, as well as to reduce its carbon footprint and electricity costs over the medium to long term.

Full Engineering News report


Allowing Cape Town to procure electricity from IPPs could revive the economy of Atlantis, which in 2018 was declared a special economic zone (SEZ) and identified as a green energy hub, says Finance and Economic Opportunities MEC David Maynier. A Cape Argus report notes that Maynier said the extent of the impact would depend on how quickly the different role-players gave effect to this policy, and the effectiveness with which a system for such contracting was put into place. ‘It is critical that the national procurement of power from utility-scale IPPs goes ahead as set out in the national Integrated Resource Plan for Electricity, published for implementation in October 2019,’ said Maynier. Maynier was reacting to Ramaphosa's announcement that draft amendments to regulations that would enable municipalities in good standing to procure their own power from IPPs would soon be gazetted.’ Mayco member for economic opportunities James Vos said: ‘IPPs and their associated value chains will play an important role in reviving the economy of Atlantis. The City itself hosts a dedicated investment facilitation office in the Atlantis industrial area that supports both new investment and the needs of existing investors.’ Speaking about the number of jobs that could emerge in the Atlantis SEZ, SA Wind Energy Association CE Ntombifuthi Ntuli said: ‘The existing local tower manufacturing facility in Atlantis currently produces 150 towers per annum and MEC David Maynier has created 340 direct jobs and 200 indirect jobs. Therefore, manufacturing 640 towers locally can potentially create 1 360 direct jobs and about 800 indirect jobs,’ Ntuli said.

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