South Africa Holds Tender To Redefine Renewable Energy Bidding Process

As of tonight, consultants are required to submit proposals for the review and replacement of South Africa's Renewable Energy Independent Power Producer Procurement Program (REIPPPP), a mechanism that in its current form has been described as "costly" to applicants and a "financial burden" on the Evaluation Office. financial burden" on the EO.

The South African government-owned Development Bank of Southern Africa (DBSA) is inviting applications from transaction advisors to review the "cost-effectiveness and efficiency" of the country's decade-old Renewable Energy Independent Power Producer Procurement (REIPPP) program, which handles large-scale renewable energy projects. The tender also asks consultants to recommend a new model.

The deadline for applications is November 2, 2023, according to the solicitation. The current auction model is "cost prohibitive" for applicants and places a "financial burden" on proposal evaluators, according to the solicitation.

The successful bidder's job includes submitting a report on the current REIPPP model and an implementation plan for a viable alternative.

The report should identify the "bottlenecks" in the evaluation process of the current program, as well as a review of the entire operation from start to finish. A comprehensive study of the recommended best alternative auction model is required, as well as an implementation and rollout plan that covers supporting business processes, infrastructure, resource requirements, and cost analysis.

Chris Ahlfeldt, energy expert at Blue Horizon Energy Consulting Services, said the REIPPP model has gained international recognition for its success in establishing public-private partnerships with governments and independent power producers (IPPs), which provide environmental and social benefits to the country.

"The procurement requirements of the REIPPP have been transparent, which has led to intense competition among international independent power producers (IPPs), which has enabled cheaper and cleaner power to be delivered to South Africa," he told PV Magazine. "This program has been delayed several times since its inception in 2011 for a variety of reasons, such as protests by Eskom (South Africa's national power utility) against government inefficiencies, an action that has slowed down the program process and contributed to the country's current power shortages."

Ahlfeldt said that these delays have also limited the country's industrialization process, as many manufacturing plants have opened and then been forced to shut down due to lack of demand. "The REIPPP was also not well integrated with the country's transmission planning, as seen in the last procurement round when no wind projects were procured due to a lack of readily available transmission capacity," he added. "Apart from enabling a power market structure with independent transmission operators, the lack of readily available transmission capacity in the most resource-rich areas of the country is the biggest challenge facing utility-scale solar PV today."

DBSA said that since the introduction of the REIPPP program in 2011, seven bidding rounds have been conducted and 6,422 MW of energy has been procured from 122 independent power producers. About 99% of the projects have been financially closed.

The tender document forecasts that 37,696 MW of new energy projects will be added to the grid under REIPPP from 2019 to 2030, including 20,400 MW of wind and solar.

Application size assessment and application costs are two of the issues affecting the current REIPPP program.

The department responsible for evaluating applications, the Office of Independent Power Producers (OIPP), which bears its costs, carries a financial burden because "the cost of the evaluation is not proportional to the number of megawatts procured," the solicitation document says.

The cost of participation for REIPPP applicants has also been described as "expensive" due to "extensive qualification and evaluation criteria."

"Streamlining the auction process will reduce bidding costs for the IPP sector and also reduce development costs for bidders, leading to more favorable tariffs for consumers," the document describes. South Africa's energy sector is suffering from a litany of problems such as widespread power constraints, insufficient grid capacity, coal-fired power plant failures, and minimal progress in clean power procurement. However, despite the difficulties, the country's installed photovoltaic (PV) capacity reached 5,826 MW by the end of 2022, according to the latest figures released by the International Renewable Energy Agency (IRENA).

Meanwhile, South Africa's energy regulator NERSA has authorized the National Transmission Company of South Africa (NTCSA) to operate the transmission system in South Africa, independently of the already struggling state-owned utility, the National Power Corporation of South Africa (NPCSA). The move is part of the government's plan to split the company into three separate entities: generation, transmission, and distribution. For the time being, SANEP remains the only company that buys electricity generated under the REIPPP program.

The bill proposes advance payments of ZAR78 billion, ZAR66 billion, and ZAR40 billion in 2023-24, 2024/25, and 2025-26, respectively, earmarked to cover capital and interest payments.