A brief history of renewable energy procurement in South Africa

Eskom has fallen short in adding renewable power to the grid, with only three projects in the Renewable Energy Independent Power Producer Programme (REIPPP) reaching financial close, says Busi Mavuso, the CEO of Business Leadership South Africa (BLSA).

Government delays, corruption and red tape have all contributed to this failure, she said – and with global demand for renewable energy procurement kicking up, South Africa may have already lost out.

South Africa has hit a record low in regard to its energy supply. The national power utility Eskom has yet again extended load shedding – this time until at least Thursday (29 September).

The popular load shedding tracking app, EskomSePush, revealed that South Africa had experienced 1,637 hours of national load-shedding over 68 days so far in 2022 – significantly higher than 1,153 hours over 48 days in 2021 and the 844 hours over 35 days in 2020.

The REIPPP sought to bring online independent renewable power producers that could assist in the country’s just transition away from coal as well as to assist the lack of power generation at the failing power utility.

Close to a year ago (29 October 2021), the Department of Mineral Resources and Energy planned for a total of 25 wind and solar power projects worth R50 billion of investment to be finalised by now, but they have been severely delayed.

The department had planned to reach financial close for Round 5 bidding within six months of announcing the winners on 29 October 2021 – but this has simply not materialised, Mavuso said.

Writing in her weekly letter, the BLSA CEO said that it was good to see that at least three renewable energy projects are set for South Africa; however, it is a small part of what is needed to address the energy crisis.

She said that the situation could have been avoided if the projects had been allowed to close swiftly instead of falling victim to frequent and costly government delays.

“There may be non-tariff steps that government could take to shift the economics of the bids, such as the relaxation of local content requirements that have already been done, and I would encourage that.

“But if bids are not going to reach close, we need to move on and allow bidders to resubmit the projects in future rounds,” said Mavuso.

She added that since 2015, South Africa had not seen one smooth procurement process. The REIPPP programme has been beset with issues since round 4 was delayed back in 2015.

“The so-called ‘risk mitigation’ round of (Independent Power Producer) IPP procurement has also disappointed, with only three of those reaching financial close over a year after bidders were announced,” she said.

Those three make up 150MW of the 2,000MW intended to have been procured in the bidding round. The last two procurement efforts have managed to close only 570MW of over 4,500MW intended.

Mavuso said that in these instances, international bidders’ appetites to participate in future rounds have been dampened and may lead to them losing confidence in the country – with only a few bidders at higher prices being left available.

“We also need to recognise that there is a global rush on new energy projects. Project developers are spoiled for choice on where they choose to offer their services. There is a finite amount of engineering capacity and manufacturing capacity in the world, and this must be allocated to the many countries trying to procure new projects amid a global energy crisis.”

“The reputation of the South African programme needs to be excellent for developers to decide to direct their efforts our way, and right now, it is rather damaged.”

She said South Africa needs to demonstrate that it offers a highly effective and efficient process of adjudication that would result in contracts closing and projects getting started.

“That is how we will get electricity onto the grid fastest and at the lowest cost.”

Had the Renewable Energy Power Producers Procurement Programme (REIPPPP) not been stalled by corrupt political interests from 2015 to 2019, the energy plants from bid window five would have been operational, and South Africa would have had half the amount of load shedding last year, said Mavuso.

If projects from Bid Windows 5 and 6 were on stream by 2021 as originally scheduled, Eskom would have saved at least R2.5 billion and reduced load-shedding by 96.5%, according to research by Meridian Economics.

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