Clean Power

Published on March 18th, 2012 | by Andrew


South Africa Aims for Green Jobs as well as Clean Energy as 2nd Round Renewable Energy Project Bidding Closes

March 18th, 2012 by  

Photo courtesy: Suzlon Energy

The South African government concluded its second round of bidding to develop renewable energy projects the first week of March. While final results have yet to be disclosed, Standard Bank Group (SBK), the largest lender on the African continent, agreed to provide financing for 31 renewable energy projects worth as much as 19 billion South African rand (SAR) (~$2.5 billion). This adds to the SAR8.2 billion ($1.08 billion) it agreed to finance in a first round of bidding, which took place last November, according to a Bloomberg News report.

A total of 79 bids were received in the second round of renewable energy project bidding. The Dept. of Energy expects to finish evaluating them on May 11. Standard Bank South Africa agreed to provide senior debt underwriting wind and solar photovoltaic (PV) projects with a total generating capacity of 1,454 MW, SBK’s head of power finance Alastair Campbell told Bloomberg News. The second round was more competitive than the first, squeezing everyone’s margins, which bodes well for electricity consumers in South Africa, he added.

“The second bidding window has resulted in a lot of bidders being aggressive in the pricing of their bids. We expect to see those bidders that secure preferred bidder status, coming in materially below the tariff caps that were set,” Campbell was quoted as saying in BusinessDay South Africa.

South Africa’s Drive for Independent Renewable Power Drive

The South African government’s Independent Power Producers (IPP) Procurement Program is the centerpiece of its drive to stimulate renewable energy and environmentally sustainable economic development and jobs growth in South Africa as per its national Integrated Resource Plan, which was enacted by the South African Parliament this past summer.

The 20-year Integrated Resource Plan calls for 42% (~17,800 MW) of South Africa’s electricity supply to come from renewable sources by 2030 and be developed in a way that contributes constructively towards socio-economic and environmentally sustainable growth. In submitting proposals during a planned five rounds of IPP project bidding, developers are “required to bid on tariff and identified socio-economic development objectives” of the South African Dept. of Energy.

The SA Dept. of Energy received more than 270 renewable energy project development bids in the IPP program’s first round, under which the government expects the first 3,725 MW of renewable energy capacity to be built by 2016. Between $10 billion-$12 billion is expected to be invested in the first round projects.

Contracts for an initial 28 renewable energy projects with a capacity of 1,416 MW were awarded in the first round of IPP bidding, the results of which were announced at the UN International Panel on Climate Change (IPCC) conference in Durban last December. Accepted were bids to develop onshore wind (1,850 MW), solar photovoltaic (PV) (1,450 MW), concentrating solar power (CSP) (200 MW), biomass (12.5 MW), biogas (12.5 MW), landfill gas (25 MW), small hydro (75 MW) and other small projects of less than 5 MW (100 MW), according to a report from Creamer Media’s Engineering News. The projects are required to close financing by June.

Job Creation and Diversifying South Africa’s Energy Sector

Looking to liberalize and diversify its power industry, state-owned utility Eskom, which supplies some 95% of the nation’s electricity, has been limited to participating in the IPP program as a buyer and to making grid interconnections. Preferred bidders selected by the SA Dept. of Energy in November need to conclude a power purchase agreement with Eskom, as well as a grid interconnection agreement with them or a municipality, as well as sign an implementation agreement with the department.

South African electricity prices have trebled in the last four years as Eskom, which generates more than 90% of its electricity from thermal coal plants, has raised prices and has been forced to shut down and ration electricity supply persistently in recent years.

The South African government is looking to the IRP and IPP program to address another chronic domestic issue besides the high and rising cost of fossil fuel energy: job creation. The SA government increased the percentage of local content required to develop renewable energy projects following the second round of IPP program bidding.

The amount of local content “was a major factor in the evaluation of the [second round] bids,” SBK’s head of power and infrastructure advisory Ntlai Mosiah, told BusinessDay. “The challenge that most of our developers have is that when they become operational … they are creating social upliftment and jobs in the area,” he said.

Two preferred IPP bidders, Gestamp Wind and India’s Suzlon Energy Ltd., are planning to establish manufacturing facilities in South Africa, according to Bloomberg News’ report.

Spain’s Abengoa won contracts to develop two CSP projects in South Africa’s Northern Cape province. Abengoa will employ solar tower technology at the 50-MW Khi Solar One plant and solar parabolic trough technology at the 100 MW KaXu Solar plant. Abengoa projects that some 1,400 construction jobs and around 70 permanent, full-time, local jobs will be created as a result.

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About the Author

I've been reporting and writing on a wide range of topics at the nexus of economics, technology, ecology/environment and society for some five years now. Whether in Asia-Pacific, Europe, the Americas, Africa or the Middle East, issues related to these broad topical areas pose tremendous opportunities, as well as challenges, and define the quality of our lives, as well as our relationship to the natural environment.

  • nermin
  • Adelaidetechglobal

    Hi Andrew, do you know which companies, besides solarresources, accoina, aveng and vestas were awarded phase 2 IPP Bidding Programme in South Africa?

  • rommel43

    How come the under developed countries set big goals like 42% of their power but countries that are developed and full of technology and money only want to hit 20% and are worried about hitting that

    • Bob_Wallace

      Something to think about – many under-developed countries are now developing more rapidly and are building new electricity generation. They may not have a lot of existing dirty generation so a modest amount of clean energy can quickly change the clean:dirty ratio.

      A developed country has a lot of old dirty generation and the problem becomes how justify/force the abandonment of systems that are producing cheap power and replace them with clean power.

      Here in the US, because we are making progress with efficiency, we don’t need much or no new power. We need to shut down coal which is giving us cheap (at the meter, not in reality) electricity and replace it with clean sources which seem to cost more.

      Many less developed countries adopted cell phones much, much faster than did the US. The had no land lines or such marginal land line service that cell phones brought connection to people who had no access to a old-fashioned phone. In the US, people had lots of phones in their houses and offices. Not as big a need for a new phone.

    • Stuart

      The 42% is of theNEW generating capacity, not the total capacity which would be by 2030 approximately 80000MW. 17800 is therefore 22% similar to the developed countries.

      • Akbweb2

        Thanks Stuart for pointing this out…

  • Captivation

    It has often been posited that war brings people together. Since we are now in a collective war against climate change, it is wonderful to think of how South Africa will become more unified through this renewable energy program.

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