The global renewable energy market is abuzz with the recent announcement of results of the fourth round auction of projects under South Africa’s Renewable Energy Independent Power Producers Procurement Programme. But the real impetus for these and future auctions is related to a crucial development in South Africa’s electricity sector.
Bidding for the fourth auction closed on 18 August 2014, but the results were delayed by about 8 months because the government could not allocate projects to successful bidders as the country’s power utility Eskom expressed its inability to provide transmission grid access to the new renewable energy projects.
The government finally went ahead with announcing the fourth round auction results after Eskom closed a $339 million financing deal with KfW for upgrading the transmission network.
As with many other countries, South Africa is also facing problems with integrating renewable energy projects into the transmission grid. The problem is aggravated as the Ministry of Energy is conducting auctions after a gap of only a few months. And since the gestation period of renewable energy projects is short, several of these projects would be commissioned within a few months of one another.
But this 8 month gap could be a blessing in disguise as Eskom would get some time to accommodate fourth round projects into its grid. The financing deal would also help Eskom increase transmission capacity for the over 6 GW of fresh renewable energy capacity set to be allocated in the future auctions of the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP).
Through the first 4 auctions under the REIPPPP South Africa managed to allocate 5,443 MW capacity, mainly in the form of wind and solar power projects. A total number of 79 projects have been allocated to some of the leading national and international project developers.
Image Credit: NJR ZA | CC-BY-SA 3.0
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