Oslo, 1 June 2021: Scatec has today been awarded Preferred Bidder status on three projects totaling 150MW (3x50MW) of Contracted Capacity, by the Department of Mineral Resources and Energy in South Africa under the technology agnostic Risk Mitigation Power Procurement Programme (RMIPPP). The tariffs awarded to the projects fall within the range of the previously awarded preferred bidders.

The three projects (Kenhardt 1-3), in total consisting of 540 MW solar and 225 MW/1,140 MWh battery storage, were bid based on sites located in the sundrenched Northern Cape Province of South Africa. The projects awarded to Scatec are the only projects with preferred bidders status exclusivity making use of renewable energy technology, making it arguably one of the largest single site solar + storage hybrids in the world.

“This is truly a great milestone for Scatec and renewable energy. We are demonstrating that cost competitive dispatchable solar power can be delivered at large scale with short implementation time. This confirms that renewable energy is an ideal choice for driving electricity generation growth in Africa and other developing countries”, says CEO Raymond Carlsen.

The solar and storage solution will provide dispatchable power from 5:00 am in the morning to 21:30 at night and will deliver much needed power to the South African economy. The power will be sold under a 20-year Power Purchase Agreement with a paid capacity charge.

Financing has already been sourced as part of the bidding process. Project capex is estimated to be USD 1 billion and will be funded by project finance debt from a consortium of commercial banks and Development Finance Institutions with expected debt leverage of 80%. Scatec will own 51 % of the equity in the project with H1 Holdings, our local Black Economic Empowerment partner owning 49%. Scatec will be the Engineering, Procurement and Construction (EPC) provider and provide Operation & Maintenance as well as Asset Management services to the power plants.

​Financial close is expected later in 2021 with grid connection by the end of 2022.
“This award further cements Scatec’s position as the leading solar IPP in South Africa and on the African continent. To date, we have successfully completed six solar plants under the country’s well known REIPPP programme and employ more than 200 people, which is set to grow further. With Round 5 of REIPPP launched in April, we are looking forward to further building on this solid foundation and experience from successful solar projects and add other renewable technologies to our portfolio”, says Carlsen.
Scatec’s integrated technology approach strengthens the competitiveness of renewables and expands the market potential. The company sees significant opportunities within hybrid solutions and is currently working on developing several projects using solar and batteries to create firm renewable power; and also combining solar with hydro to increase value proposition and competitiveness of hydro. In addition, Scatec works with partners to combine competitive renewable energy with industrial projects. In total, about 15 percent of the company’s project pipeline consists of hybrid solutions projects.
For further information, please contact:
Mikkel Tørud, CFO, tel: +47 976 99 144, ir@scatec.com
Ingrid Aarsnes, VP Communication & IR, tel: +47 950 38 364, ingrid.aarsnes@scatec.com

After five years of research, development and being ‘shovel ready’, locally-owned renewable energy companies have been effectively frozen out by Gwede Mantashe’s latest procurement announcement. Local Independent Power Producers have been left with stranded projects and five years of costs in keeping them ‘construction ready’ at the government’s request.

Minister of Mineral Resources and Energy Gwede Mantashe recently announced a raft of measures aimed at resurrecting the ailing state procurement of renewable energy. However, in a glaring omission, he failed to mention any intention to progress with a set of fully developed and awarded renewable energy projects representing 100MW of locally developed capacity, still awaiting Eskom’s signature.

Now instead of progressing with the projects that have been kept “shovel ready” for five years, he appears to prioritise the awarding of “emergency” projects to foreign-led entities such as those hailing from Turkey and Saudi Arabia.

The Small Projects Programme (SPP) was established in 2013 through the Department of Energy (DoE), in parallel to the conventional Renewable Energy Independent Power Producers Procurement Programme (REIPPPP). It was facilitated by the Independent Power Producers (IPP) office to award projects up to 5MW in size with the stated objective “to allow South African citizens who are, or who own or control, SMEs and or emerging, smaller power developers an opportunity to participate in the Renewable Energy generation sector”.

The high development and capital costs for large infrastructure projects make it difficult for local entities without experience to raise the funding and attract the financial, legal and technical support required for projects of scale. As a consequence, the larger REIPPPP programme, aimed at projects between 75MW and 140MW, has been dominated by international utility companies. The result is that, despite billions of rands of IPP projects being procured, we have almost no local IPP companies able to compete with large foreign utilities representing, for example, the Eskom equivalents of Norway, Italy, France and Saudi Arabia.

Those within Treasury, DoE and the IPP office who understood the importance of establishing local skills and experience, promoted the Small Projects Programme, which was officially launched in the form of a Request for Proposals in August 2013. Prospective bidders were asked to submit projects of up to 5MW in size.  In contrast to the larger REIPPPP, this process mandated higher levels of local ownership, with a specific requirement that 60% of the proposed project ownership had to eventually be held by a South African parent company.

The bid requirements were otherwise substantially similar to the large IPP programme, making submissions time-consuming and costly. All land, grid, environmental and permitting rights needed to be secured and advanced to qualify for evaluation. The costs, amounting to several hundred thousand rands per project, were incurred by local developers seeking to respond to the government’s request for proposals.

In 2015, after two rounds of bidding, the IPP office awarded preferred bidder status to 20 projects ranging across wind, solar and biomass technologies, and representing around 100MW in capacity. The projects were instructed to develop further and prepare for financial close and signature of Power Purchase Agreements (PPAs) with Eskom.

Since then, after five years of incurring costs to keep the projects on standby for government go-ahead, no PPAs have been signed and no projects have proceeded into construction.

Rather than give a clear message that the state is not proceeding with these projects, the preferred bidder status was renewed by the IPP office no less than six times during the five-year period, leaving companies guessing as to the government’s intent.

In 2020, at the government’s request, and in good faith to South African consumers, the bidders adjusted their tariffs downwards to account for improvements in capital costs over the years of delay. Eight months after the adjusted tariffs were submitted, there is still no progress. Many of the locally owned companies that were investing in developing smaller projects for this process have now put down tools and given up on their projects, due to the lack of government progress and commitment.

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The Department of Mineral Resources and Energy (DMRE) have announced a delay in the release of documentation for the Request for Proposal (RFP) for the Renewable Energy IPP Procurement Programme (REIPPPP) Bid Window 5.
The delay is as a result of a need to align certain parts of the RFP documents with the feedback from National Treasury on the PPPFA exemption application.
Government remains committed to the urgent procurement of the much-needed energy to power our economic recovery.
We are working in earnest to ensure that this delay does not negatively affect the timelines we have set out to get these projects connected to the grid.
The Department intends to release the documentation for BW 5 RFP not later than 12 April 2021.

Two so-called draft “S34 determinations” by the National Energy Regulator of South Africa (Nersa) are the first step in the process of procurement of new electricity generation capacity in South Africa totalling some 13,813 MW from independent power producers (IPPs).
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South Africa’s national energy regulator on Friday published two draft determinations by Minerals and Energy Minister Gwede Mantashe in terms of Section 34 (1) of the Electricity Regulation Act.

The first draft S34 determination relates to the procurement of 2,000 MW of new generation capacity between 2019 and 2022, and the second draft S34 determination to the procurement of a further 11,813 MW between 2022 and 2027. 

These draft S34 determinations begin the procurement process after the gazetting of the South African national integrated resource plan for electricity, IRP 2019 on 18 November 2019. The determinations were submitted to Nersa by the minister on 21 February 2020 for “concurrence” by the energy regulator and published on Friday 20 March 2020.

A high court judgment in April 2017 ruled that in terms of the Electricity Regulation Act and the Promotion of Administrative Justice Act (PAJA), Nersa is required to concur with the draft determinations following a public consultation process before they become final and are gazetted. 

The public consultation process began after Nersa published two consultation papers on 18 March 2020. These call for public comment and input on the two draft S34 determinations issued by Minister Mantashe, by 14 April 2020 and 7 May 2020 respectively.

​Despite the current electricity supply emergency, which has resulted in up to Stage 6 (6,000 MW) load shedding in South Africa, Nersa has indicated that now, more than a month since receiving the draft S34 determinations, it will require a further three months to concur with the first S34 determination, and six months for the second.

Nersa does not seem to have got the message from Minister Mantashe when he said recently:

“Officials in the department are used to working according to rules, where it takes three months to do this, or six months to do that. The situation we are in requires a change of approach. That’s why we are engaging with Nersa and everybody to say: Guys, let’s accelerate processes, because if we don’t, we are going to be plunged into darkness.”

The Department of Minerals and Energy and Nersa are coming under increasing pressure and criticism for the snail’s pace of their bureaucratic processes and decisions. The energy regulator refutes this criticism and says that “Nersa is cognisant of the urgency of the request [for concurrence] as evidenced by the proposed fast-tracked concurrence process in the consultation papers”.

The draft S34 determinations indicate that electricity produced from the new generation capacity will be procured from IPPs “through one or more tendering procedures which are fair, transparent, competitive and cost-effective”.

The electricity procured from IPPs by the department in terms of the draft S34 determinations may only be sold to Eskom as the designated buyer of the electricity, in accordance with power purchase agreements (PPAs) concluded in the course of the procurement programmes.

Recent statements by the ministers of public enterprises and minerals and energy have indicated that Eskom should not be excluded from building, owning and operating new renewable energy generation capacity. However, the draft Section 34 determinations indicate that all new generation capacity up to 2027 – wind, solar, energy storage, gas and coal-fired – will come from IPPs. None of the new generation capacity will come from Eskom itself. 

This is a big shift from the current Eskom monopoly, towards a more diversified electricity supply industry. It also represents a significant diversification away from South Africa’s over-dependence on coal as primary energy for power generation, which stands at about 80% of the total electricity generated in South Africa. 

Chris Yelland is MD of EE Business Intelligence.

Energy regulator Nersa took a crucial step toward allowing the government to procure emergency power and to allow the building of more privately owned power plants.

The regulator issued public consultation papers after the energy minister allowed the procurement of 2GW of emergency capacity as soon as possible and the construction of 6.GW of capacity from longer-term renewable power plants. The longer-term plan is in line with a government energy framework that includes additional generation capacity in the form of non-renewable power. South Africa is in urgent need of more electricity to end recurrent outages.

As soon as the process is finished by the regulator, procurement of new capacity can begin, department of mineral resources & energy deputy director-general Jacob Mbele said on 3 March.

South Africa received hundreds of responses to a call for 3,000 megawatts of emergency power that it estimates could be brought online within two years.
The Department of Mineral Resources and Energy put out a request for information in December to gather solutions for power generation in the midst of outages that are slowing economic growth.

There were 481 responses to the RFI that included options for gas, liquid fuels, coal, renewables, storage and nuclear, Mineral Resources and Energy Minister Gwede Mantashe told lawmakers Wednesday.

A preliminary analysis found that “some proposals can bring power to the grid in less than 24 months,” Mantashe said. The original request asked for short-term power-supply options of as much as 3,000 megawatts within a year.

Analysis by the department “also suggests that longer-term contracting is required to ensure prices do not negatively affect the current tariffs.”

The National Energy Regulator of South Africa also received 132 applications for a total capacity of 59 megawatts of generation for own use, according to Mantashe.

The licensing requirements for this category have been removed in an effort to reduce South Africa’s power supply deficit.
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Consulting Engineers South Africa (CESA) president Sugen Pillay urged government on Wednesday to urgently restart its “successful” renewable-energy procurement programme to help address the country’s prevailing electricity crisis.

Briefing the media in Johannesburg, Pillay said CESA was particularly keen for the fifth bid window of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) to be initiated, as the REIPPPP was a stand-out example of a public procurement scheme that had worked.

“In addition to its value as a short-term intervention towards addressing our electricity crisis, it will also inject, albeit small, much-needed project opportunities for consulting engineers and contractors,” he added.

The Integrated Resource Plan 2019 (IRP 2019), which was published in October, calls for 1 600 MW of wind and 1 000 MW of solar photovoltaic (PV) capacity to be added in most years between 2020 and 2030, translating to the addition of more than 17 000 MW of new wind and 8 200 MW of new solar PV (excluding embedded generation) capacity in ten years.

For procurement to be initiated, however, Mineral Resources and Energy Minister Gwede Mantashe needs to publish Ministerial determinations in line with Section 34 of the Electricity Regulation Act and to do so with the concurrence of the National Energy Regulator of South Africa.

To date, Mantashe has not published the document, with the Department of Mineral Resources and Energy (DMRE) instead focusing on a Risk Mitigation Power Procurement Programme, the implementation of which will be guided by responses to a request for information (RFI) on short-term supply and demand options.

The DMRE had given itself a month from the January 31 RFI closing date to evaluate the responses and develop a procurement programme or programmes.

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The acting head of the Independent Power Producer Office (IPPO), Advocate Sandra Coetzee, has indicated that there should be “no surprises” in the bid documentation that will be released once procurement activities resume again, following a hiatus of nearly five years.

Coetzee, who stepped into the role in late July following the departure of Karen Breytenbach, tells Engineering News Online it is premature to offer detailed insight into the changes being considered. She confirms, however, that these adjustments will be guided by the principles of greater inclusivity and transformation, as well as affordability.

“With regard to procurement design, the team has done a considerable amount of work that is putting us in a good position for procurement as soon as determinations are in place after promulgation of the IRP.  We are actively engaging with our colleagues at the Department of Mineral Resources and Energy (DMRE) in this process."

The IPPO also intends having an “extensive” series of stakeholder engagements ahead of the release of the documentation to ensure the bankability of programmes and that they remain attractive to potential independent power producer (IPP) investors. These engagements will be initiated once the Integrated Resource Plan (IRP) is published.

“The roll-out of the programme will continue to build on the strong foundations of the past nine years,” Coetzee insists, describing those foundations as being a predictable regulatory framework, as well as proving investors with the certainty of lawful and compliant procurement.

Through the IPPO’s flagship Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) 6 323 MW of mostly solar and wind capacity has been procured since 2011 across 92 separate projects, spurring about R200-billion in investment.

Coetzee’s immediate priority is to ensure that the IPPO is ready to implement any procurement programmes that will arise once the IRP is promulgated and the Ministerial determinations are published. With the energy sector being in crisis, the role of a capable and ready IPPO is important to attract urgently needed investment in generation capacity in South Africa.

Coetzee has deep knowledge and rich experience in infrastructure development in South Africa and across the continent. She also has senior management experience in government and the public sector having previously worked at the Department of Public Enterprises and South African Airways.

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Energy Minister Jeff Radebe says government has no intention of renegotiating the power purchase agreements (PPAs) for renewable-energy projects procured in 2011 and 2012, but has left the door open for a “refinancing” of the projects in the interest of lowering the cost of the plants to the consumer.

The prospect of renegotiating the contracts had been raised by Public Enterprises Minister Pravin Gordhan during a recent Parliamentary Portfolio Committee meeting in Cape Town.

Gordhan was quoted as saying that a renegotiation of the PPAs associated with the first two bid windows of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) would “alleviate pressure on Eskom and the electricity tariff”.

However, Radebe said that, while the tariffs bid during the first rounds were indeed high; there had been a steady decline in subsequent auctions. In addition, the PPA contracts had been signed after a "very fair, very competitive and very transparent" process.
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​Government would be open, though, to approaches from the IPPs themselves should they have refinancing proposals that could result in a lowering of the costs. "We will cross that bridge when we get to it," the Minister said.

One proposal is to allow for a possible ten-year PPA term extension, which would create additional value for the IPPs that could be paid for by lowering the current tariff.

Briefing the media in Pretoria on Sunday amid attacks on the IPP programme, which has been singled out by some stakeholders as posing a major financial risk to Eskom, Radebe mounted a robust defence of the REIPPPP. He noted that the programme had not only attracted R209-billion in investment over the past eight years, but had also been lauded internationally.

"While I acknowledge the programme is not perfect and can be improved in specific areas, why do we not embrace a programme that has done so much for the country and has received international acknowledgement?"

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