The Minister of Mineral Resources and Energy, Gwede Mantashe, says his department is planning to announce the preferred bidder for the procurement of 2 600 megawatts of renewable energy under Bid Window 5 by the end of next month. 

The Minister said this when Ministers in the Economics Cluster responded to oral questions in the National Assembly on Wednesday. 

“The department is in the process of procuring a further 6 800 megawatts of renewable energy. From this proposal, 2 600 megawatts will be under Bid Window 5, which is being evaluated, with the preferred bidder announcement planned for the month of October 2021. 

“The remainder of the 6 800 megawatts capacity is planned for procurement before the end of March 2022,” the Minister said. 

To date, the department has completed the procurement of 6 422 MW of renewable energy.  

Through four bidding rounds, as at the end of June this year, 5 422 megawatts is already connected to the grid and is part of the energy supply. 

Mantashe said renewable energy now accounts for just under 10% of electricity supply, with the country still heavily reliant on Eskom.

“In line with the Integrated Resource Plan 2019, additional renewable energy capacity will be released to Eskom and municipalities as and when requested, when requests for Section 24 determination are received. 

“The biggest allocation for new generation capacity to be developed between now and the year 2030 is renewable energy. 

“The Integrated Resource Plan 2019 provides for 14 400 megawatts of additional wind power, 6 000 megawatts of additional solar power and 2 088 megawatts of battery storage. 

Renewable energy a necessity to the economy 

Mantashe said, meanwhile, that one of the issues that need to be considered about renewable energy is that while it is expensive technology to be introduced, it is necessary to do so, as it contributes to economic growth. 

“What we should always take into account is that renewable energy is relatively new technology in South Africa and if you look at Bid Window 1, 2, 3, and a little bit of Bid Window 4, one of the issues was that it was expensive to build renewable energy. 

“But I always argue that that was a subsidy for introducing technology that was necessary in the economy. 

“Therefore, it was not a cost, rather that it was a premium paid for introducing technology to the economy.” 

Mantashe said the second inhibiting factor is the fact that the components of building renewable energy are manufactured outside of South Africa. 

“That’s inhibiting, as it does not give South Africans optimal benefits of the technology and lastly, it is the fact that it is still dominated by foreign companies. We have a responsibility of ensuring that there is an increased participation of South Africans in the technology.” 

To combat high costs, Mantashe said his department is working towards localising the manufacturing of renewable energy components in the country, which is expected to lead to job creation.

“The department is working with business, labour and community representatives to develop localisation and industrial plans that will make it possible for us to attract investment and develop local manufacturing capacity. 

“Analysis of the potential jobs in renewable energy shows that large numbers of jobs will be created during the manufacturing and construction phase. It is crucial for us as a country to maximise economic opportunities that come with the planned power generation capacity,” Mantashe said.  – SAnews.gov.za  

Sales to Eskom or a municipal distributor would also have to follow a procurement process within Eskom or the municipality.

Previously the IPP Office of the DMRE has been used to procure long term PPAs for Eskom through IPP bid processes and indications are that this will continue to be used. A fifth round of the Renewable Energy IPP process is presently underway by the IPP Office. The IPP Office REIPP page can be accessed here.

In future electricity sales to ‘Eskom’ will made directly to the National Transmission Company which it has been announced will be unbundled from Eskom by the end of the year.

Various municipalities have recently announced an intention to procure new generation capacity from IPPs. The Western Cape government has recently released a Request for Information regarding supply of renewable energy to municipalities in the province. The Western Cape RFI can be accessed here.

What is the timing on implementing this?

The exemption has been gazetted and is effective immediately. However, two things appear to be outstanding:

NERSA still needs to release an updated registration procedure as the current procedure is specifically directed at ‘small-scale’ embedded generators up to 1MW. These are likely to be similar for 100MW facilities. The existing rules can be accessed here.
The wheeling framework and charges that Eskom will apply need to be clearly accessible and should be capable to implementation without lengthy one-on-one negotiations with Eskom. The Eskom webpage regarding wheeling of energy (eskom.co.za) indicates that bilateral engagements are presently required for wheeling and also that NERSA is still developing a national framework for use of system charges.

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IT has been a difficult few years for South African fuel retailers. The market has been shrinking since 2016, and COVID-19 has accelerated this trend. Alongside a slowdown in economic activity as a result of national lockdowns, lifestyles have changed. More people working from home and increased computing and network penetration mean less traveling. This suggests that even as economies begin to recover, demand for fuel is likely to lag.

Since the price of fuel is regulated, and retailers are given a fixed cents-per-litre margin, it’s a volume-driven business, and reduced demand is making it tough for fuel retailers. So, what can they do to cut costs and become more self-sufficient?

One option is to embrace advances in energy technology. The rise of fuel retail has come with increasing demands on energy supplies. Refrigeration, in particular, is an energy-hungry process. But fuel retailers and forecourt operators in South Africa face two acute challenges in this regard: high energy costs, and low energy certainty.

Electricity is expensive, and its supply uncertain. In addition to load shedding, many areas are structurally power constrained, and an aging infrastructure continues to add pressure to the grid. South Africans have lived with this reality for many years, and retailers of all types have invested in diesel generators. But they are costly, noisy and inefficient.

Grid-tied solar systems are simple, comprising nothing more than solar panels and an inverter linked to the municipal electrical grid. The panels convert sunlight into useable alternating current when it’s available. They aren’t connected to batteries, and so switch back to the municipal grid at night or when the sun is obscured. During the day they can easily produce enough energy to power fuel pumps, a retail store and an administrative backend.

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Capital investment of R500 000 to R1 million in these types of systems will typically allow an owner to save 30-50% of their energy costs. This coupled with incentives such as the Section 12B tax benefit, which allows for the tax deductibility of certain assets used in the production of renewable energy, means that payback periods are shorter than ever before. Regulations have also relaxed, and suppliers of these systems will be able to guide purchasers through the process of registering with municipal grids, and with health and safety requirements.

The worldwide shift towards electric vehicles (EVs) and other alternative fuel technologies is slow but accelerating rapidly.

More alternative-fuel vehicles on the roads will place demands on fuel retailers; some obvious and some less so. Batteries will be required to address spikes in demand, especially in the first phases of electrical vehicle adoption, and provision made for LNG or hydrogen fuelling capacity where warranted. But charging an electric vehicle is not like pouring petrol into a tank. It takes time: Tesla’s most powerful chargers, the 150 kW Supercharging stations, take 30-40 minutes to charge today’s Tesla Model S to 80% capacity.

Forecourts will increasingly be built to accommodate longer visits, becoming convenience hubs where refuelling is offered as one service amongst many. Shopping, entertainment, and pick-up services (such as online retailer lock boxes) will proliferate. Your children will play while you work and your EV charges. Partnerships with retailers, restaurants, and quick-service food chains will be key to developing convenience ecosystems, and they’ll all be tied together through digital networks and associated payment and reward schemes.

The forecourt of the future will probably look remarkably different. For owners and operators, preparing for this future begins with taking a clear-headed look at their current energy circumstances. An appraisal of energy cost and availability allows them to take control over these variables, giving them an advantage when planning for the continued sustainability and cost effectiveness of their businesses.

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Coal continues to dominate the South African power supply, contributing 81.8% to the total energy mix in first half of 2021, while contribution from renewable energy sources totalled almost 11% (solar PV, wind, hydro, concentrating solar power, others) and zero-carbon energy sources contributed 14.3% (renewables and nuclear).

This is according to research conducted by the Council for Scientific and Industrial Research (CSIR) published in its “Statistics of utility-scale power generation in South Africa 2021” report, focusing on the first half of 2021.

The report is based on data originally published by Eskom, which includes insights provided on technology-specific daily, weekly and monthly electricity production, as well as flexibility needs of the national power system.

The report notes SA has been gradually adding utility-scale wind, solar PV and CSP for years, increasing the installed capacity from 467MW in 2013 to 5 324MW by the end of June 2021. This includes 2 613 of wind, 2 211 of solar PV and 500MW of concentrating solar power added during the first half of the year alone.
According to the report, SA was plunged into 650 hours of load-shedding in 1H-2021 (15% of the time) wherein 963GWh of estimated energy was shed (mostly stage two load-shedding), as an additional coal unit at Kusile power station entered into commercial operation.

This is 76% of the total load-shedding experienced during 2020.

Last year, renewable energy contributed 10% to the total national energy over the 12-month period.

“By the first quarter of 2021, SA had 52.6GW of wholesale/public nominal capacity. The electricity mix is dominated by coal-fired power generation, which contributed 83.5% to system demand in the period,” says the report.

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“In 1H-2021, the variable renewable energy fleet of 5.3GW (wind, solar PV, CSP) reduced peak demand slightly, but more importantly, reduced high demand hours by 65%. Flexibility needs were not yet significantly increased with the existing variable renewable energy fleet in 1H-2021.”

For years, industry pundits have been touting renewable as the answer to SA’s ongoing energy crisis.

While SA has a heavy reliance on coal resources, governments across the globe have been introducing new frameworks to help combat climate change by enforcing the reduction of the amount of fossil fuels emitted by firms.

In an effort to resolve SA’s energy supply shortfall and reduce the risk of load-shedding, president Cyril Ramaphosa last month announced government will increase the National Energy Regulator of South Africa licensing threshold for embedded generation projects from 1MW to 100MW. This would allow companies to produce their own electricity without a licence.

The move was hailed by the renewable energy sector as it also opens up opportunities for intensive energy users like mines to generate their own electricity; the previous licensing requirements were limiting and cumbersome for end-users.

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The Western Cape’s Municipal Energy Resilience (MER) Initiative has signed memoranda of understanding (MoUs) with all six of the candidate municipalities participating in the initiative. 

This follows a ceremonial signing with the executive mayor of Stellenbosch Alderman Gesie van Deventer, on behalf of the Stellenbosch municipality, which will be participating in the first phase of the MER Initiative in this financial year.

The Drakenstein, Mossel Bay, Overstrand, Saldanha Bay and Swartland municipalities will also participate in the initiative. 

The signing of these MoUs is a critical step in Phase 1 of the MER Initiative and follows a readiness evaluation to determine which municipalities are most equipped and meet the conditions required to take advantage of the energy regulations to develop their own power generation projects and procure power from independent power producers (IPPs), says Western Cape Finance and Economic Opportunities Minister David Maynier.

“We will now be supporting and assisting these municipalities to ensure that municipal electricity networks are prepared to undertake pioneering renewable energy projects,” he notes.

Maynier says the work will explore multiple pioneering renewable energy technologies and scales, cost options, scale of investment required, location issues, risks, municipal readiness needs, infrastructure needs, timelines to get capacity onto the grid, transaction and procurement mechanisms, and regulatory issues.    

“While we have been finalising the MoUs with these municipalities, we successfully concluded a request for information (RfI) calling on all potential private and public sector organisations, including municipalities, to provide information on renewable energy projects which will assist in defining the potential pioneering projects that can be implemented in relevant candidate municipalities in the Western Cape.  

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​“Additionally, we are also collaborating with the City of Cape Town and welcome their recent announcement of an RfI for innovative funding and financing instrument solutions for their Renewable Energy Programme,” Maynier acclaims.

He says the RfI is aimed at development banks and multilateral development funds for projects that the city will own and operate, located on city-owned land and buildings (typically within the city distribution grid) and ranging in size from less than 1 MW to 100 MW per project, with the potential to explore larger-scale projects connected to State-owned power utility Eskom’s network.

“We will continue to do everything we can to support municipalities and businesses to participate in the growing the green energy sector and to become more energy resilient so that together we can create a more energy resilient future in the Western Cape,” Maynier comments. 

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The City of Cape Town is calling private and public sector financiers to submit proposals for the low-cost finance of renewable energy projects that will be owned and operated by the city.

The city hopes to have a ground-mounted solar photovoltaic (PV) plant built and operated by around 2022/23.

This is in addition to the plan to procure some of its energy from independent power producers in future, it said.

‘The programme will be made up of a number of projects ranging in size from less than 1MW to 100MW per project and all projects will be located on city-owned land and buildings, typically within the city distribution grid,” said deputy mayor Ian Neilson.

​“It will comprise a range of technologies and sizes, including both rooftop and ground-mounted solar PV systems, developed and implemented over a period of 20 years, until 2040.”

The renewable energy provided is expected to be derived predominantly from solar photovoltaics and wind generation systems accompanied by utility-scale energy storage, with the opportunity for other renewable or lower-carbon energy sources to be included.
The finance provided must also cover all costs required to connect the projects to the distribution grid.
The minimum operational life of each project is expected to be 20 years and accordingly, the tenure of the funding instrument should be in the region of 15 to 20 years.
The finance provided should cover all costs of development and construction of each power plant and can be in the form of loans/debt, grants, equity, credit guarantees, or a blend thereof.
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The South African contract Karpowership is chasing could be a game-changer for the group, making Eskom its largest client globally. What will we pay and how much will the Turkish conglomerate pocket? AmaBhungane does the sums.

One well-publicised estimate puts the cost of the South African Karpowership contracts over 20 years at more than R200-billion. This number is simply the “evaluation tariff” the company provided when it bid for allocations under the emergency Risk Mitigation Independent Power Producer Procurement Programme (RMI4P), multiplied by the absolute maximum amount of power Eskom can buy from the company in terms of the programme’s rules*.

This comes to R225.7-billion over 20 years or R11.3-billion per year.

The RMI4P rules also provide for a minimum guaranteed “take or pay” element where Eskom has to pay for a certain amount of power, irrespective of whether it actually needs it. 

This is equal to 70% of the maximum possible sales, ie, R7.9-billion per year or R158-billion over 20 years. 

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This is the revenue at the level of the local subsidiary Karpowership SA which is 49%-owned by a local consortium. All of that comes from Eskom. 

These, however, are ballpark figures because the actual tariff Karpower and other bidders will charge is tied to reigning gas prices, among other conditions.

These figures represent revenue, which is a good measure of what Eskom will pay, but a bad measure of how much money Karpowership will make. 

They include fuel costs which the company simply buys and sells onward as a “pass-through”. If you remove that from the equation you get the elements that really make up Karpowership’s income. 

The main one is the capacity charge or, for simplicity’s sake, the rental cost of the powerships. 

There are also smaller items that the parent company charges the local subsidiary for, like spare parts.

Rental income and spare parts, which together make up the bulk of total revenue, all go to the international group. Smaller expenses will, however, occur in South Africa. According to documents that Karpowership submitted as part of its local bid, the local component of costs come to about 9.3% of the operating expenditure, excluding fuel.

So what is the contract worth to Karpowership? 

As part of an ongoing court case involving allegations of corruption in the RMI4P process, Karpowership has filed parts of its RMI4P bid that show the breakdown of expenses at one of its three proposed projects: Coega.

According to this document, the rent paid abroad will be roughly R35-billion, with another R6-billion paid for spare parts over the 20 years. This seems to exclude the fuel ship that will accompany the powerships. That’s an additional R11.7-billion.

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South Africa’s renewable energy programme has begun to move towards sustainable goals and a just energy transition.

A decade into South Africa’s renewable energy programme, evidence of a maturing sector continues to come to the fore. Most recently, the launch of a programme that will help the sector to be a legitimate actor in the just energy transition, through deliberate involvement in the Sustainable Development Goals of the country.

The Renewable Energy Independent Power Producer Procurement Programme (REI4P), is recognised as a highly effective policy instrument, designed to accelerate and sustain private investment in renewable energy by channeling private sector expertise and investment and additionally plays a significant role in the social landscape of South Africa. 

Now, with the launch of the Initiative for Social Performance in Renewable Energy (INSPIRE) last week, the country will have a centre of excellence to drive leadership in the energy transition through training, convening, research and innovation.
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Ntombifuthi Ntuli, CEO of the South African Wind Energy Association (SAWEA) explained: “It can be said that the sector is certainly coming of age. With a baseline of information gathered over the last ten years, through planning and executing socio-economic development (SED) initiatives for renewable energy projects, we are ready to shift from compliance-driven initiatives to more impact-driven programmes.”

“Our vision is to see more collaboration amongst the Independent Power Producers (IPPs) and also with other sectors of the economy, such as mining. Collaboration will enable us to co-create programmes with the communities, and at the same time, pool our resources to ensure more impactful initiatives, which INSPIRE, will help us capacitate.”

INSPIRE, led by Synergy Global Consulting under the guidance of Dr Holle Wlokas, aims to advance the field of social performance in South Africa’s renewable energy sector, by creating a centre of excellence to drive leadership through learning, knowledge sharing, partnership and innovation.

Speaking at the launch of this programme, which is implemented in partnership with WITS University, Dr Wlokas highlighted the advancement of the maturing REI4P sector and the growing understanding of the complex challenges to make a meaningful and long-term contribution to the development trajectory of communities and economies around the country.

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Renewable sector works towards sustainability goals and a just energy transition
“As the sectors understanding of economic development and the wider field of social performance has matured over the past couple of years, we have seen companies grow dedicated teams to manage the work scopes. The number of professionals employed in this scope has risen from a mere handful at the onset of the REI4P to close to a hundred, and more even when counting site-level Community Liaison Officers,” Dr Wlokas explained.

Learning from more established industry sectors, it is recognised that the capacity of social performance practitioners is absolutely critical in enabling the development outcomes of the REI4P to be realised.

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Imagine a prosperous future without load shedding where enough energy is supplied by an affordable energy system that catalyses a large-scale industrialisation programme. A system that injects new life and capital into South Africa’s struggling rural towns. It’s easy if we try.
By Mark Swilling, Nthabiseng Mohlakoana, Merin Jacob, Ndamulelo Mararakanye, Bernard Bekker and HJ Vermeulen
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The publication of the list of preferred bidders for the Risk Mitigation IPP Procurement Programme (RMIPPPP), the subsequent opening of Bid Window 5 by the Department of Mineral Resources and Energy (DMRE) and the recent presidential announcement about the new 100MW limit for self-generated licence-exempt renewables has focused attention on the accelerated construction of renewable energy generation in South Africa.

This brings the procurement of renewable energy from Bid Window 1 to Bid Window 5 to a total of 9GW, with a further potential procurement of 1.8GW from the RMIPPPP. Although this may not be as much as civil society groups, industry associations, research organisations and even Eskom may have wanted, the total of 10.8GW renewable energy, ie 24% of capacity currently installed in South Africa, does suggest that South Africa may well be catching up with the rest of the world that is transitioning fast into a renewables-based energy future.

The establishment of the Presidential Climate Change Coordinating Commission (P4C), with a clear mandate inherited from the National Planning Commission’s Just Transition Scenarios, will inevitably lead to the government confirming the globally accepted “Net Zero by 2050” target that was referred to in the Low Emissions Development Strategy approved by the Cabinet in September 2020. The Net Zero target refers to achieving net zero carbon emissions by 2050. This does not mean no carbon emissions, it means that the total output of emissions and total capture of emissions in carbon sinks should equal zero.

It’s an ambition that South Africa’s Nationally Determined Contributions (NDC) being prepared for COP26 later this year will need to fully embrace. The strongest commitment statement to date to the energy transition comes from the Presidential Economic Advisory Council (PEAC): “What used to be a choice is now mandatory. Those countries not adapting to a green transition will find themselves behind and excluded.”

The above developments, together with the recent announcement by the president that the cap on licence-exempt self-generation will be lifted from 1MW to 100MW that could unlock as much as 5GW of additional capacity in the near future, must undoubtedly be celebrated by all stakeholders.

According to the Council for Scientific and Industrial Research (CSIR) an ambitious commitment to building 5GW of renewable energy per annum for decades is urgently required — this equates to the generating capacity of two-and-a-half Koeberg nuclear power stations. This is needed to replace South Africa’s ageing coal-fired power stations and could unlock nearly R500-billion worth of investment over the next 10 years, creating 50,000 jobs per annum in construction and operation of wind and solar plants.

This, in turn, would trigger an upstream industrialisation programme that will catalyse the re-industrialisation of the South African economy that will rapidly drive down unemployment levels. All good news. Expanding and decarbonising the generation capacity through investment in renewable energy, however, represents only one aspect of the transition to a stable and sustainable energy scenario.

Once generated, electricity must be transmitted from distributed generation sites to load centres via the electricity grid. The existing grid, however, is unevenly developed — it is strong in the northeast where the coal deposits are, and weak in the southwest where the best wind and solar resources are located. Is the national grid, therefore, fit for future purpose?

National demand for electricity by businesses and households is variable, and it changes according to summer and winter seasons. While weather-dependent wind farms at two different locations might generate the same amount of energy per year, the times during which they dispatch energy onto the grid may differ drastically. One wind farm might generate power when the grid needs it (eg during the morning and evening peak times in winter), another in a different region may generate power at different times. This raises a crucial question: how well will the new weather-dependent renewable energy generators synchronise with the demand patterns of the end users (households and businesses) across different seasons?

Investments in renewable energy will unlock economic growth, especially in the regions where the plants and grid infrastructure are sited. However, will these benefits be optimally and equitably distributed across the South African landscape? Communities around wind and solar farms are well positioned to benefit developmentally from these projects. But this depends on the capabilities of local governments, local businesses and civil society to take advantage of new inward investment flows. This has implications for the location of projects. It would not be desirable, for example, to put projects into locations where there are high levels of corruption and mismanagement.

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Department of Mineral Resources and Energy (DMRE) director-general Advocate Thabo Mokoena reports that government intends using the South African Renewable Energy Masterplan (SAREM), which is currently being drafted, to position the country as a “globally significant” producer of inputs used in renewable-energy plants.

In a keynote address to the virtual Enlit Africa conference on Tuesday, Mokoena said the SAREM would help “coordinate the renewable-energy requirements” to support such an industrialisation drive and to boost manufacturing employment.

The DMRE, together with the Department of Trade, Industry and Competition, was currently prioritising the establishment of a multi stakeholder SAREM executive oversight committee, which would guide and champion industrialisation across renewables value chains.

Speaking during a recent webinar hosted to coincide with the six-month countdown to the upcoming COP26 climate talks, to be held in Scotland in November, Green Cape’s Francis Jackson said that, once convened, the committee would be able to confirm the target timeline for finalising of the plan and its adoption.

He indicated that, historically, the yearly South Africa Investment Conference had been an opportunity for masterplans to be announced, but stressed that this did not preclude prior adoption should the plan be endorsed ahead of the conference, scheduled for early November.

“The present focus is the establishment of the executive oversight committee as well as the research and consultation phase.

“Inputs from the research and consultations are contributing to an emerging set of opportunities, barriers and bottlenecks and trade-offs.

“These require the executive oversight committee’s engagement to take to the next level of prioritising levers to unlock them,” Jackson told Engineering News separately.

A matrix of value-chain elements was being considered, with priority being given to those primary materials, components and subcomponents used in the manufacture and assembly of the renewables technologies outlined in the Integrated Resource Plan of 2019 (IRP2019), including solar photovoltaic (PV), wind and battery storage.

“Care is being taken to ensure that the perspectives of global value-chain players eyeing the market for investment in local production capacity, as well as incumbent local manufacturers’ perspectives, are represented in the problem-solving.”

MANUFACTURING OPPORTUNITY

Value-chain elements have not yet been “strategically prioritised”, but the objective is to outline a rational sequencing of support that harnesses “the low-hanging fruit that catalyse related value-chain elements”.

“For example, wind turbine towers and blades are obvious primary component opportunities, should procurement and project pipeline certainty be clear,” Jackson outlines, adding that the integration of local components in nacelle assembly could grow over time.

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