WHAT IS THE REIPPPP?
The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is a competitive bidding process used by the SA government to procure electricity from independent power producers (IPPs) using renewable energy sources such as solar, wind, and biomass. The programme is designed to promote the development of renewable energy in South Africa and to help the country meet its renewable energy targets outlined in the Integrated Resource Plan (IRP).
In each round of the REIPPP, IPPs submit bids to develop and operate renewable energy projects, including information on technology, location, and proposed price for the electricity to be generated. The government then evaluates the bids and, once the evaluation is complete, awards contracts to the successful bidders providing successful IPPs with a Power Purchase Agreement (PPA) to develop and operate the project.
OVERVIEW OF THE REIPPPP
The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) was launched in 2011 to increase the share of renewable energy in the country’s energy mix. Since that date, the program has helped increase the country’s installed capacity of renewable energy from 1 400 MW in 2010 to over 9 000 MW in 2020. It has also helped to significantly reduce the cost of renewable energy in South Africa.
However, the program has faced multiple challenges – including delays in procurement, a lack of effective implementation of local content, and, most recently, challenges with available grid capacity. Despite the challenges experienced, preferred bidders from the latest rounds, including the RMIPPPP, bid window 5, and bid window 6, were announced on 18th March 2021, 28th October 2021, and 5th October 2022 respectively.
RISK MITIGATION IPPPP
The Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) was released on 24th August 2020 and is different from the REIPPPP in that multiple geographically dispersed generation facilities could be bid as a single dispatchable project.
The RMIPPPP was aimed at filling the short-term electricity supply gap and reducing the extensive and costly use of diesel-based peaking electrical generators. There was a total of 39 bids submitted, of which 11 were selected as preferred bidders with a collective capacity of 1 996 MW.
Of the successful bids only the 3 Scatec Kenhardt 50MW projects have reached Financial Close to date with timeline extensions currently in place to enable other preferred bidders to address outstanding permitting and other requirements.
REIPPPP ROUND 5 & 6
There were 102 bids received during the 5th bid window submission period, beginning on 16th August 2021. Of the 102 bids, 63 of them were for solar PV and 39 for wind, with a collective generation capacity of 9 644 MW. 25 of the 102 bids received preferred bidder status with 19 of them having reached Financial Close as of 8th December 2022.
Bid window 6 saw fewer bids with only 56 bids received during the submission period, despite the extension provided to the bid submission deadline from 11th August to 22nd September. The 56 bids were comprised of 33 bids for solar PV and 23 bids for wind and have a collective capacity of 9 600 MW. Of the 56 bids that were received only 6 of the solar PV bids, capable of generating 1 840 MW, were accepted. These projects are to start delivering power to the grid within 24 months of commercial close (expected 2025).
None of the bids for wind were accepted due to a lack of available grid capacity – initial indications show that the capacity may have been swooped up by private projects whilst bid window 6 was underway.
FINAL THOUGHTS
South Africans have endured power cuts for years but 2022 was the worst on record with 205 days of rolling blackouts. With load shedding reaching stage 6 (6000 MW deficiency) and no immediate signs of improvement it prompts the question of what can be expected in terms of generation capacity additions in the immediate future.
Projections for 2023 include increased imports of power from neighbouring countries, (re)commissioning of Kusile Units 1-5, and various private sector projects coming online which are collectively expected to add capacity of 7 652 MW.
In 2024, municipal procurement, the commissioning of the remaining units of Medupi and Kusile, RMIPPPP and bid windows 5 projects, and additional private embedded generation projects are expected to contribute a further 7 465 MW.
From 2024 onwards, the remaining projects in bid windows 5 and 6 projects, Eskom land lease projects, new pumped storage, private sector projects, and new gas facilities at Richards Bay and/or Mossel Bay could add a further 29 000 MW if they are all realised. The question remains whether all these projects will make it to implementation, and, taking into consideration the current rate of decline in generating assets, will it happen quickly enough?
