Mantashe names preferred bidders for emergency power tender

Energy Minister Gwede Mantashe today named eight preferred bidders for the country’s emergency power tender.

The Minister told a press conference this afternoon that energy security of supply was recognised as critical to achieving the objective of economic recovery in South Africa. In response to President Ramaphosa’s Economic Reconstruction and Recovery Plan, his department – to meet energy needs – had set itself a target of Thirteen Thousand Eight Hundred and Thirteen megawatts (13 813 MW), to be delivered from a mix of energy sources.

This included, among others,

• Procurement of Two Thousand megawatts (2 000 MW) under the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) to meet the immediate electricity supply gap.
• Procurement of Eleven Thousand Eight Hundred and Thirteen megawatts (11 813 MW) from various energy sources. For this purpose, we Gazetted the Section 34 Ministerial Determinationswith the intention to urgently procure additional generation capacity for the national grid.

“We are here today to announce the preferred bidders for the Risk Mitigation Independent Power Producer Procurement Programme and to provide an update on the procurement of additional power in line with IRP 2019,” Minister Mantashe told reporters.

He explained that the Risk Mitigation IPP Procurement Programme (RMIPPPP) was released to the market in August 2020. The aim was to alleviate the electricity supply constraints and to reduce the extensive utilisation of diesel-based peaking electrical generators in the medium-to-long-term.

The Bid Submission closed on 22 December 2020 and attracted a total of 28 bid responses with a potential contracted capacity of approximately Five Thousand One Hundred and Seventeen megawatts (5 117MW).

“This clearly demonstrates a sustained private sector interest in participating in the South African energy landscape,” the Minister added.

The Risk Mitigation IPP Procurement Programme succeeded in attracting project proposals featuring a variety of technology combinations.

The quantity and quality of the bid responses and potential megawatt of contracted capacity allowed for a competitive price evaluation, he said.  All compliant bids were subjected to local and international benchmarking which is necessary to ensure that value for money was received as required by legislation.  

The evaluation process resulted in the selection of 8 Preferred Bids totalling One Thousand Hundred and Forty-Five megawatts and a further Eligible Bids totalling One Hundred and Fifty megawatts (150MW).

The three Eligible Bids are subject to the value for money proposition in line with the provisions in the Request for Proposal. “It is important to note that these Three bidders are within the Two Thousand megawatts (2000MW) capacity threshold in terms of the evaluation rankings, but their announcement can only be made following satisfactory value for money propositions.”

Minister Mantashe named eight Preferred Bidders as:

“The solutions provided by these preferred bidders are from a combination of a range of technologies that include, Solar PV, Wind, Liquified natural gas and battery storage. The prices for the proposed solutions range from One Thousand Four Hundred and Sixty-Eight Rands per megawatt hour (R1 468 per MWh) to One Thousand Eight Hundred and Eighty-Five Rands per megawatt hour (R1 885 per MWh). The weighted average price is One Thousand Five Hundred and Seventy-Five Rands per megawatt hour (R1 575 per MWh).”

The Minister said that the 8 projects will inject a total private sector investment amount of R45 billion to the South African economy, with an average local content of 50% during the construction period. South African entity participation from these projects is 51%, with black ownership at 41%.

About Three Thousand Eight Hundred job opportunities will be created during the 18 months construction period and a further 13 500 during the 20-year Power Purchase Agreement (PPA) term.

The Preferred Bidders are required to reach Financial Close by no later than the end of July 2021. “Due to the urgency to bring power online, this date is not negotiable. It is for the Preferred Bidders to manage all the risks to reach financial close. It is envisaged that, first power from these projects will be connected to the grid from August 2022.”

Release of Renewable Energy IPP Procurement Programme Bid Window 5

In September 2020, the National Energy Regulator of South Africa (NERSA) concurred with a Section 34 Determination to procure Eleven Thousand Eight Hundred and Thirteen (11 813) megawatts from a range of technologies. These included Wind (4 800 megawatts), Solar PV (2 000 megawatts), Coal (1 500 megawatts), Gas (3 000 megawatts), Battery Storage (513 megawatts).

“I am pleased to announce the first bidding round in response to the Section 34 Determination. The Request for Proposal (RFP) for the procurement of 2 600 megawatts under the Renewable Energy IPP Procurement Programme Bid Window 5 will be released to the market at Midnight today,”the Minister said.

Of the 2 600 megawatts from this Bid Window 5, 1 600 megawatts will be from wind and 1 000 megawatts from Solar PV.

“Given the energy challenges that we are facing the objective is to get these projects connected to the grid as soon as possible,” he added.

The closing date for the Bid Submission is August 4^th, 2021.

Roll out of the rest of the second Determination

The Minister informed reporters that the Department intended to release four more Requests for Proposals within the next 12 months. These will include:

• Two thousand six hundred megawatts (2 600MW) from renewable energy,
• Three thousand megawatts (3 000MW) from gas,
• One thousand five hundred megawatts (1 500MW) from coal, and
• Five hundred and thirteen megawatts (513MW) from battery storage.

“In line with the IRP and the provisions in the Electricity Regulations of New Generation Capacity, additional Determinations will be issued to Eskom and Municipalities as and when requests are received.

“The Department is working with the necessary speed to review the licensing threshold for increased embedded generation.”