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South African renewables RFP attracts over 100 bids

23 August 2021 Keiron Greenhalgh

A South African government renewable electricity request for proposals (RFP) attracted 102 bids from potential project developers, Department of Mineral Resources and Energy (DMRE) data revealed.

The RFP was the fifth phase of the government's Renewable Energy Independent Power Producer Procurement Programme, now in its 10th year, which aims to increase the size and reliability of the country's generation fleet as well as decrease South Africa's GHG emissions.

Tenders for renewable power have also been issued by companies and municipal authorities seeking to decarbonize and increase the reliability of their power supplies.

Of the 102 bids in the latest government RFP, 63 involve solar photovoltaic (PV) projects and 39 are onshore wind proposals, the data show. The DMRE declined to comment 23 August on how much combined capacity was submitted into the 2.6-GW tender.

Technology allocations in the tender were split into 1.6 GW of onshore wind and 1 GW of solar PV capacity. Bids were due 16 August. The government will announce the preferred bidders in October or November, with financial close expected in February or March 2022, and commercial operations to begin 24 months later, DMRE said.

"Strong" response

The level of response was strong, Kiren Maharaj, chairperson of the South Africa National Energy Association, a trade body, told Net-Zero Business Daily, adding that she expected the capacity target of the tender to be fully subscribed, if not oversubscribed.

Just as pertinent, she said, was that projects would be located in parts of South Africa where the mining industry—responsible for seven of the country's top ten exports, according to banking group Santander—doesn't have a foothold and therefore employment is scarcer.

In addition, because of the bias toward solar, there was less chance of opposition from politicians and environmentalists, IHS Markit power and renewables analyst George Hilton said 23 August, as was seen when the preferred bidders for the government's Risk Mitigation Independent Power Producer Procurement Programme (RMIPPP) were announced.

The country's generation stack is dominated by coal, accounting for 85% in 2019, according to IHS Markit data. South Africa produced 258.9 million mt of coal in 2019, according to Minerals Council South Africa, good for seventh in the global rankings table.

South Africa's installed power generation capacity is just over 58 GW, according to US government figures. Of that, around 3.5 GW is hydro-electric, while solar and wind account for around 2.3 GW each, respectively.

In consultancy and accounting firm EY's 2020 Renewable Energy Country Attractiveness Index, South Africa slipped one spot year on year to 37 from 36.

By 2050, solar facilities could account for as much as 35% of the generation stack, according to the US Energy Information Administration, a figure Hilton said was eminently probable.

South Africa's push to add generation capacity, particularly from renewable resources, comes after endemic load shedding at state-owned utility Eskom. The vertically integrated utility accounts for 86% of total power generation capacity, according to IHS Markit data.

The government's biggest task is to solidify electricity supplies, part of the reason it issued the RMIPPPP. The tender was issued specifically to fill a near-term power supply gap of 2 GW identified by the 2019 Integrated Resource Plan. The tender attracted 28 bids accounting for 5.117 GW of potential capacity.

However, LNG took the biggest share of the winning RMIPPP bids, with 1.22 GW across three Karpowership vessels. The lack of LNG infrastructure in the country makes offshore power ships a more feasible option, according to a report from IHS Markit's Hilton and his colleague Silvia Macri.

But the power ship contracts came up against hurdles, with the Department of the Forestry, Fisheries & the Environment blocking environmental approval, and the South African energy regulator holding hearings on the proposed contracts.

The ministry said in an email it had extended the deadline for other bidders to line up their financing. In the 23 August chat with Net-Zero Business Daily, Hilton said the cost of the gas and questions about where it would come from were behind the scrutiny.

The hunt for reliable power

Absent reliable power from Eskom, industrial buyers and municipal authorities are branching out on their own after the government lifted the size of a cap on "self consumption," or the amount of power an entity could source for its needs beyond what the state-owned generator could provide. The decision, said Hilton, was a lifeline under the current circumstances.

Chemicals-to-energy company Sasol issued a 900-MW renewable energy request for proposals (RFP) 13 April. Sasol's RFP is a joint venture with Air Liquide after the French industrial gas company bought oxygen production units at the Secunda complex in South Africa in 2020. The two companies are looking to buy the 900 MW of renewable capacity by 2030.

Before the sale, Sasol had said it would buy 600 MW of renewable power for the Secunda site in the province of Mpumalanga. Deals for some 600 MW of the overall 900 MW will be inked in 2021. Sasol said the first projects are likely to be wind or solar PV. The projects that produce the power Sasol and Air Liquide will buy are expected to be online by 2023. Sasol did not respond to requests for comment on the response to the RFP in recent days.

South Africa's powerful mining sector is another set of customers seeking to minimize the impact of energy supply constraints as a result of Eskom's rolling blackouts.

Several miners such as Gold Fields; Bushveld Minerals, a producer of battery metal vanadium; and gold producer Pan African Resources have sought to complement their allocations from Eskom with renewable energy solutions.

The platinum sector—which accounted for about 9.3% of exports in 2019, according to Santander—is also looking to renewable energy, with top four miners Anglo American Platinum, Sibanye Stillwater, and Impala Platinum to the fore. South Africa is the biggest platinum miner on a country basis by volume. Sibanye also has its eyes on the battery metal sector, with investments in nickel, lithium, and critical minerals.

Another potential buyer for renewable energy not produced by Eskom is South Africa's biggest city by population, Cape Town. The city government on 13 July issued a tender seeking financial backing for renewable energy projects. Bids are due 27 August.

"The city has always believed that local governments have the constitutional power and obligation to procure renewable energy, and this is necessary to move away from the sole reliance on Eskom for energy supply," Councillor Phindile Maxiti, who has an energy and climate brief, said when the tender was announced.

Hydrogen

It isn't just solar and wind that are finding favor as decarbonization—and especially the shift away from coal—gathers pace. Green hydrogen, produced through electrolysis using renewable electricity, is set to be tapped too.

German export credit agency KfW Development Bank and the country's government is looking to support green hydrogen initiatives in South Africa, and issued a request for information in July, the government-backed Council for Scientific and Industrial Research said. A source close to the process told Net-Zero Business Daily that about 50 responses to the RFI were currently being assessed.

Sasol is also looking to enter the hydrogen sector, it said in a 14 April statement. The company has teamed up with Toyota South Africa Motors to explore development of a "green hydrogen mobility" ecosystem in South Africa. Sasol already produces grey hydrogen from fossil fuels, it said in the statement. The companies plan to develop a "mobility corridor" for hydrogen fuel cell-powered heavy-duty long-haul trucks.

Posted 23 August 2021 by Keiron Greenhalgh, Editor, Climate & Sustainability Group, IHS Markit

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