The cost of renewable energy for South African businesses and homes is coming down.
Projects chosen in the second bidding window of the renewable energy independent power producers (IPP) programme would offer power at lower prices, the Department of Energy announced yesterday.
The projects had a value of R28.1 billion, with R11.8bn in local content value.
Mike Peo, the head of infrastructure, energy and telecoms at Nedbank Capital, said that yesterday’s announcement would ease any lingering doubts regarding the government’s commitment to its integrated resource plan.
“(The news) sends a clear message to local and international stakeholders and investors – not to mention the general public – that the vision of a South Africa powered to a larger extent by renewable energy is destined to become a reality,” he said.
The department named 19 preferred bidders for window two of the IPP bidding process that closed on March 5.
The projects have the potential to produce 1 044 megawatts (MW) of power, which the department was counting on to help Eskom deal with rising electricity demand as well as meet its 3 625MW power procurement target for 2016.
The department estimated that by the end of the bid process, the IPP plan would attract project proposals worth R100bn over its lifetime.
A total of 7 059 jobs during construction and 328 jobs during operations would be created by the projects announced yesterday.
Nine solar photovoltaic (PV) bids were selected with a combined capacity of 417MW against the department’s allocation for PV of 450MW.
Seven wind projects were selected, representing 563MW against an allocated 650MW.
The two small hydropower projects chosen would produce 14MW power and there was one concentrated solar power (CSP) project with 50MW capacity, fulfilling the 50MW allocation.
These projects, together with those chosen in window one, place South Africa well ahead of its IPP procurement target. The two bidding rounds had an allocation of 2 459MW of generation capacity and only 1 166MW remains to be procured in the upcoming three windows.
The department said the average prices offered by the PV developers fell to 1.7c a kilowatt-hour (kWh) from 2.8c in the first bidding window. Prices for wind projects fell to 89c a kWh from R1.14. The CSP prices fell slightly from R2.68 to R2.51 a kWh.
Energy Minister Dipuo Peters said a total of 79 bids had been received, a notable increase from the 53 bids submitted in the first window.
These bids represented 3 200MW of potential capacity, but only 51 bidders met the requirements of the request for proposals.
However, given the capacity limitation on this window, only 19 projects were selected.
The department confirmed that it would release a tender for projects involving less than 5MW in the next few weeks.
At the beginning of the year Cosatu raised concerns about the level of local content, which was very low and encouraged the importing of jobs. It said this should be increased.
Yesterday the department said that price and other elements such as empowerment and local content played a crucial part in determining bid selection. In some of the technologies the local content target was now as high as 60 percent, while the minimum 40 percent South African equity participation requirement remained unchanged.
“This certainty in requirements should surely encourage project developers to relocate their manufacturing capacities to South Africa so that we can also realise the additional target of growing local employment opportunities and upscaling skills,” the department said.
The level of commitments on economic development in window two had improved compared with window one.
More communities were expected to benefit through employment or shareholding in these projects. Also, most of the preferred bidders would establish community trusts that the department would monitor.
The SA Photovoltaic Industry Association (Sapvia) welcomed the government’s call for increased local content.
The association said it was working closely with the government on a roll-out plan to increase the local content for PV technologies in South Africa, which would strengthen the value of solar PV projects for the economy.
To secure a future for the industry, a long-term procurement programme of solar projects was needed as this would stimulate further investment in local manufacturing, Sapvia concluded.