By Lehlohonolo Lehana.
Dr Kgosientsho Ramokgopa, the Minister of Electricity and Energy has praised the performance of the Independent Power Producer (IPP) Office in its procurement of mostly renewable-energy capacity since 2011, noting that about 8.2 GW of IPP capacity from 107 projects was currently either in operation or under construction.
These projects have a combined investment value of about R272-billion.
Ramokgopa briefed media on the IPP as part of his regular media briefings on South Africa’s Energy Complex.
However, during a briefing he also acknowledged that there was a need to adapt the procurement process in light of recent failures to advance projects selected as preferred bidders to financial close, as well as to navigate grid constraints and streamline the grid-connection processes, which had emerged as a serious bottleneck.
As a result, government is considering far-reaching changes to the way public procurement IPPs generation capacity is being carried out so as to accelerate deployments in a way that navigates the country’s prevailing grid constraints, while also creating the certainty needed to support green industrialisation.
The changes were considered necessary to facilitate the procurement of some 10 GW of additional renewables capacity covered by the Ministerial determinations issue to enable procurement, including capacity available for re-allocation from previous bidding rounds where projects were either not selected or did not advance to construction.
Besides a decision not to select any wind bidders for a 3.2 GW allocation released as part of Bid Window 6 (BW6) of the Renewable Energy Independent Power Producer Procurement Programme in 2022, 14 projects with a combined capacity of 1.4 GW selected as preferred bids under BW5 failed to advance to financial close, while five projects with a combined capacity of 1.6 GW had failed to close under the risk mitigation round.
The IPP Office has moved to pull the bid bonds of bidders that did not achieve financial close during BW5, but head of legal Lena Mangondo reported during a briefing that this action was being challenged legally.
She also reported that the preferred bidder fees had been paid by the developers of risk-mitigation projects that failed to reach commercial close, but made no mention of whether their bid bonds were also being pulled by the IPP Office.
Ramokgopa said the pulling of the bid bonds was necessary for the credibility of the programme.
“These are legally binding documents … [and] we are going to pull the bid bonds. If we land in court, let’s land in court,” he said, expressing impatience with the fact that contracts were not being honoured.”
“We must stick to the rules of this programme.”
While no decisions had been made regarding the future procurement framework, which the Minister indicated would be finalised in the coming three to four weeks.
Ramokgopa said discussions were also under way internally about the value of pursuing either “mega-procurement rounds”, as he had proposed previously, or implementing “smaller, more frequent” bid windows, as had been proposed by the renewables industry itself.