Minister of Electricity and Energy, Kgosientsho Ramokgopa, yesterday announced that the ministry was deliberating the launch of the next phase of the Independent Power Producer (IPP) Programme.
With transformative proposals expected within the next three to four weeks, the ministry is exploring whether to initiate a mega bid or a series of smaller, focused bids that could be geographically ring-fenced to support specific technologies.
“We are having this conversation internally, but hope to have a proposal on the way forward within the next three to four weeks,” Ramokgopa said during a media briefing.
These developments are vital for South Africa’s aim to procure 10 000MW of renewable energy capacity.
Ramokgopa underscored that creating clear procurement pathways would restore the long-term policy certainty needed for IPPs, their financial backers, and the broader supply chain.
“The visibility of a consistent pipeline will equip the Department of Trade, Industry and Competition to introduce incentives that can further boost the industrialisation of the renewables supply chain,” he remarked, highlighting the role of stable policy frameworks in galvanising investment in local supply capacities.
The energy landscape is at a critical juncture, as it grapples with not only generation capacity but also substantial industrialisation opportunities in the renewable sector.
The renewable energy and battery storage value chain is complex and expansive, requiring various components, such as solar panels, wind towers, transformers, and battery cells.
According to Segemotso Scheepers, head of the National Transmission Company of South Africa (NTCSA), significant lead times exist for important equipment like large transformers, which can take between 24 to 36 months to deliver.
This underlines the urgency for clearer procurement strategies.
Examining the achievements of the IPP Office, Ramokgopa praised its successful procurement record since August 2011, which has seen approximately 8 200MW of IPP capacity operational or under construction across 107 projects.
This development has catalysed an impressive investment boom, valuing around R272 billion, with only 18% of funding coming from international investors.
The financial repercussions of the IPP Programme have already begun to reflect on consumer pricing, with dramatic reductions seen in energy costs; solar prices dipped from 466 cents per kilowatt-hour (kWh) to a mere 56 cents per kWh, while wind prices fell from 193 cents to 58 cents per kWh.
To further streamline the bidding process, the ministry convened meetings with stakeholders, aiming to review past bid windows and address reservations that have previously hindered progress.
Of particular concern was the 2022 Bid Window 6, where a lack of successful wind bidders highlighted ongoing grid constraints.
Furthermore, 14 projects in Bid Window 5, with a cumulative capacity of 1 400MW, failed to secure funding, showcasing the formidable barriers that remain.
Proposed reforms may include efforts by Eskom to reduce timelines for grid connection cost estimates and the finalisation of the curtailment framework that could unlock significant solar capacity in areas currently considered under-connected.
Ramokgopa also indicated that South Africa might look to international models, such as Saudi Arabia’s solar parks, aiming to concentrate power generation projects in locales with strong grid access.
BUSINESS REPORT