The first unit of power produced by independent power producers (IPPs) using renewable energies will be incorporated into the national grid in December, the department of energy has advised.
All the 47 IPPs who were chosen as preferred bidders in the department’s renewable energy IPP procurement programme have already signed power purchase agreements with Eskom and a number of them have begun constructing their specified projects. Altogether, they have committed to sell 2 459 Mega Watts (MW) of electricity to the power utility.
The first project to come on stream will be solar as most of these have an average construction period of 12 months.
The first wind farms will be incorporated on to the grid towards December 2014 as they have average construction periods of around 18 to 24 months.
One of the projects that is at an advanced stage of construction is the Metrowind van Stadens Wind Farm in the Port of Ngqura near Port Elizabeth. This project is five months into construction and ahead of its schedule with civil works nearing completion and all nine wind turbine bases completed.
The wind farm which will feed 80 000 Mega Watts hour (MWh) a year of green electricity into the Nelson Mandela Bay Metro grid received all its turbine components on Monday and these are anticipated to start being erected by August.
The department of energy’s spokeswoman, Thandiwe Maimane, said that the department had put in place various mitigation plans such as imposition of penalties, takeover of the project and even termination on the agreements signed with the IPPs to ensure that the December deadline was met and that IPPs stuck to their contractual obligations.
The renewable energy projects chosen in window one and window two of the IPPs procurement programme have attracted investment into the country from financing and developmental institutions, commercial banks, private companies in different industries and even equity financing.
The department of energy also said that the National Treasury had been approached by many international donor countries keen to increase their contribution to renewable energy funding in South Africa.
Earlier this month, Pele Green Energy and its solar concentrated photovoltaic equipment making partner, Soitec raised the first renewable energy bond in Africa.
Mike Peo, the head of infrastructure, energy and telecommunications at Nedbank Capital, said that project bonds were increasingly becoming part of the financing mix of infrastructure projects in general and the Renewable Energy Independent Power Producers (REIPP) projects were likely to raise more bonds after construction.
“There is a degree of complexity in using project bonds at the bidding stage of these projects due to the requirements set by the department of energy.
“So in our opinion, the real interest in project bonds will start to emerge as project construction is completed,” he said.
Nedbank has committed more than R10 billion of direct funding and in excess of R12bn of hedging and other facilities in the first two rounds of REIPP.
Peo said that the continued success of the window two programme emphasised the serious intent by the department of energy to the clean energy commitment and meeting the country’s targets in this regard.
When South Africa unveiled its Integrated Resource Plan in May 2010 which set a target of 18 giga watts (GW) of renewable energy production over a 20-year period, there was much scepticism about the country’s ability to meet what some labelled as an “too ambitious target”.
But almost all chosen IPPs have made a smart move by drawing expertise from countries and companies who have vast experience in the renewable energy sector which has eliminated some of the teething problems they could have experienced.
The collaboration of the GDF SUEZ Group – which ranks among the world’s leading energy companies – with Investec Corporate and Institutional Banking in Cape Town’s 94 MW West Coast One wind project is one example.
The GDF SUEZ Group, whose core businesses are electricity, natural gas, and energy and environmental services, is the leading operating IPP with a direct equity interest in 25 500 MW of power capacity in the Gulf Co-operation Countries.
The company is also involved in two open-cycle gas-turbine power plants in Durban and Port Elizabeth.
The Suzlon Group, which is ranked as the world’s fifth largest wind turbine supplier in terms of cumulative installed capacity, is also involved in a number of projects chosen in the REIPP programme. There are a number of other internationally recognised renewable energy sector players involved in the programme.
And what is interesting is that even though foreign companies are involved in these projects in a big way, the department of energy has suggested increasing local content for projects bidding in window three to 40 percent from 25 percent in the previous bidding windows.