The Independent Power Producer (IPP) Office will introduce reserve bids in bid window 7 of the Renewable Energy Independent Power Producer Procurement Programme if preferred bidders in the window cannot close their projects on time.
Head of the IPP Office Bernard Magoro told prospective bidders during a virtual bidders’ conference on Wednesday that reserve bids will be leveraged as backup if preferred bidders fail to close projects on time, to avoid delays in adding capacity to the grid.
“Given our experience with the closing of projects, we have also introduced reserve bids in bid window 7. So we will have reserve bids in case other preferred bidders fail to close projects on time, we will be able to call on those reserve bidders to step in and close the projects so we do not delay this much-needed capacity on the grid,” said Magoro.
Officials from the IPP Office briefed bidders during a virtual conference regarding bid window 7 on Wednesday morning. The office plans to procure 5,000MW — 3,200MW of wind and 1,800MW of solar PV — with project sizes ranging between 50MW and 240MW.
The seventh Renewable IPP Procurement Programme bid window was launched in December after some delays related to bid window 5 projects and challenges with the electricity grid. More than 500 delegations are said to have registered for this week's virtual conference.
Eskom will remain the buyer for this bid window. The IPP Office has 6.35GW of renewable energy and another 1GW of open-cycle gas turbines already operational through the programme, with 1.6GW under construction.
Magoro said the IPP Office spent much of last year dealing with grid challenges and introduced interventions including a curtailment regime. He said the office had developed interventions to bolster the power procurement initiatives, but some are still subject to regulatory approvals from Nersa.
“We have spent most of last year dealing with the grid issues. I think most people are aware of all the initiatives that came out of that. [The] curtailment regime was one of them. The rules for issuing of BQs [budget quotes] ... came out of those initiatives.
“We also came up with the concept of [a] gating approach, which Eskom is now engaging the regulator to implement that. We were hoping that by the time we released this bid window, this initiative would have been approved by the regulator, but unfortunately, that process is still ongoing,” said Magoro.
He acknowledged that 1GW of bid window 6 experienced delays but said they should reach close by the end of the second quarter of 2024. He said the government guarantees afforded to IPPs in case of government default or Eskom’s failure to pay would be reduced.
“We have been engaging the market on this and the government guarantee has been reduced from 100% to 80%. I must mention that this is purely in the case of government default or Eskom's failure to pay, which we have not had such a scenario to date.
“In case of government termination through legislation or expropriation, this guarantee remains at 100%. So it’s a very minor change from the regime we’ve always had in the past,” he said.
The conference seeks to share the request for proposal content expectations the IPP Office has of bid responses. More than R300bn worth of investment has been drawn by the IPP Office in the past 13 years.
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