The long-awaited procurement process for South Africa’s first renewable energy projects should begin next week, Department of Energy (DoE) deputy director-general Ompi Aphane confirmed with Engineering News Online on Friday.
Aphane reported that a response had been drafted to deal with questions raised by the National Energy Regulator of South Africa (Nersa) when its concurrence was sought on the proposed procurement process. He added that government anticipated that the regulator’s full concurrence would be secured next week.
On fulfilment of that legal requirement, the bidding documentation, including the proposed power purchase agreement, would be issued, triggering an open bidding process.
Nersa had indicated to Engineering News Online earlier that it would concur with the documentation, but confirmed that it was seeking clarity on certain aspects of its role within the process.
It was initially anticipated that the request for proposals (RFP) would be issued in April, after the DoE and the National Treasury received a strong response to their call for expressions of interest in the second half of 2010.
However, before the tender was published, Nersa announced a review of the renewable energy feed-in tariffs (Refit) promulgated in 2009. At the same time, it emerged that government had serious doubts about the legality of a procurement process based on predetermined tariffs set by Nersa.
This led to an outcry from the potential participants, who argued that the Refit model should be sustained, owing to its success in helping to develop renewables industries elsewhere. Developers even produced legal opinion which they said showed that Refit was neither unconstitutional, nor in conflict with the Public Finance Management Act. However, it was accepted that the process would need to be exempted from the provisions of government’s preferential procurement legislation, which sets a 90% evaluation weighting for price and only a 10% weighting for other objectives.
Nevertheless, government remained concerned that the process might eventually be challenged on the basis that Nersa could not set a binding predetermined tariff that it would later need to approve as part of the licensing process. In other words, it would be constrained in exercising the discretion expected of it during the licensing of power producers.
Further, government was worried that the “high” tariffs promulgated in 2009 might not be affordable, nor sustainable, which could result in a “stop/start” procurement process.
Aphane told Engineering News Online that the objective was to create the process certainty necessary for multiple procurement rounds, well beyond the 1 025 MW initially envisaged for the first round.
He also argued that only a “diligent”, “transparent” and “legal” process could foster the certainty necessary for the building of supply industries around South Africa’s renewables programme, which envisaged the deployment of 17.8 GW of capacity by 2030.
He acknowledged that communication around government’s reasons for the adjustments had been poor. But he promised that potential bidders would be given time to absorb the changes.
A month following the release of the RFP, the DoE and the National Treasury would host a ‘bidders conference’ in an effort to field any questions that might arise. It was also possible that the response period might be extended to three months.
Aphane also stressed that the adjudication process would incorporate two stages, with the pricing aspect to be evaluated only once the project had proved that it was environmentally and technically sound, and included provisions for localisation, local economic development and empowerment.
Once the bidding closed, government expected to take a month to select its preferred bidders and it was anticipated that construction on the first projects should begin during 2012.
“We are looking to build a long-term, sustainable industry and we believe that a legally compliant process is more important than tariff certainty in facilitating that objective,” Aphane concluded.