First South African solar park deals possible in early 2011, first power by end 2012

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The first commercial transactions relating to the development of utility-scale solar power generation capacity in South Africa’s first designated solar park near Upington, in the Northern Cape province, could be completed in the first half of 2011, with the first electricity flowing into the grid by 2012, a senior government official said on Tuesday.

Invitations were sent out this week to international technology providers, as well as to local and international solar developers for an investor conference, scheduled for Upington on October 28 and 29. And, Department of Energy deputy director-general Ompi Aphane believes that the first deals could be concluded in the first or second quarter of next year.

He revealed that the solar park, which could involve an investment of some R150-billion over a ten-year horizon, had been factored into the yet-to-be-published integrated resource plan, or IRP2010, which would provide a framework for South Africa’s power generation mix for the coming 20 to 25 years.

But Aphane also stressed that they would not compete with solar energy projects seeking to access South Africa’s renewable-energy feed-in tariffs, or Refit, as it would be unaffordable to extend the Refit to solar park investors, owing to the scale of the projects envisaged.

Proposed is a technology-neutral solar zone, operated by a so-called ‘Solar Park Authority’, or SPA, where up to 5 000 MW of peaking and base-load solar electricity will be phased in over a ten-year horizon.

It is estimated that government would need to invest between R70-million and R105-million to set up the basic transport, water and transmission infrastructure to stimulate private investment of around R150-billion in generating assets.

The investor conference itself will showcase the opportunities and help inform a full feasibility study that is being pursued, following the South African government’s recent endorsement of the prefeasibility study conducted by the Clinton Climate Initiative (CCI).

In fact, CCI chairperson Ira Magaziner argued that the Northern Cape’s world-beating solar irradiation levels of greater than 8 kWh/m2 for much of the year, together with the fact that the government would facilitate access to land, water and the power grid, could ensure the delivery of peaking and base-load capacity that would be competitive with coal.

The technology mix would hinge on factors such as grid stability and the country’s requirement for base-load as opposed to peaking power, with the solar thermal solutions providing the former and photovoltaics the latter.

The first phase would target the production of 1 000 MW built in increments from a range of solutions.

Ministry of Energy special adviser Jonathan de Vries tells Engineering News that work is currently being done to determine the technology mix, with particular emphasis being given to dispatch stability.

“We want to use the first phase to assess the performance of the various solar technologies at the scale we are proposing,” De Vries explained, adding that the projects would be selected through a competitive bidding process.

Energy Minister Dipuo Peters, who unveiled the concept at a function in Johannesburg, indicated that the SPA could be either be established as a unit within the State-owned Central Energy Fund, or set up as a provincial or local government agency.

The organisation would act as an investment facilitator, in a role akin to that of a development authority within South Africa’s industrial development zones.

In other words, it will be responsible for the nongenerating infrastructure within the 9 000-ha property, such as roads, water and transmission capacity. The initial site, which is reportedly adjacent to the one where Eskom plans to build a 100-MW power-tower project, will draw water from the Orange River, which flows nearby. It is also close to existing transmission infrastructure and within a corridor that is earmarked for additional transmission investment by Eskom.

The full park could be built in a corridor spanning from Upington to De Aar and involve up to 19 000 ha of land. The sites close to the Orange River would not require additional water infrastructure, but water would have to be piped to the other sites.

The SPA could also facilitate access to government incentives, as well as aid investors in gaining regulatory and environmental approvals for their projects.

But the solar park was also affected by the ongoing uncertainty surrounding the buying entity for power generated by private producers, as well as a lack of clarity on the nature of the power purchase agreements (PPAs). It was not clear, for instance, whether the PPAs would be backed by a government guarantee.

“We hope that, through this process, we will be able to deal with these uncertainties in a way that not only unblocks investment in the park, but is also supportive of other renewable energy developers, as well as independent power producers more generally,” De Vries said.

It was likely that Eskom would be the initial purchasing agent, with a growing acceptance that creation of an independent system and market operator, or ISMO, could still take years.

But Aphane insisted that the IRP2010 would be promulgated before the end of the year, despite that fact that it has yet to be released for public comment. He also indicated that a Ministerial determination on new generation capacity was likely before year-end.

De Vries told Engineering News that site preparation could begin in 2011 and that, should the legislative and regulatory hurdles be cleared, the first power plants could be producing by the second half of 2012.

A number of working groups have been established around the project, including one that will interrogate the potential job creation and industrial development spin-offs.

Peters stressed that government was keen to facilitate the development of industrial capacity to supply both into the solar park and future domestic solar programmes, as well as into the export market.
Engineering News

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