Renewable energy procurement in SA – a disquieting move from transparent to opaque

0
65

by Chris Yelland, EE Publishers    
To comment and respond to this article, and/or to any of the views and positions expressed, visit EE Publishers’ blog: “The best from EE Publishers…“, click on the article title, and respond. 

On 23 August 2011, EE Publishers hosted an open panel discussion and debate in Midrand, entitled “Renewable Energy in South Africa – going backwards or forwards?” (more)

The presenters at the panel discussion and debate were:

  • Thembani Bukula, board member of the National Energy Regulator of South Africa (NERSA) responsible for electricity regulation;

  • Brigette Baillie, partner and head of the project development and finance practice at Webber Wentzel, legal advisors to the Department of Energy and National Treasury;

  • Paul Eardley-Taylor, head of investment banking coverage for the energy, utility and infrastructure sector at Standard Bank;

  • Johan van den Berg, chief executive officer of the South African Wind Energy Association (SAWEA); and

  • Ompi Aphane, deputy director-general at the Department of Energy (DoE) responsible for electricity, nuclear and renewable energy.

These key players in the renewable energy (RE) sector of South Africa covered the background on where the country finds itself now, as well as the road ahead in the implementation of the ambitious RE targets detailed in the national integrated resource plan for electricity, IRP 2010 – 2030. This will involve the installation of some 9200 MW of wind generation capacity, 8400 MW of solar photo-voltaic (PV) capacity, and 1200 MW of concentrating solar plant (CSP) capacity by 2030.

Thembani Bukula detailed the open and transparent two-year stakeholder and public participation process facilitated by NERSA in the lead-up to the promulgation of the renewable energy feed-in tariff (REFIT) framework in 2009/10 in terms of policy directives from the DoE and the relevant legislation.

Brigette Baillie then detailed the subsequent abandonment of the REFIT framework in May 2011 in favour of an alternative competitive project tender bidding process, on the basis that the former REFIT process so carefully promulgated by NERSA was subsequently deemed to be illegal and anti-competitive. Webber Wentzel was tasked to prepare the new project bidding tender process and documents in December 2010, which is now referred to as the REBID process.

Ompi Aphane discussed the new project tender bidding process and its rationale. In respect of the procurement policy flip-flop, he acknowledged that “we messed up”. Aphane also gave details of the current request for proposals (RFP) issued by the DoE in August 2011 for tender by interested bidders in terms of the REBID process, for the first tranche of some 3725 MW of RE capacity for commissioning in 2013/14/15.

  

Paul Eardley-Taylor indicated that despite initial fears of a loss of interest by local and international investors, financiers, IPPs and developers resulting from the sudden change in the procurement framework, Standard Bank’s analysis was that the REBID process and the associated legal, financial and contractual framework encompassed in the RFP / tender documents are solid and realistic, and will prove acceptable to RE investors, financiers, IPPs and developers.

  

Johan van den Berg indicated that the investment in RE generation capacity to 2030 was estimated to be about R350-billion, or R18-billion per year for every one of the next 19 years till 2030. He said that this needs to be compared to the total foreign direct investment into South Africa of R11-billion in 2010, which was 70% down on that of the previous year.

Van den Berg generally agreed with Eardley-Taylor that the REBID documents were sound, but cautioned that there had been a significant loss of trust in the procurement process following the abandonment of the transparent and participative REFIT framework promulgated by NERSA, to a process prepared behind closed doors, without consultation and transparency, and fundamentally lacking in any form of stakeholder and public participation.

As an example, Van den Berg pointed to the stringent confidentiality requirements in the RFP / tender enquiry documents, which bind bidders to maintain the documents as strictly confidential under threat of severe penalty. The intention is clearly an attempt to prevent wider access to and scrutiny of the RFP / tender enquiry documents by stakeholders, the media and the public, and to restrict access to a tight circle within government, and to bidders for the RE projects who, by their very nature, have significant vested commercial interests.

While such confidentiality requirements create (perhaps quite unnecessary) suspicion, it is hard to imagine how they serve the broad public interest in a government tender for RE generation capacity amounting to literally billions of rands. It is also hard to imagine what actually it is that is overriding the broad stakeholder and public interest and requires the inclusion of these stringent confidentiality requirements in the RFP / tender enquiry documents of a public body. Not surprisingly, efforts directed at the DoE and its legal advisors, Webber Wentzel, to obtain answers to these questions, proved fruitless by the time of publishing.

Stakeholders, customers of electricity and the general public surely have a justifiable interest in knowing that there will be a rational and non-political bid selection process. This includes how the bid selection board will be constituted, how the successful bidders will be selected, the bid selection criteria and the weighting of selection parameters such as price, BEE shareholding, localisation, job creation, industrial offsets, etc.

Any lack of transparency and secrecy serves to fuel concerns that parasitic and non value-adding shareholders, politicians, political parties, advisors, consultants, agents and sundry pedlars of influence are lining up again for an even bigger feeding frenzy than that of the R30-billion arms deal, the Chancellor House involvement in the Medupi and Kusile boiler contracts, and other major public sector procurements. 

  

PRESENTATIONS FOR DOWNLOAD 

The following presentations at the panel discussion and debate are available for download by clicking the following links:

Please note that there is no presentation from Brigette Baillie of Webber Wentzel for download, as she spoke from notes.

FURTHER READING 

For further independent media analysis following the debate, please see:

To comment and respond to this article, and/or to any of the views and positions expressed, visit EE Publishers’ blog: “The best from EE Publishers…“, click on the article title, and respond.  

Comments

comments