Simplified tender for small renewables projects

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Simplified tender documentation for small-scale renewable-energy independent power producer (IPP) projects of between 1 MW and 5 MW is being prepared and should be released by November, government has confirmed.
The National Treasury’s Karen Breytenbach reported at the recent bidders conference, hosted to canvass responses to the Depart- ment of Energy’s (DoE’s) request for proposals (RFP) for the procurement of 3 725 MW of renewables capacity, that work was currently under way on the documentation.
The tender should be available for release by the time the first bid window closed for the current RFP on November 4, 2011, and she promised that it would be “much simpler” and would “lower the barriers to entry”.
Government acknowledged that the legal, financial and environmental stipulations contained within the current RFP, which was released in August, were stringent, making it difficult for smaller businesses and entrepreneurs to participate in the deployment of renewable-energy projects.
In fact, many smaller participants have even criticised the fact that government was demanding a R15 000 fee to access the RFP documentation, saying that the fee, together with the guarantee of R100 000/MW bid, had created unnecessary barriers to entry.
But government argued that the qualify- ing criteria were appropriate in order to encourage developers with proven records to participate, as South Africa needed to ensure that it contracted with companies capable of delivering within the tight timeframes outlined.
Most of the technologies (wind, solar photovoltaic (PV), biomass, biogas, landfill gas and mini hydro) would have to enter commercial operation during 2015, with concentrating solar power developers having been given until 2016, owing to the fact that the technology was relatively immature.
The initial developers would also have to pay a ‘development fee’ equal to 1% of the total cost of their projects, which government would ringfence to use in support of future renewable-energy rounds.
The DoE had also released an RFP for ‘showcase’ renewables IPP projects that would need to be delivered ahead of the seventeenth Conference of the Parties, or COP 17, climate talks scheduled to begin on November 28.
Under this fast-track procurement process, projects would only be considered if they could be delivered by November 15 and some 20 MW of capacity could be procured under the scheme.
These projects would receive two-year power purchase agreements (PPAs) from Eskom, which had been designated as the buyer, but could be converted into projects accepted under the larger renewables procurement programme. Should that be the case, new PPAs would have to be negotiated and that capacity would be deducted from the 3 725 MW sought under the RFP.
Intense Interest 
The bidders conference also confirmed that there was still material interest in the main tender, with the gathering attracting interest from Europe, North America and Asia, as well as domestic companies and possibly equipment and construction services suppliers.
Government indicated that it had been pleased with the response, which, at one stage, was uncertain, owing to the initial disquiet caused by the decision of the authorities to abandon renewable-energy feed-in tariffs, or Refit, in favour of a competitive bidding process.
DoE director-general Nelisiwe Magubane said the response had been “overwhelming” and that more than 300 potential developers had paid the R15 000 fee to receive the RFP documents.

Should the need arise, other bid windows would be opened beyond November 4, with one already tentatively scheduled for March 4, 2012, to offer developers time to prepare for a process that included high compliance hurdles.
Government had employed the services of world-class local and international legal, environmental, financial and technical transaction advisers to help with the design of the process and the drafting of the RFP, which has been widely applauded, but is also considered to include some onerous conditions.
The RFP was for 1 850 MW of onshore wind, 1 450 MW of PV concentrating solar power (200 MW), biomass (12.5 MW), biogas (12.5 MW), landfill gas (25 MW), small hydro (75 MW) and other small projects of less than 5 MW (100 MW). However, the DoE reserved the right to reallocate capacity across technologies should there be an oversubscription in one area and an undersubscription for other technologies.
Only once market responses had been received would such reallocation decisions be made in a bid to ensure that megawatts were not ‘sterilised’ by any possible inappropriate allocation of technologies in the tender.
The commercial processes were expected to be completed by mid-2012, triggering a project development process that was likely to involve foreign and domestic investment of between $10-billion and $12-billion.
Eskom had received 321 applications for grid connections from potential renewables projects representing 27 000 MW of potential capacity, mostly for wind and PV developments.
The response, thus far, was also indicative that further rounds were likely, in line with the current Integrated Resource Plan for 2010 to 2030, which would be changed periodi- cally. The plan envisaged renewables would contribute 42%, or 17 800 MW, of South Africa’s new generation capacity by 2030.
Eskom had been excluded from bidding, but the State-owned utility would be the buyer and, together with municipalities, would also be responsible for connecting the projects to its grid.
Preferred bidders would need to conclude a PPA with Eskom, finalise a connection agreement with either Eskom or a munici- pality and sign an implementation agreement with the DoE.
Eskom delivery unit head Kannan Lakmeeharan reported that a Grid Access Unit had been set up within the utility to provide a one-stop shop for IPPs requiring information on where connections were available and what the costs would be. It would also offer services to the IPPs that eventually emerged as Eskom grid customers.
A ‘two envelope’ tender process would be pursued, with the first envelope outlining how a developer planned to meet the specific economic development objectives outlined in the RFP, and the second containing the actual price offer.
Prices had also been capped for each technology at levels below those promul- gated in the 2009 Refit approved by the National Energy Regulator of South Africa. For instance, wind projects would need to be priced at below 115c/kWh, as opposed to the 120c/kWh outlined in the 2009 Refit.
The other caps were 285c/kWh for solar PV and solar thermal, 107c/kWh for biomass, 80c/kWh for biogas, 60c/kWh for landfill gas and 103c/kWh for mini hydro. Eskom’s blended tariff is set to rise to around 66c/kWh by 2013. These caps would be adjusted for exchange rate fluctuations, however.
The selection had been 70% weighted towards price. But a bidder’s price would only be considered once it had met the other economic development criteria, which carried a 30% weighting.
Bidders were cautioned not to submit projects that failed to meet the economic development criteria related to job creation, the involvement of historically disadvan- taged individuals, community development and economic spin-offs, such as the localisation of components and solutions. Any evidence of collusive and uncompetitive behaviour would result in disqualification and the loss of the bid bond. A refund- able guarantee of R100 000/MW would be required on submission.
Environmental and land authorisations would also need to be included as part of any submission, the absence of which would result in immediate disqualification.
Magubane acknowledged that the Department of Environmental Affairs was currently “snowed under” with requests for authorisations from potential developers, having received more than 300 over the past few months.
But she said the department had promised to dedicate capacity to fast-track the process, without breaching the “letter and spirit of the law”.

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