- Developers of three wind energy projects from Bid Window 5 have signed new agreements with government and Eskom.
- The projects, each with a capacity of 140MW, are worth an investment of R11 billion.
- The developers, French multinational EDF, will now work to reach financial close within 60 days.
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Three wind energy projects from Bid Window 5 have reached a new milestone after several agreements were signed between developers, government and Eskom on Thursday.
The projects - Coleskop Wind Power, which is to be located in the Eastern Cape, and San Kraal Wind Power and Phezukomoya Wind Power – both located in the Northern Cape – are to be developed by French multinational Électricité de France (EDF).
EDF has also partnered with 100% black-owned firm GIBB Power to deliver the projects, which require an investment of R11 billion.
The timelines to finalise project agreements for Bid Window 5 preferred bidders, of which there are 25, has been pushed from April 2022 to October 2022.
The Independent Power Producer (IPP) Office, which oversees the procurement process, has on multiple occasions explained that the delays were linked to issues with Eskom issuing budget quotations that projects require for lender approvals. In total, Bid Window 5 should secure 2 583MW of generation capacity, Bernard Magoro, the head of the IPP Office, said at the signing ceremony.
Magoro said that all the budget quotes for the 25 projects had been issued, and the office is hopeful that the remaining 22 bidders will finalise their project agreements by the end of October.
Magoro said that once the EDF projects reach financial close, construction is expected to take 24 months – which means capacity should be online by December 2024.
Although not an immediate relief for the constrained grid, which has seen Eskom implement Stage 6 load shedding, the added capacity will contribute to plugging the 4 000MW to 6 000MW capacity gap.
From an economic development perspective, the projects will create about 2 230 job years (one job for one year) throughout the life of the project. A total of R543 million has been committed to socioeconomic development and enterprise development in the areas where the projects are located.
"We are engaging them with Eskom to make sure we conclude process to get capacity online as soon as possible," said Magoro.
The IPP Office aims to release a request for proposals for battery storage projects by next Friday, Magoro said.
Segomoco Scheppers, group executive of transmission at Eskom, noted the constraints of load shedding. While existing plants are receiving attention, there is still a need to invest in new capacity, he explained.
"This is a key milestone in making a contribution to that journey," Scheppers said, referring to the signing of the new Power Purchase Agreements with the projects.
Scheppers also noted the network constraints, which are making it challenging to add new capacity. The areas where the best renewable energy resources (wind and solar) are found in the Northern Cape, Western Cape and Eastern Cape, but the network capacity is not adequately developed.
Eskom, however, has been working on a transmission development plan – with the next iteration of it to be published by the end of October. Stakeholders will be able to submit comment on it, said Scheppers.
Tristan de Drouas, CEO of EDF, said that in addition to the wind farms, the developers had started constructing a substation that would help bulk up much-needed grid capacity. The substation is also an effort to ensure the projects can come online on schedule. "We are highly conscious of time pressure to deliver power in grid … The substation will enable connection of further projects," he said.
De Drouas said that it has been a long journey to get to this point, as the projects have been in development for about 10 years. He shared that EDF persisted in its ambitions to set up renewable energy projects in South Africa – even when the future for the renewable energy industry in the country was unclear. Government stalled the Renewable Energy Independent Power Producer Procurement Programme from 2016 - which had ramifications for investment and local suppliers, many of which closed down.
For now, EDF will be focusing on reaching financial close, which is the next big milestone. De Drouas noted that since bid submission, global supply chain constraints have caused a "very strong" inflationary cycle. "We managed to cope with that thanks to very hard work of our contractors and partners, and optimisations on the project that could be made post-bid to cope with the price increase," he said.
De Drouas was confident that EDF would be able to supply energy at the tariff cost of about R600 per megawatt hour – which he believes is a prudent estimate. "We were not the cheapest [bidders] by far, but then, prudence pays off," he said.
Responding to questions about steps being taken by Eskom to ensure it does not delay Bid Window 6, Scheppers said there had been a lot of work done between the power utility's grid access unit and the IPP Office to streamline processes when it comes to issuing budget quotes and cost estimate letters for developers.
Magoro said the biggest risk to getting projects online is the limited grid capacity – which is why the IPP Office and Eskom's grid access unit are working closely.
"We do not foresee the delays we have seen in Bid Window 5 going forward," he said.
Mineral Resources and Energy Minister Gwede Mantashe said that efforts to streamline procurement are seen in the establishment of the National Energy Crisis Committee.
"The beauty of the structure is that all relevant ministers meet under one roof," Mantashe said. The current system requires any procurement approvals need support from multiple departments, including the National Treasury, the Department of Public Enterprises and the Department of Trade, Industry and Competition.
"All of us, we meet under one roof, that will accelerate procurement," said Mantashe.