Locked-down South Africa will need to restart its renewables procurement program “very soon” to hit targets in its latest integrated resource plan and put a year of severe power outages behind it.
The plan calls for a gigawatt of PV and 1.6 gigawatts of wind to come online in 2022, said Chris Ahlfeldt, energy specialist at Blue Horizon in Cape Town.
This would require a reboot of South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which saw more than 6.4 gigawatts of capacity being awarded to 90+ projects across four bid windows between 2011 and 2018.
Last year the country was pushed toward recession, with rolling outages a primary driver. In December heavy rains flooded power stations, taking 6 gigawatts of capacity offline. The resultant load-shedding lasted more than a week, the worst period of power outages in a decade.
South Africa’s administration was gearing up to resuscitate the independent power producer (IPP) program just as coronavirus struck. The government had solicited public comments on two ministerial determinations to procure about 14 gigawatts of new generation by 2027.
The capacity was to include renewables, gas, energy storage and coal, said Ahlfeldt.
“The details for the potential procurement and proposal deadlines have yet to be made publicly available, but it seems like Round 5 [of the REIPPPP] may be grouped together with this larger procurement process,” he said.
At least 2 gigawatts of capacity will likely come from distributed generation, biogas and, potentially, co-generation as part of an expedited procurement round to meet a near-term supply gap that had led to widespread load-shedding by the state electricity company Eskom before COVID-19 hit.
Eskom's supply shortages and resultant load-shedding had created pressure on government to move quickly with the procurement of new power projects, Ahlfeldt said.
“Renewables remains the lowest-cost option for new generation in South Africa and can be built in a short period of time, so it would make sense to prioritize these projects,” he commented.
Alongside the government procurement plan, South Africa’s Minister of Mineral Resources and Energy, Gwede Mantashe, also recently granted the mining sector a license waiver to build its own multimegawatt generation projects, said Ahlfeldt.
The pipeline for new mining generation projects is estimated to range from 600 megawatts up to 1.5 gigawatts of capacity, he said. “Hopefully, similar waivers will be granted for other sectors at some stage to avoid favoritism for the mining sector,” he added.
Wind sector calls lawyers after COVID-19 curtailments
As it stands, the coronavirus epidemic has seen South Africa lurch from crippling energy shortages to an almost equally worrying level of oversupply.
The country’s coronavirus lockdown began on March 27 and has seen demand shrinking by up to 9 gigawatts as many commercial business and industrial facilities have closed. In response, Eskom has told 22 wind IPPs to expect curtailments.
Eskom spokesperson Sikonathi Mantshantsha told Reuters that any periods of curtailment would be added onto the wind companies’ contract lives to make sure they were fully reimbursed.
However, the South African Wind Energy Association (SAWEA) criticized the move, which came just a week after the government had assured project owners that their facilities were among those classified as "essential services" in the coronavirus emergency.
SAWEA communications consultant Tina Meier told GTM that the industry body had not been consulted on the curtailment plans. “Letters were issued to IPPs individually, on a case-by-case basis, which we are not privy to,” she said.
The association said it would seek legal counsel on whether Eskom was justified in invoking force majeure to cancel wind energy purchases during the lockdown. “Some experts deem reduced demand as a normal system event,” said SAWEA in a press note.
Bad to worse for Eskom
Unperturbed, Eskom has since gone on to issue similar cancellation notices to its coal suppliers — and has drawn the threat of legal action from them, too. Given the state utility’s precarious position, breaking supply contracts is likely the least of its woes.
In recent days, it has had to deal with customers stealing electricity and even taking technicians hostage in Gauteng, northern South Africa. And the company is creaking under ZAR 450 billion ($24 billion) of debt.
The government has agreed to inject ZAR 250 billion ($13 billion) into the company and has also insisted on an unbundling plan to separate Eskom’s generation, transmission and distribution operations.
The unbundling could remove the conflict of interest Eskom faces in procuring electricity from third parties as well as owning its own generation assets.
“This process at Eskom is moving slower than planned, but it should help to reduce offtaker risk for IPPs in the future,” Ahlfeldt noted.
For the time being, though, South Africa is treading a thin line between getting the energy it needs for post-coronavirus operations and having a utility that is capable of acting as a trustworthy offtaker.
“COVID-19 has reduced Eskom's revenue from electricity sales and therefore its ability to pay back its growing debt,” cautioned Ahlfeldt. “The pressure on them will continue to build.”