South Africa’s government has identified around 20GW of pure renewable energy capacity and 4GW of co-generation technologies that may form part of its renewable energy procurement plan under the region’s feed-in tariff programme.
It received responses from 384 renewable energy developers in response to a request for information (RFI) that South Africa’s Department of Energy (DOE) made in late September to map potential capacity-building before issuing a request for proposals under its renewable energy master plan.
But despite there being a number of South African renewable energy projects in the pipeline, the initial RFI showed that less than a tenth of potential projects are ready to secure power purchase agreements and close funding.
‘It is a minimal quantity that are sufficiently in a state of readiness to enter into a procurement process and close deals soon after penning a power purchase agreement,’ South Africa’s DOE said in a statement.
The DOE’s readiness index by which it analysed the projects includes the status of equity partners and lender commitment, environmental approval, grid readiness and the status of shareholder agreements.
Nearly a third of responses to the request came from wind power projects that could form around 70 per cent of identified renewable energy capacity, if given the go-ahead.
Solar photovoltaics also accounted for nearly a third of responses, which the department estimates could amount to about 15 per cent of proposed capacity. Concentrated solar power accounted for just five per cent of responses from developers, while it accounts for nearly ten per cent of proposed capacity. The remaining projects identified in the group of proposals included biomass, hydro, landfill gas and biogas.
The DOE and National Treasury had made the initial call for information from potential private renewable energy developers to assess the readiness of the private sector for participating in its Renewable Energy Feed-in Tariff (REFIT) programme.
The bodies concluded that Environmental Impact Assessments are, as always, a ‘major barrier’ for the deployment of renewable energy projects. The request showed that less than a tenth of identified projects are ready to connect to the energy grid, with only 30 projects being able to give a preliminary timeframe for grid connection.
In an effort to spur lending for renewable energy projects to be procured under the programme, the government held negotiations with key banks that have committed to conduct financial due diligence when it enters the bidding phase.
The 384 responses from renewable energy developers were processed by EA Energy Analyses with support from the Royal Danish Embassy. In response to concerns over a possible conflict of interest around the role of state-owned electricity company Eskom as a buyer and procurer, a government task team is now managing and implementing the procurement.
The DOE said the findings have provided it with a set of criteria it says can be used for the renewable energy procurement programme and that it is set to release a procurement paper to begin the procurement process in early 2011.
The next stage is to map out potential projects against the region’s Eskom-operated transmission system, and it will conduct further requests for information to identify renewable energy project readiness further down the line. The government says early discussions with Eskom Transmission Planning indicate the availability of sufficient connection capacity for the REFIT programme until around 2014.
South Africa has raised the renewable energy targets that it first set in 2003, from initially targeting 10,000GWh of renewable energy by 2013, which would account for four per cent of its power supply. It later identified the need for 1025MW of renewable power from private sector suppliers by 2013, targeting the installation of 16 per cent of renewable energy capacity over the next 20 years.
Acting deputy director general for electricity, nuclear and clean energy at the DOE, Ompi Aphane, says, ‘Our objectives for the RFI – namely gaining information to support the development of a comprehensive request for proposals for renewable energy independent power producer projects; including the state of readiness of potential projects and market interest – were met beyond our expectations.’
Aphane adds, ‘Government, in driving this process, will target employment creation, skills and technology transfer, and environmental protection.’
South Africa’s government says it is currently reviewing its original Renewable Energy White Paper, which is now open for public comment.
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