South Africa announces preferred bidders for its IPP programme

The Energy Department of the Republic of South Africa has announced its preferred bidders for the second phase (Window 2) of its Independent Power Producer (IPP) Procurement Programme.

The Government’s Integrated Resource Plan (IRP), published in May 2011, sets out South Africa’s required new generation capacity for the next 20 years taking into account the different energy carriers required to ensure a stable energy mix.

In accordance with the IRP, the Request for Proposal (RFP) was published in August 2011. This provides for procurement of renewable energy up to 2016, something that is "urgently needed" due to the energy constraints the country is likely to experience over the next few years.

Private sector alternative energy is therefore seen as being essential to energy stability while also presenting an opportunity to grow the economy in the face of large numbers of currently unemployed citizens.

In some of the technologies included in the bidding programme, the target is as high as 60% with a minimum 40% South African Equity Participation which is intended to attract developers to South Africa in order to expand employment opportunities and broaden skills.

The IPP programme is being conducted in five phases termed Windows. In Window 1 preferred bidder status was awarded to 28 proposals out of 53 received. This secured commitment for the provision of 1,416 MW of renewable energy out of the total 3,625 required.

The target of 1,000 MW to be reached by the end of 2011 was thus exceeded and financial close on Window 1 is expected by June 2012.

A total of 79 Window 2 proposals were received of which 51 met the required criteria as set out in the RFP.

However, of these the Department selected only 19 due to megawatt limitations and competition. Window 2 commitments to economic development are significantly greater than those in Window 1 meaning that more communities in South Africa will benefit from employment or shareholding in these projects. Most of the preferred bidders in Window 2 will be creating community trusts in order to develop surrounding communities. This will be monitored by the Department so that the communities benefit accordingly.

The Department estimates that by the end of the 5 Window process, the IPP programme will have attracted project proposals to the value of R100 billion over its lifetime. This confirms the importance of the programme to the country’s growing energy demand and need to develop natural resources in an environmentally friendly manner. In the next few weeks the Department will roll out the bidding process for the less than 5 MW renewable energy programme.

Details of the preferred bidders are available here.

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