COUNTRY | Gauteng

REGION | Africa

SECTOR | energy

QII Principles | Principle 1 Sustainable Growth & Development, Principle 2 Economic Efficiency, Principle 3 Environmental Considerations

QII Sub-Principles | 1: SDGs, 1: Paris Agreement, 1: Wider economic benefits, 2: Operation and maintenance, 2: Technological innovation, 3: Environmental Impact Assessment, 3: Environmental Impact Mitigation, 3: Disclosure of environmental aspects, 3: Ecosystems, 3: Biodiversity, 3: Climate, 3: Weather, 3: Emissions, 4: Resilience, 4: Disaster risk management, 5: Job creation, 6: Growth & development strategies, 6: Procurement transparency

Overview

Size

To date, 112 IPP projects have been procured from four bidding round windows with further windows expected to be announced in the future. They use a variety of renewable energy technologies including biomass, landfill gas, hydro, solar (concentrated solar power (CSP) and photo voltaic) and onshore wind.

Parties involved (public and private)

The Renewable Energy Independent Power Producers Programme (REIPPP) is a public-procurement program that allows Independent Power Producers (IPPs) to submit competitive bids to design, develop and operate large-scale renewable energy power plants across South Africa.

Context

The National Development Plan requires the development of 10 000 MW additional electricity capacity to be established by 2019 against the 2010 baseline of 44 000 MW1. The Integrated Resource Plan (IRP) 20102 developed the preferred energy mix with which to meet the electricity needs over a 20-year planning horizon to 2030. In line with the national commitment to transition to a low carbon economy, 17 800 MW of the 2030 IRP target are expected to be from renewable energy sources, with 5 000 MW to be operational by 2019 and a further 2 000 MW (i.e. combined 7 000 MW) operational by 2020.

In 2009, the government began exploring feed-in tariffs (FITs) for renewable energy. The resulting program was known as the Renewable Energy Independent Power Producer Procurement Program (REIPPPP). This program has successfully channelled substantial private sector expertise and investment into grid-connected renewable energy in South Africa at competitive prices.

The Department of Energy (DoE), National Treasury (NT) and the Development Bank of Southern Africa (DBSA) established the IPPPP Office for the specific purpose of delivering on the IPP procurement objectives. In November 2010 the DoE and NT entered into a Memorandum of Agreement (MoA) with the DBSA to provide the necessary support to implement the IPPPP and establish the IPPPP Office. A new MoA was agreed by all parties in May 2016 for a further 3-year period.

Source: An overview of IPP – Quarterly report (December 2019) https://www.ipp-projects.co.za/Publications

Aim(s) of the project

The programme’s primary mandate is to secure electrical energy from the private sector for renewable and non-renewable energy sources. With regard to renewables, the programme is designed to reduce the country’s reliance on fossil fuels, stimulate an indigenous renewable energy industry and contribute to socio-economic development and environmentally sustainable growth. The REIPPP programme, launched in 2011, effectively implements the vision of IRP 2010, with the target of producing 17 800 megawatts (MW) of electricity from renewable energy sources by 2030.

In addition to the supply of clean energy, the REIPPP programme is designed to contribute to various developmental objectives:

  • job creation;
  • social upliftment; and
  • economic transformation, primarily through broader economic ownership.

REIPPP aims to drive positive social change and requires approved energy projects to share ownership with local communities.

Timeline

Key dates including procurement, construction, operations

The REIPPP programme, launched in 2011, effectively implements the vision of IRP 2010, with the target of producing 17 800 megawatts (MW) of electricity from renewable energy sources by 2030.

Of the IRP 2019’s 39 696 MW to be installed to 2030, 8 208 MW6 (20.7%) reflects capacity that has already been committed or contracted under IRP 2010 for grid connection between 2019 and 2022, while 31 488 MW (79.3%) represents new additional capacity that has to be added between 2019 and 2030. In the Large REIPPPP, 91 of the 92 projects have reached Financial Close. There is still one BW3 project that has not reached financial close.

Construction has not yet commenced on one BW3.5 project that reached Financial Close by end July 2019. Scheduled commercial operations for the BW4 projects that recently started with construction is expected from late 2019 to 2022. Three (3) BW4 projects have started operations this quarter. The Smalls programme and future bid windows are currently on hold pending the implementation of the IRP 2019 and NERSA's concurrence of the associated Ministerial determinations.

Relevance to QII

The REIPP Programme has contributed significantly to socio-economic development, environmental considerations and have positively impacted on the stabilisation of energy supply.

Benefits

Expected and realised benefits

The REIPPPP has successfully procured 6.4 GW from 112 IPPs in BW1 to BW4, 1S2 1 and 2S2. Of this, 6.3 GW (from BW1, BW2, BW3 BW3.5 and BW4) are at various stages of construction or have commenced with commercial operation. By end March 2020, 4 226 MW of the procured capacity started operations and delivered 4 201 MW of actual capacity (i.e. 67 IPPs delivering 25 MW short of procured capacity). In terms of national targets for renewable energy capacity, as defined by the IRP and National Development Plan, this represents 24% towards the 2030 target and 60% towards the 2020 target (i.e. 7 GW RE capacity to be procured by 2019 and commissioned by 2020 and 17.8 GW by 2030). 0.6 GW is still to be procured to meet the 2019 procurement target. The target


Energy supply capacity impact:

  • 6 422 MW1 of electricity had been procured from 112 REIPPs in seven bid rounds;
  • 4 201 MW of electricity generation capacity from 67 IPP projects has been connected to the national grid;
  • 46 946 GWh of energy has been generated by renewable energy sources procured under the REIPPPP since the first project became operational.
  • The electrical energy generated over the past 12-month period for the 64 projects is 11 176 GWh which is 94% of their annual energy contribution projections (P50) 3 of 11 882 GWh over a 12-month delivery period.

Investment, economic, social and environmental impacts:

Investment (equity and debt) to the value of R209.7 billion, of which R41.8 billion (20%) is foreign

Created 50 984 job years for South African citizens to date;

Socio-economic development contributions of R1.2 billion to date, of which R88.3 million was spent in this reporting quarter;

Enterprise development contributions of R365.6 million to date, of which R25.0 million was spent in this reporting quarter;

Carbon emission reductions of 47.7 Mton CO2 has been realised by the programme from inception to date, of which 2.9 Mton in this reporting quarter;

Source: An overview of IPP- Quarterly report (December 2019) https://www.ipp-projects.co.za/Publicationshttps://www.ipp-projects.co.za/

Publications

The energy mix of the procured REIPPPP portfolio is well aligned with the IRP planned mix as targeted for 2030.

Source: An overview of IPP- Quarterly report (December 2019)

Metrics

Delivery on Outcome 6 targets and the REIPPPP procurement mandate

The REIPPPP has successfully procured 6.4 GW from 112 IPPs in BW1 to BW4, 1S21 and 2S21. Of this, 6.3 GW (from BW1, BW2, BW32, BW3.5 and BW4) are at various stages of construction or have commenced with commercial operation. By end March 2020, 4 226 MW of the procured capacity started operations and delivered 4 201 MW of actual capacity (i.e. 67 IPPs delivering 25 MW short of procured capacity). In terms of national targets for renewable energy capacity, as defined by the IRP and National Development Plan.

Achieving the desired energy mix

The energy mix of the procured REIPPPP portfolio is well aligned with the IRP planned mix as targeted for 2030.

Cost effectiveness of the REIPPPP

In line with international experience, the price of renewable energy is increasingly cost competitive when compared with conventional power sources. The REIPPPP has effectively captured this global downward trend with prices decreasing in every bid window. Energy procured by the REIPPPP is progressively more cost effective and rapidly approaching a point where the wholesale pricing for new coal and renewable-generated energy intersect.

Cost effectiveness of RE technologies

Prices contracted under the REIPPPP for all technologies are well below the published REFIT prices. The REIPPPP has effectively translated policy and planning into delivery of clean energy at very competitive prices. As such it is contributing to the national aspirations of secure, affordable energy, lower carbon intensity and a transformed ‘green’ economy.

Geographic distribution

IPP project distribution has automatically aligned with the prevalence of renewable energy resources. Solar has contributed the largest number of IPPs with PV and CSP IPPs making up 68 of the 112 projects. Solar projects are concentrated in the Northern Cape where the radiation intensity in the country is the highest. As a result, the Northern Cape has received the bulk of the projects (59 of 112 in BW1, BW2, BW3, BW3.5, BW4, 1S2 and 2S2) and should see the benefit from the significant associated investments and the socioeconomic commitments that have been secured for local communities through the procurement process.
Wind projects are largely located along the coastal regions of the Eastern Cape and Western Cape provinces based on the strong wind flows along these shores.

BW3 included the first landfill gas and the first biomass IPPs, as well as the first projects in both Gauteng and KwaZulu Natal.

Generation from landfill gas and biomass power plants are less constrained by energy availability and typically offers higher load factors. Higher load factors, availability during peak demand hours, increasing energy diversity and a larger distribution footprint of generation capacity offered by these technologies, further contribute to the value of the renewable energy portfolio.

Name of Institution

National Treasury

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