Report of the Portfolio Committee on Energy on the
Energy Stakeholder Meeting, scheduled on 07 June 2012, dated 18 February 2014
Theme: Independent Power Producers
Renewable Energy Procurement Bidding: Window 1
1. Opening remarks by the
Chairperson, Hon SJ Njikelana
The Chairperson welcomed
delegates to the third public stakeholder’s meeting on renewable energy hosted
by the Portfolio Committee on Energy.
The Chairperson pointed out that there is much to discuss in the energy
sector, thus the committee resolved that it had to create a platform for robust
debate by the various organisations in the public and private sectors and civil
society involved in the renewable energy industry.
2.
Presentations
2.1. Presentation by the
Department of Energy (DOE)
Mr Thabang
Audat, Chief Director: Electricity Supply, DOE
presented an update on the Window 1 and Window 2 procurement programmes.
The procurement documents for
Window 1 were released on 3 August 2011.
The documents provided for the procurement of 3725 megawatts (MW) in
five different bidding rounds. A total
of 53 bids were received under Window 1 and 28 preferred bidders were selected
in December 2011. A total of 79 bids
were received under Window 2. The bids
received under window 1 substantially exceeded the cap of 1275 MW.
The procurement process
followed was explained. The Request for
Proposal (RFP) comprised of the following; the general requirements and rules
(Part A), the qualification criteria (Part B) and the economic development
criteria (Part C). Separate Power Purchase Agreements (PPA’s) are applicable to
the seven different types of renewable energy technologies. The Implementation Agreement is a legally
binding contract between the DOE and the Independent Power Producer (IPP).
The contractual arrangements
between the IPP, Eskom and government (i.e. the DOE and the National Treasury)
were illustrated. The RFP’s received
from IPP’s were subjected to a qualification process. Preferred bidders had to meet all six
qualification criteria. If the bid was
over-subscribed, the bidders were subjected to a comparative evaluation
process. The comparative evaluation
assessed the economic development criteria (30%) and the price criteria
(70%). The bids received for Window 2
would be subjected to the additional comparative evaluation process, which had
not been necessary for Window 1.
The sequence of events for bid
Window 1 was summarized. The bid
evaluation team included the following; international reviewers, a legal
evaluation team, a technical evaluation team and a financial evaluation
team. The evaluation streams covered
environmental, land and commercial legalities, economic development, financial
and technical aspects. Bids were received
from entities producing Solar Photovoltaic (PV), Concentrated Solar Power (CSP)
and Onshore Wind energy. The total
allocation to preferred bidders for Window 1 was 1415.52 MW. 13,908 construction jobs and 874 operations
jobs would be created through Window 1.
The majority of bids received
were of a good standard but contained many omissions and inconsistencies that
had to be clarified. The key
shortcomings identified during the financial evaluation process were
listed. 33 bidders passed the financial
evaluation. The majority of bidders
submitted prices at or just below the applicable technology price cap. A comparison of the bidding prices for the
various technologies for Window 1 and Window 2 was provided. The price differential was 25.1% for Solar
PV, 11.3% for Onshore Wind and 6.5% for CSP.
The total financial investment
for bid Window 2 was R85 billion. A
total of 79 CSP, Landfill Gas, Onshore Wind, Solar PV and Small Hydro projects
was involved and a total of 3233 MW would be generated. 22,590 construction jobs and 1,371 operations
jobs are involved. 19 preferred bidders
were short-listed.
2.2. Presentation by the
Sustainable Energy Society Southern Africa (SESSA)
Mr Stephen Forder,
Representative, SESSA advised that the presentation prepared covered the
establishment and organisation of SESSA.
SESSA is a member of SAREC, which had prepared a more detailed
presentation document on the bidding process.
2.3. Presentation by the South
African Renewable Energy Council (SAREC)
Mr Johan van den Berg,
Chairperson: Steering Committee, SAREC presented the submission.
The presentation covered the
establishment of SAREC and a summary of the outcomes of the bidding
process. The Council commented on the
complexity, cost and secretive nature of the procurement process. The objective to increase local content was
welcomed. An assessment of the
visibility, stability and predictability of the procurement process was
included.
SAREC commented on the
development of the renewable energy industry in South Africa and included a
list illustrating the country’s global ranking and potential for
improvement. The Council warned against
the dangers of “cavalier” bids, a pricing ‘race to the bottom’ and the need for
long-term sustainability. A table
summarizing the cost/output data from a study of the Kusile
power station published by the University of Pretoria was included.
The presentation was concluded
with remarks on job creation, the achievement of the socio-economic objectives,
the experience gained from the first two rounds of the procurement process and
the need for a coordinated effort to meet the challenges. SAREC offered to host a workshop for
stakeholders to find the best way forward.
2.4. Presentation by the Black
Business Council (BBC)
Mr Kashif
Wicomb, Representative, BBC presented the submission.
The presentation focused on
four areas of concern and included specific observations and
recommendations. These areas are; the
ability of local black business to participate in the renewable energy sector,
the financial aspects, job creation and the technical aspects.
The major concerns involved
The presentation was concluded
with suggestions for some micro solutions that could be considered by
government.
2.5. Presentation by the
Southern African Alternative Energy Association (SAAEA)
Mr David Lipschitz,
Representative, SAAEA presented the submission
The presentation focused on
Solar PV. The illustration of the
lifespan of various global energy resources highlighted the limitless
availability of renewable energy resources, in particular energy derived from
the sun. It was also pointed out to the
committee that coal reserves used in the production of electricity would be
exhausted by 2054.
The presentation examined the
need for electricity and the challenges faced.
Graphs illustrated;
SAAEA considered the nature of
the financing required for large-scale and small-scale power stations and the
potential for small, micro and medium-sized enterprises (SMME’s) and homeowners
to produce electricity. The ultimate
cost to South Africa if the old methods to generate electricity are continued
with is a staggering R2.3 trillion over 20 years. The relative speed of delivery of tenders,
the feed in tariff (FIT) and the net metering processes was compared. Finance options for the net metering
alternative were examined. It was
pointed out to the committee that it is a myth that energy had to be supplied
by big technology and big business.
2.6. Presentation by the South
African National Energy Development Institute (SANEDI)
Mr Kevin Nassiep,
Chief Executive Officer, SANEDI presented the submission
The presentation dealt with the
impact of imported renewable energy technology and the opportunities for
localization. The reasoning behind
promoting local content and the local content requirements in Windows 1 and 2
were outlined. The total investment in
the first two rounds of bidding was R75 billion, of which 31% (R23 billion)
would be for local content. Imported
content extended across the entire project value chain.
The percentage of total and the
amount of MW produced by the various technologies were analyzed. Wind generated is 47%, Solar PV is 43%, Solar
CSP is 8% and mini hydro projects produced less than 1%. The greatest opportunities for local content
and job creation are in the waste-to-energy industry.
There are currently only two
solar energy component manufacturers in South Africa. Suggestions on initiatives to increase local
content are made. The wind technology
and PV component value chains are illustrated to demonstrate the opportunities
for manufacturing the components in South Africa. A summary of the local content requirements
for comparative programmes in China, Brazil, India and Canada was
included. South Africa only requires 35%
local content, which is a low percentage compared to other countries.
SANEDI commented on the
The potential for job creation
in the short-, medium- and long-term was illustrated.
Observations made on the Window
1 and Window 2 procurement processes included;
3. Discussions
4. Recommendations