South Africa doubles down on renewables with plans for 6.3GW auction

South Africa has revealed plans to more than double its renewable energy program, after the energy department said this week it hoped to tender for another 6.3GW of projects.

In a notice released on Thursday, the DOE said that the new round of auctions – South Africa’s fifth in just over five years – was aimed at maintaining the momentum of the country’s highly successful Renewable Energy IPP Procurement Programme (REIPPPP).

On Wednesday, the government confirmed that 1.12GW of new contracts had been awarded in the country’s fourth round of large-scale auctions, with preferred bidder status awarded to 13 independent power producers.

The 79 projects – of which 676MW are wind, 415MW solar – are due to reach financial close in the fourth quarter of this year, with the first reaching commissioning stage in November 2016.

The latest awards mean 5.24GW of capacity has so far been contracted across the four tender rounds, the energy department said. South African energy minister Tina Joemat-Pettersson said this would bring in R168-billion worth of investment to the sector.

As reported here on Monday, South Africa rated a special mention in the latest Bloomberg New Energy Finance report on global renewables investment, for bucking a worldwide slowdown in the first quarter of 2015.

While other big markets including China, Europe and Brazil slumped in Q1, renewables investment in South Africa surged to $3.1 billion from almost nothing in 2014, providing the quarter’s strongest growth.

“Since 2012, South Africa has emerged as one of the most important centres for clean energy investment, as it seeks to expand power capacity and take advantage of its sunshine and wind resources,” said BNEF analyst Luke Mills.

“The first quarter saw the financing of a series of large projects in solar thermal, wind and PV that won through in the latest round of the country’s auction program.”

Now, says Joemat-Pettersson, the government wants to “pull out all the stops” to accelerate and expand the program in response to “the current electricity supply challenges experienced in our country”.

To this end, says Joemat-Pettersson, the new funding round will be “redesigned”, to include projects for industrial local-content and community benefit, as well as “taking into account the constrained distribution and transmission systems that we are dealing with”.

Joemat-Pettersson also said energy department officials would look into allocating further capacity from the fourth round – officials are expected to report on the options for this by the end of the month.

South Africa will also issue an RFP for a “shortened and simplified” competitive procurement process of 1,800MW from all technologies, which will be open to unsuccessful bidders from the four previous renewable tender rounds.

Meanwihle, the DOE has also developed a Small Projects Programme, which seeks to procure renewables projects of between 1-5MW in size from small-scale Independent Power Producers. A procurement process, seeking 50MW of the 200MW determined for small projects, has so far attracted 29 bids.

The full-steam-ahead approach to renewables of the South African government is in stark contrast to that of Australia’s – and even of the major Opposition party – which has achieved little but to stall the entire large-scale industry by quibbling endlessly over the already meagre provisions of the Renewable Energy Target.

“South Africa has shown us how you can successfully run auctions for renewable energy over the last three years and get new generation on the bars – quickly,” Simon Currie told RenewEconomy in an email.

Currie, who is the global head of energy at Norton Rose Fulbright, has been working extensively on the South African programme since 2011 from his base in Sydney.

“They have managed to harness local and international capital and drive down costs, while growing a local supply chain,” he said.

“The South African experience demonstrates the savings that can be achieved when developers and investors believe there is political support and a reliable mechanism – even if the auctions themselves are very competitive.”