Wind, solar, international bids dominate Sth Africa renewables round

South Africa’s Department of Energy said on 29 October that it has chosen 17 preferred bidders from 93 contenders in round three of its renewable energy tenders program. Like the first two tenders, the third round was over-subscribed, with increasing interest from international developers, which accounted for over three-quarters of the bids for solar PV and wind.

As Bloomberg New Energy Finance anticipated, bidding prices have become more and more competitive. A total of 1,500MW was awarded of which, just over half went to seven bidders for onshore wind farms, 30% to six solar PV bidders, 13% to two solar thermal bidders, and the remainder to three bidders for landfill gas and biomass projects. So successful was the round that the government is now considering whether to grant further awards.

The Department had been due to unveil the identities of the winners on 29 October but has postponed the announcement. However, some companies have revealed their own identities: Ireland’s Mainstream Renewable Power was preferred bidder for three wind farms worth a total of ZAR 9bn (USD 912m) with capacity of 360MW, it said in a statement. This is not its first foray into South Africa as it was awarded 238MW of wind and solar projects in round 1 of the tender program.

A South Africa virgin is China Longyuan Power, the country’s biggest wind farm operator, which has won a bid to develop two wind projects totalling 244MW with local companies, according to a statement on its website. The bid is only Longyuan’s second venture abroad though it may well not be its last, as it now has a strategy of “going global”. Its first wind project outside China is in Canada, where it said in August it would begin construction on a 100MW wind farm in Ontario where such projects can benefit from an attractive feed-in tariff.

Italy’s Enel Green Power may well be one of the biggest winners of round three, being the preferred bidder for 314MW of solar PV projects and 199MW of wind farms. In line with the rules of the program, Enel has participated in the tender with local companies but will retain a 60% controlling stake. For one 111MW wind farm worth ZAR 2.25bn (USD 224m), it will work with Cape-Town-based Red Cap Investments.

As to other technologies, Spain’s Abengoa has said it has been chosen to build a 100MW solar thermal plant, in a consortium with the South African Industrial Development Corporation, Public Investment Corporation and KaXu Community Trust. The project will benefit from a 20-year, EUR 210m loan from the European Investment Bank via the Rand Merchant Bank, a division of FirstRand Bank. This plant will be built next to another 100MW plant Abengoa is building in the Northern Cape. Altogether, the Spanish company’s solar thermal portfolio will be the largest in the Southern Hemisphere.

Two more rounds are planned by end-2016, by which time South Africa plans to add 3,725MW of renewable energy capacity. This should help state utility Eskom to reduce its dependence on emissions-heavy coal and meet the surging demand for power.

Future rounds are likely to see similar levels of interest from domestic – and in particular, international – developers, if the government implements similar conditions, according to Bloomberg New Energy Finance. Some market consolidation is anticipated as developers look for partnership opportunities, especially to meet the government’s increasingly strict local content rules, and international companies seek a more solid foothold in this burgeoning market. A shortage of finance has not been much of an impediment to date; but commercial banks may grow wary of the size of their exposure to renewables, in which case development bank dollars – such as the ZAR 4bn (USD 401m) in additional funding that may be offered by the Development Bank of South Africa – would become even more important.

This Clean Energy Update was originally published by Bloomberg New Energy Finance. Reproduced with permission