Big procurement year

26th January 2024

By: Terence Creamer

Creamer Media Editor


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The coming year is poised to be the most active ever for the public procurement of new electricity generation capacity.

Besides shepherding the already-procured projects to financial close – including battery storage projects in the Northern Cape and those solar photovoltaic projects procured during the largely unsuccessful sixth renewables bid window, or BW6, when no wind preferred bidders were selected for a 3 200 MW allocation – there are also three procurement rounds under way for more wind (3 200 MW) and solar (1 800 MW), additional battery storage (615 MW/2 460 MWh) and gas-to-power (2 000 MW).

Not to mention the outstanding projects from the poorly designed risk mitigation round for 2 000 MW, which was happily as unsuccessful as BW6, or it would have lumped consumers with three polluting powership projects for 20 years at tariffs exposed to the vagaries of gas and foreign-exchange markets.

The renewed procurement push will take place in a context of grid constraints, both real and perceived, and the complexities that are likely to be associated with the country’s inaugural tender for gas-to-power, with the latter owing not only to novelty but also the current absence of both domestic gas and import infrastructure and the ongoing foreign-exchange exposure it will introduce to the electricity market.

Given a chronic supply shortfall – and an aged coal fleet that continues to be unreliable and is likely to continue to decommission itself even if the official schedule is extended – it is crucial that public procurement begins to break from its recent history of under- delivery, a trend that was also evident in the partial failure of BW5, when technology costs surged post-bidding, owing to the twin disruptions of the Covid lockdowns and Russia’s invasion of Ukraine.

True, South Africa is fortunately no longer reliant only on government’s Independent Power Producer Procurement Programmes, or IPPPPs, with private firms and households investing heavily in large and small generators mostly to mitigate the negative effects of loadshedding, but also for some tariff stability.

Nevertheless, the supply/demand gap is substantial, as reflected in the draft 2023 Integrated Resource Plan, or IRP 2023, which quite astoundingly allocates for loadshedding until at least 2027, when the gas projects are expected to close the deficit. While the IRP 2023 has many shortfalls, which will hopefully be exposed during the comment phase, its assumption of ongoing loadshedding could sadly be one of its more realistic inclusions.

That said, the document under-caters for supply- and demand-side remedies that could be introduced to address the immediate shortfall if they were not crowded out by a gas programme that is possibly oversized from a capacity perspective, but definitely when the assumed utilisation factor of 86.71% is included.

While important battles are waged over the future plan – which thankfully won’t fully dictate the investment pace, but which does set out a wrongheaded vision – it is equally crucial that procurement, both public and private, picks up proper momentum this year.

Edited by Terence Creamer
Creamer Media Editor



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