South Africa has run out of road

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14-12-2022
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Business Tech
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Mineral resources and energy minister Gwede Mantashe announced last week that the government had signed 13 new energy generation agreements totalling just shy of 900MW as part of South Africa’s delayed 5th Bid Window in the Renewable Independent Power Producer Programme (REIPPP).

The announcement came as the country battled with stage 6 load shedding and while it sat on edge waiting for power utility Eskom to cross the threshold to its highest-ever levels of rolling blackouts.

While the move to stage 7 load shedding never came – although that depends on who you ask – the stress of the situation put South Africa’s precarious energy position into sharp focus and brought attention to the second part of Mantashe’s announcement.

Bid Window 6 – which makes room for 4,200MW of renewable projects – has so far only managed to appoint five preferred bidders promising a total of 860MW, and a sixth bidder may join on taking the total closer to 1,000MW.

This has sent alarm bells ringing across the energy sector.

Economists at the Bureau for Economic Research said that the bid result gives a worrying outlook for the country’s energy stability, particularly because the result was devoid of any wind projects.

Of the 56 bids received for bid window 6, 23 were for wind projects totalling over 4,100MW of energy. None of these bids made it through, wiping off a potential 10TWh of energy production per year, according to the South African Wind Energy Association (SAWEA).

According to Intellidex analyst Peter Attard Montalto, the reason for this stark absence is that South Africa has, simply put, run out of road.

“Having 3,200MW of unallocated slots for wind wasn’t expected, but what we are seeing is expected themes and blockages play out on steroids,” he said in a note this week.

Put simply, Attard Montalto said that there were no wind projects on board because there is no grid to connect these projects in the Eastern Cape and the Western Cape.

This is because the spare grid capacity that was shown by Eskom at the time of bidding in the two provinces – about 3,800MW – had subsequently, and legally and by the rules, been taken instead by private off-taker projects that could reserve the grid space faster than the cumbersome REIPPP bids.

SAWEA echoed this with disdain following the announcement. The group said that the published Generation Connection Capacity Assessment (GCCA) clearly indicated grid availability in the provinces where wind projects were developed for public procurement. However, this ended up not being the case at the evaluation stage.

“Project developers need clear communication in real time of changes to reduce risks in an already costly process,” it said.

“We strongly urge immediate intervention by key role-players to unpack the challenges with the wind sector and find viable solutions to unlock the hurdles facing the progression toward a secure energy system.

This has highlighted the next big problem of South Africa’s energy crisis: Eskom needs to urgently expand its grid, Attard Montalto said.

“The Northern, Western and Eastern Cape are now full and, given the current pace of transition, will remain so until well into 2027 or beyond,” the analyst said. “There is now no more grid access in key areas for the foreseeable future. The implication is more load-shedding for longer than previously assumed.”

“The recent failure of all bids for wind power in the REIPPP bid window 6 process is a timely reminder that the end of power cuts — let alone navigating a successful Just Energy Transition — is still a long way off,” he said.