Baseload IPPP anticipated

November 13th, 2014, Published in Articles: Energize

 

After the success of the Renewable Energy Independent Power Producer Procurement Programme (REIPPP) run by the Department of Energy (DoE), the release by the DoE of requests for proposals for gas, coal and hydro under the government’s baseload procurement programme is hotly anticipated.

Malibuye Cossie and Katia Mengel

Malibuye Cossie and Katia Mengel

This article highlights some of the differences that we expect to see in the Coal Independent Power Producer Procurement Programme (CIPPP) versus the REIPPP.

Single buyer versus multiple buyers
  
The REIPPP has a single buyer (Eskom) and the projects are geographically restricted in that they must be built, operated and maintained within South Africa. However, the Request for Registrations (RFR) issued for the CIPPP by the DoE indicates that it is willing to consider bids where:

  • Eskom is the sole purchaser of the capacity generated by a project (single buyer project)
  • Eskom is not the sole purchaser of the capacity generated by the project (multiple buyer project)
  • The project is located outside of South Africa

Feedstock supply agreements

The need for feedstock supply agreements will be a key aspect of a CIPPP project’s viability. Although it is clear that the supply agreement will be a requirement under the CIPPP’s Request for Proposal (RFP), it is not clear whether the RFP will stipulate specific requirements which must be contained in such feedstock supply agreements.

Tariff

CIPPP bidders will be required to submit a tariff for the energy generated by the project. The RFR gives no indication as to whether there will be a cap on tariffs as was initially seen in the REIPPP where technology-specific caps were imposed and then later removed in relation to wind and solar technology in the fourth round of the REIPPP.

Economic development obligations  

REIPPP bidders are currently required to comply with seven economic development obligation elements. The RFR for the CIPPP lists eleven economic development obligations which may form part of the qualification and evaluation criteria.

Location: water supply and grid capacity

While the location of a project under the REIPPP was flexible and driven predominantly by the availability of environmental resources, the location of a CIPPP project will be a key determinant in its success. Location will affect water availability, feedstock availability and access to the grid. Projects located near the Waterberg area and Lephalale are likely to find securing water resources and access to the grid more difficult, because of the existing pressures placed on these resources by the Kusile and Medupi power stations. Eskom’s plans in relation to connecting its own facilities and upgrading or expanding the grid will also have to be taken into account when deciding on an appropriate location.

Conclusion

Although we envisage that there will be numerous differences between the CIPPP and REIPPP, the DoE, sponsors and lenders will, without doubt, draw from their experiences to date under the first programme. We envisage as much success in the baseload programmes as has been experienced under the renewable energy programme.

Contact Claire Marais, Norton Rose Fulbright, Tel 011 685-8565, claire.marais@nortonrosefulbright.com

 

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