Tight deadlines threaten to pull plug on power reform

The independent power producers programme office, which is run by the department of mineral resources & energy, aims to procure 2,000MW of electricity in its latest request for proposals.

This is part of an effort to secure new generation capacity under the risk-mitigation procurement programme, and comes in response to SA s shortterm

’ electricity supply gap.

However, the industry and country face a conundrum that appears to be derailing the process with unrealistically tight deadlines.

The IPP programme office originally held a workshop in January and stipulated that the request for proposals should be completed within a short construction period.

It took the office more than eight months after this workshop to officially issue the request for proposals. With the pending bid submission date being November 24, this has placed companies under extreme pressure to ensure that their bids are compliant and ready to start by mid-2021.

Due to historic inconsistent behaviour and unnecessary delays by the government, many organisations are now hesitant to fully invest in this project.

The anticipated date for the announcement of preferred bidders is December 15, and the planned financial close for these projects will take place on April 30 2021.

Projects will need to be constructed within a 12-month period, with commercial operations up and running by the end of June 2022. Typical renewable energy sources such as wind and solar may thus have limited opportunities within this bidding round as it usually takes longer than 12 months for these types of projects to be built.

The state of affairs also leaves questions for those participating in the tender, such as whether the authorities will be able to issue the relevant permits required for construction timeously. For example, it can take six to 18 months for a water-use licence to be issued, something that is crucial for the construction of these projects.

The request for proposals doesn t allow sufficient time for

’ bidders to obtain the required contractual permits and comply with other legal requirements to meet the short development timelines. For example, one of the requirements is the need to adhere to the Carbon Tax Act. This won t

’ apply to solar and wind farms but projects that want to provide liquefied petroleum gas or liquefied natural gas will be subject to the act.

The request for proposals requires that 40% of goods and services be procured locally. In doing so, the government is trying to ensure the local economy reaps the rewards. However, SA s shrinking economy

’ and the fact that many organisations have shut down since the national lockdown hasn t

’ been taken into account.

Nor has the fact that the country faces a brain drain as more South Africans move overseas. Even though these bidders are forced to use local resources, they struggle to identify the skilled individuals who will help complete the job effectively.

It has been noted that there will be investment in industry infrastructure, which comes just in time for an already struggling industry. But the industry needs government commitment, infrastructure investment, support and cash flow to be able to become operational again and produce.

With the renewable energy sector having to deal with historical delays, coupled with the uncertainty created by continued rumours of a nuclear build, companies are still scurrying to meet the submission deadline. They are simultaneously conservative with their bid preparation requirements.

The renewable energy industry and the government should take a step back to realise the disconnect between resources, compliance requirements and where the economy lies. Further complicating the issue is the bidders struggle to obtain

’ the necessary skills.

The government should therefore look towards a more effective communication strategy that ensures the industry is aware of its plans timeously, while removing any doubt and uncertainty around these kinds of projects.

The department must understand that the renewable energy industry as a whole will plummet should the government elect to proceed with a nuclear build, and more so if it does not stick to its timelines, thereby causing unnecessary delays with the implementation of both this risk-mitigation request for proposals and the planned round five of the IPP programme.

The delay by the independent producers office in issuing the request for proposals has placed companies under extreme pressure