North West ‘ideal’ for battery storage project
North West has been identified as the ideal location for the second battery storage projects bid window, as three energy procurement programmes get into full swing with plans to introduce backup in the next round to deal with the challenges that come with grid capacity.
The bidders’ conferences for three bid windows took place on Wednesday and Thursday and sought to brief bidders on the country’s bid window 7 for renewables, its second battery storage system window, and its first gas-to-power bid window.
Through the bid windows the Independent Power Producers (IPP) Office plans to procure 5,000MW of renewable energy (3,200MW of onshore wind and 1,800MW of solar photovoltaic), 2,000MW of gas to power, and 615MW of battery energy storage from IPPs.
In terms of the second battery storage bid window, Eskom found that North West is the ideal region for battery storage projects despite initial indications that the Northern Cape would be best placed to host such projects.
Eskom’s chief engineer for transmission grid planning, Caswell Ndlhovu, said KwaZulu-Natal, Gauteng, Limpopo, Mpumalanga and the Free State have high scores on the criteria for battery storage, but North West has the highest overall.
After “long, painful discussions”, Eskom came up with six criteria for selecting a supply area: the availability of capacity; reduction in losses; system strength; the concentration of storage; facilitation of renewable energy; and decongestion of the transmission network.
“What we found as opposed to the first study that we did in the Northern Cape, we found very little substation dependency on these transfers from the North West. So, it did not select any substation over the other in the North West,” Ndlhovu said.
In areas with high levels of wind supply, particularly the Western Cape, battery usage tends to be limited because when the wind blows for an extended period, batteries will become fully charged and excess energy cannot be diverted elsewhere.
IPP Office head Bernard Magoro said while the office hopes to introduce policy interventions to tackle South Africa’s grid challenges, these are expected to endure in the current bid window’s requests for proposals.
“Grid remains a challenge and we are hoping that by the time we have released the next window, we will have resolved this challenge,” he said.
Speaking to energy project bidders during a series of conferences on the IPP bid windows this week, Magoro said the office will also make use of reserve bids to avoid delays in adding capacity to the grid as a backup if preferred bidders fail to close projects on time.
“Given our experience with the closing of projects, we have also introduced the concept of reserve bids in bid window 7. So we will have reserve bids in case other preferred bidders fail to close projects on time, we will be able to call on those reserve bidders then to step in and close the projects so that we do not delay this much-needed capacity on the grid,” said Magoro.
Magoro said the IPP Office spent much of 2023 dealing with grid challenges and introduced interventions including a curtailment regime.
He said the IPP Office had developed interventions to bolster the power procurement initiatives, but that some are still subject to regulatory approvals from the National Energy Regulator of South Africa.
“We have spent most of last year dealing with the grid issues. I think most people are aware of all the initiatives that came out of that. [The] curtailment regime was one of them. The rules for issuing of BQs [budget quotes] … came out of those initiatives.
“We also came up with the concept of [a] gating approach, which Eskom is now engaging the regulator to implement. We were hoping that by the time we released this bid window, this initiative would have been approved by the regulator, but unfortunately, that process is still ongoing,” said Magoro.
During the IPP Office’s first bid window conference for gas-to-power energy, Magoro said of the 3,000MW of gas earmarked to be procured in the 2019 Integrated Resource Plan, 2,000MW will not depend on location and 1,000MW will be limited to the Port of Coega in the Eastern Cape.
“Gas has a role to play in South Africa. We have an energy challenge. We have a transition plan to go from coal-dominated power. Gas will help us to integrate more renewables. But over and above that, there is a gas strategy by the [department of mineral resources & energy] which will be sent to parliament for consultation so we can get public comment going,” he said.
IPP Office head of legal Lena Mangondo said bidders must comply with all the request for proposal provisions and requirements of anticompetitive and collusive practices.
IPP Office head of infrastructure finance Elsa Strydom said the price, financial standing, robustness and compliance of bids need to pass the functionality test where bidders provide a price per MWh and must be in line with the consumer price index.
“The price must include the cost of grid connection and ... the full scope of work in the estimate letter provided. It must be independent of any projects outside of this particular bid,” she said.
IPP Office legal adviser Louis Moyse said participation in the bids and projects will be subject to empowerment requirements on bidders and supporting documents including broad-based BEE certification, shareholder details and the equity holding of preferred bidders.
Grid remains a challenge and we are hoping that by the time we have released the next window, we will have resolved this challenge
Bernard Magoro
IPP Office head