With the first 200 MW of Concentrated Solar Thermal Power allocated as part of South Africa’s IPP programme, the question at the forefront of the industry is does this represent a market changer or a one off opportunity?

The Ministry of Energy in South Africa officially launched the Independent Power Producers (IPP) Procurement Programme earlier this month.

This now replaces the previously debated REFIT programme, in which bidders would be asked to bid for projects based on fixed tariffs. Due to the delay in finalising South Africa’s position on renewables, it is proving to be an exciting and tense time for CSP developers as they feel time pressure in preparing a robust project proposal that secures an IPP with Eskom.

It is expected that the first phase of IPPs will be announced at COP17 being held in Durban in November. However there are concerns that with delays already seen, is there enough time from when the bidding programme closes to when COP17 takes place to fully assess all the proposals.

Due to the nature of a very specific bidding condition ‘Bid Responses which are submitted must be accompanied by a Bid Guarantee in the form of a bank guarantee for an amount equal to R100 000 (one hundred thousand Rand) per MW of the installed capacity of the proposed facilities for the Project in respect of which a Bidder submits a Bid Response, ‘it makes sure that only those with the capacity and balance sheet to support their project need apply. Therefore controlling the volume and quality of proposals to a select few, and making it feasible to have a decision by November.

However with all of this in mind and the fact that photovoltaic have been allocated 1450 MW, it does pose the question: Is this the beginning of a CSP gold rush in South Africa or will it be a CSP monopoly in market with a short shelf life? There is no easy answer to this, as the reality of developing a CSP project in South Africa remains unknown, making it difficult to assess the risk, cost and level of ROI. In an already competitive industry developers and EPCs are weighing up spending their resources in more established markets such as the US and Spain or the new opportunity being presented in South Africa.

But there is hope as Eskom are leading the way with their 100MW CSP demonstration plant in the Northern Cape using central receive technology. The lessons learned from this plant up to its commission in 2016 will provide a great foundation for future projects and could dictate the market’s development.

On August 1st, 2011, the DoE issued the first request for proposals (RFP) for renewable energy projects to meet its goal of 3.72 GW of electricity generation from renewables.

In order to qualify for this first of five rounds, renewable energy developers must notify the DoE of their intent to bid by August 31st, 2011, and submit bids by November 25th, 2011.

Bids ceiling of USD 0.397/kWh

Bids will be evaluated on both price and economic development criteria, with price weighted at 70%. Bids for PV or CSP will need to meet a price cap of USD 0.397/kWh, with other price ceilings for other technologies.  Bidders will also be required to post a bid guarantee of USD 14,000/MW. Successful bidders will enter into an implementation agreement with the DoE and a power purchase agreement (PPA).