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New Energy

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New Energy

23rd September 2011

By: Terence Creamer
Creamer Media Editor

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I should confess upfront that the decision by government to abandon the renewable energy feed-in tariffs, or Refit, in favour of a competitive bidding process initially made me uneasy. But I have been won over to such an extent that I believe the tender should now become the template for the way government departments procure many other big-ticket items.

Notwithstanding anxiety about the fact that one needs to pay R15 000 simply to receive the request for proposals documentation, the documentation is nothing short of world-class and a credit to government, as well as the State’s legal, financial and technical transaction advisers.

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That’s not to say that in doing the right thing, government managed the transition from Refit to ‘Rebid’ (as some now call it) in a manner that inspired confidence.

To be sure, the uncertain period between December last year and August this year – when it became apparent that government no longer favoured the Refit model, but details about the new procurement regime were not forthcoming – was deeply unsettling. In fact, the opacity surrounding that change of heart could well have undermined the entire process.

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But the Department of Energy and the National Treasury have recovered well, as was in strong evidence at last week’s Bidders Conference, when more than 870 people converged on Gallagher Estate, in Midrand, to receive a briefing on the documentation, as well as deeper insight into what is expected of bidders.

The key take away is that bidders should refrain from making submissions that are incomplete. The documentation has clear stipulations on everything from environmental records of decisions, through to price indexing. Those wanting to tender for the procurement of the first 3 725 MW of renewables capacity by 2016 need to clear all of those compliance hurdles or have their bids immediately disqualified.

In other words, this is a serious process, for serious bidders. That is also why government is demanding bid guarantees equal to R100 000 for every megawatt bid. It is seeking to attract established market participants, which are more likely to be able to deliver bankable projects within the tight timeframes required.

Naturally, the onerous compliance stipulations have raised the ire of smaller investors, who believe government has deliberately moved to exclude them.

But here again, I am sympathetic. South Africa needs to put green energy on the strongest footing possible. It aims to do this by attracting the world's leading renewables developers, without being distracted by hundreds of submissions that amount to little more than wishful thinking.

That said, the renewables industry should not remain the preserve of the rich and powerful, which is why I was also pleased to learn that a simplified tender process is being prepared for smaller projects of between 1 MW and 5 MW.

All in all, I think government has struck the correct balance and that this ‘new energy’ now needs to permeate other areas of government to spur much needed infrastructure delivery.

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