The South African Wind Energy Association (Sawea), which initially voiced strong objections to the abandonment of renewable energy feed-in tariffs (Refit) in favour of what had since been dubbed 'Rebid', acknowledged that substantive progress had been made in the process to procure renewables in South Africa. But Sawea's Johan van den Berg cautioned on Tuesday that the compliance requirements and the financial burdens associated with the recently released request for proposals (RFP) documentation had also increased materially.

Speaking at a debate in Midrand organised by EE publishers, Van den Berg said that, on balance, the bid documentation appeared to be facilitative of bankable projects. However, the documentation also included requirements that had the potential to “break a young camel's back”, unless mitigated.

Potential developers were, for instance, expected to put up R15 000 simply to gain access to the bid documentation. In addition, bidders would need to raise a bond of R100 000 for every megawatt of capacity eventually bid – the equivalent of R5-million a 50-MW project. Stipulations within the tender not directly related to the core business of power generation, such as localisation and socioeconomic spinoffs, were also “very high”.

The synergy of trust and consensus that had been built up over the months and years of consultation on the Refit, which had been facilitated by the National Energy Regulator of South Africa’s (Nersa’s) hearings, had also been seriously undermined by the unilateral manner in which the ‘Rebid’ was eventually handed down by the Department of Energy (DoE) and the National Treasury.

Nevertheless, Van den Berg argued that government, supported by its legal advisers, had produced an “excellent” bid document and that if alignment and trust were rebuilt between the industry, government and Nersa, the foundation could be laid for renewables investments of around R350-billion between now and 2030 – the equivalent of R18-bllion a year over that period.

The long-awaited tender for renewables from independent power producers was made available on August 3, 2011, and was for projects with a nameplate capacity of 3 725 MW.

The DoE also allocated capacity across various renewables technologies, with 1 850 MW set aside for onshore wind, 200 MW for concentrating solar thermal, a further 1 450 MW for solar photovoltaic solutions, 12.5 MW for both biomass and biogas, 25 MW for landfill gas capacity, 75 MW for small hydro, and a further 100 MW for other small-scale IPP projects of less than 5 MW.

DoE deputy director-general Ompi Aphane said that a bidders conference would be hosted on September 14 and that preferred bidders should be selected by November.

He anticipated that financial closure on the first projects could be reached in the first half of 2012 and the construction should also begin next year.

The RFP shows that projects would only be considered if they could enter commercial operation by June 2014. However, concentrating solar thermal projects would qualify if they could enter commercial operations by June 2015.

Standard Bank’s Paul Eardley-Taylor gave the bid documentation a rating of “eight out of ten” and indicated that, notwithstanding tariff capping, reasonable project returns should still be possible. These returns should also be sufficient to attract the equity and debt finance needed to facilitate the projects.

The bank estimated that about $11-billion of investment would be required to deliver the capacity and that between $3-billion and $3.5-billion of that would be in the form of equity funding, much of which would flow in the form of foreign direct investment.

Webber Wentzel’s Brigette Baillie, who helped advise government on its compilation of the tender, explained that a departure from Refit was deemed necessary following a legal audit, which showed that the predetermined tariff would fall foul of South Africa’s procurement rules.

The procurement process, she said, had been designed to ensure legal and economic sustainability, while meeting government’s macroeconomic, industrial policy and social objectives. Baillie argued that the changes would improve the robustness of the process and would lay the foundation for the further procurement rounds.

Nersa’s Thembani Bukula said that the regulator had moved ahead with the design of a Refit in line with government policy and national legislation. But he said that framework changed on May 4, 2011 when the New Regulations on New Generation Capacity were promulgated and made no reference to Refit. Therefore, on July 29, 2011, Nersa concurred with government’s competitive bidding process.

South Africa’s Integrated Resource Plan for the period 2010 to 2030 envisaged the deployment of 17 800 MW of renewables capacity, with wind and solar photovoltaic expected to deliver 8 400 MW of capacity each, and concentrated solar thermal a further 1 000 MW.