The high levels of interest in South Africa's renewable energy programme came into sharp relief in Gauteng on Wednesday when more than 870 people, many representing potential bidders, converged on Gallagher Estate, in Midrand, for the Department of Energy's (DoE's) renewable energy independent power producer (IPP) programme bidders conference.

The gathering attracted interest from serious renewables developers from Europe, North America and Asia and represented another milestone in the process to procure the first 3 725 MW of renewables capacity by 2016, with the tender documents having been made available on August 3, 2011.

The programme, while modest relative to capacity deployed in other countries, represented one of the largest single renewables procurement initiatives under way globally.

First bids would have to be submitted by November 4 and preferred bidders should be named during the seventeenth Conference of the Parties (COP 17) climate conference in Durban in late November, early December.

Should the need arise, there would be other bid windows, with one already scheduled for March 4, 2012, to offer developers time to prepare for a process that included high compliance hurdles. Government employed the services of world-class local and international legal, environmental, financial and technical transaction advisers to help with the design of the process and the drafting of the request for proposals (RFP), which has been widely applauded, but is also considered to include some onerous conditions.

The RFP was for 1 850 MW of onshore wind, 1 450 MW of solar photovoltaic (PV), solar concentrating solar power (200 MW), biomass (12.5 MW), biogas (12.5 MW), landfill gas (25 MW), small hydro (75 MW) and other small projects of less than 5 MW (100 MW). However, the DoE had reserved the right to reallocate capacity across technologies should there be an oversubscription in one area and an undersubscription for other technologies.

Only once market responses had been received would such reallocation decisions be made in a bid to ensure that megawatts were not "sterilised" by any possible inappropriate allocation of technologies in the tender.

The commercial processes were expected to be completed by mid-2012, triggering a project development process that was likely to involve foreign and domestic investment of between $10-billion and $12-billion.

Government indicated on Wednesday that it had been pleased with the response, which at one stage was uncertain, owing to the initial disquiet expressed by the decision of the authorities to abandon renewable energy feed-in tariffs, or Refit, in favour of a competitive bidding process.

Director-general Nelisiwe Magubane said the response had been "overwhelming" and that more than 300 potential developers had paid the R15 000 fee to receive the RFP documents.

Eskom's delivery unit head Kannan Lakmeeharan added that it had received 321 applications for grid connections from potential renewables projects representing 27 000 MW of potential capacity, mostly for wind and PV developments.

The response, thus far, was also indicative that further rounds were likely, in line with the current Integrated Resource Plan for 2010 to 2030, which would be changed periodically. The plan envisaged renewables would contribute 42%, or 17 800 MW, of South Africa's new generation capacity by 2030.

Eskom had been excluded from bidding, but the State-owned utility would be the buyer and, together with municipalities, would also be responsible for connecting the projects to its grid.

Preferred bidders would need to conclude a power purchase agreement with Eskom, finalise a connection agreement with either Eskom or a municipality and sign an implementation agreement with the DoE.

GRID ACCESS UNIT

Lakmeeharan reported that a Grid Access Unit had been set up within the utility to provide a one-stop shop for IPPs requiring information on where connections were available and what the costs would be. It would also offer services to the IPPs that eventually emerged as Eskom grid customers.

A "two envelope" tender process would be pursued, with the first envelope outlining how a developer planned to meet the specific economic development objectives outlined in the RFP, and the second containing the actual price offer.

Prices had also been capped per each technology at levels below those promulgated in the 2009 Refit approved by the National Energy Regulator of South Africa. For instance, wind projects would need to be priced at below 115c/kWh, as opposed to the 120c/kWh outlined in the 2009 Refit.

The other caps were 285c/kWh for solar PV and solar thermal, 107c/kWh for biomass, 80c/kWh for biogas, 60c/kWh for landfill gas and 103c/kWh for minihydro. Eskom's blended tariff is set to rise to around 66c/kWh by 2013.

The National Treasury's Karen Breytenbach indicated that the IPP selection was 70% weighted towards price. But a bidder's price would only be considered once it had met the other economic development criteria, which carried a 30% weighting.

She cautioned bidders not to submit projects that failed to meet the economic development criteria related to job creation, the involvement of historically disadvantaged individuals, community development and economic spinoffs, such as the localisation of components and solutions.

She also warned that any evidence of collusive and uncompetitive behaviour would result in disqualification and the loss of the bid bond. A refundable guarantee of R100 000/MW would be required on submission.

Environmental and land authorisations would also need to be included as part of any submission, the absence of which would result in immediate disqualification.

Magubane acknowledged that the Department of Environmental Affairs was currently "snowed under" with requests for authorisations from potential developers, having received more than 300 over the past few months.

But she said the department had promised to dedicate capacity to fast-track the process, without breaching the "letter and spirit of the law".

Applicants had recently received a scorecard to help them calculate whether or not their potential projects were meeting the criteria as outlined in the RFP.

A simplified process was also being designed for smaller projects of less than 5 MW to facilitate the entry of renewables entrepreneurs.