Government kicks off bid conference for additional power, as Eskom struggles along

• The Department of Mineral Resources and Energy held a Risk Mitigation Independent Power Producer Procurement Programme conference to brief bidders for power.
• As Eskom continues to grapple with its operational challenges, South Africa in 2020 has had its worst year of load shedding on record. 
• The final outcome of the bidding process must provide energy, capacity and ancillary services to Eskom.

While Eskom continues to grapple with its capacity problems, the Department of Mineral Resources and Energy kicked off a bid conference to help find bidders to assist with the country's energy constraints by July 2022.

This comes as Eskom and South Africa have had their worst year of load shedding on record and the penny drops on the power utility's capacity, after it had to implement load shedding on an only partially functioning economy during the Covid-19 national lockdown.

The Risk Mitigation Independent Power Producer Procurement Programme seeks to respond to the short-term power supply gap identified in the 2019 Integrated Resource Plan and the 2000 MW ministerial determination gazetted in July, which the National Energy Regulator of SA (Nersa) concurred with, paving the way for a possible 11 000 MW power to be procured from 2022.

The department said in a statement that at the end of the process the final solution of the bidding process must provide energy, capacity and ancillary services to Eskom.

"The conference was attended by more than 1 000 delegates, including registered and other interested bidders, project developers, financiers and energy sector stakeholders," the statement read.

Speaking during the virtual bidder's conference on Friday morning, head of the Department of Mineral Resource and Energy's IPP Office Bernard Magoro said bidders had until 15 October to submit clarity seeking questions on the bid process after which bids would be taken in from 30 October..

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Bid submissions will be taken until 24 November strictly by physical delivery with Covid-19 protocols at the IPP offices. Bid submissions will be considered through November and successful bids are expected to be announced in January. Power is expected to be at hand by June of 2022.

Magoro said the IPP Office worked with the Nersa, the Department of Environmental Affairs, National Treasury, the Department of Mineral Resources and Energy and the Department of Trade Industry and Competition to ensure successful bids are in line with requirements.

"At the IPP Office we are working closely with Nersa the departments involved and Eskom to assist in making sure that license authorisations are needed for this programme before the time that they are required.

"The design of the programme was based on the requirements of the system operator. That was the main feature of the technical aspects of the programme. All of that emanates from what the system operator indicated was the requirement of the grid," he said.

Head of legal at the IPP Office Lena Mangondo said the 2019 IRP would guide the procurement during the process and establish the competence of the department to implement the risk mitigation and decide how this programme is undertaken.

"The department must comply with the preferential procurement policy framework act in terms of evaluation and exemptions. The department asked the minister of finance for an exemption and deviation from the minister of trade industry and competition," said Mangondo.

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Mangondo said if a preferred bidder fails to comply their agreement may be terminated and lose their status as a preferred bidder with no obligation on the department.

"Once bidders qualify, they can go to comparative and competitive evaluation. They will sign a preferred bidder development undertaking to determine commercial close and enter a range of project agreements including a power purchase agreement with Eskom," said Mangondo.

Head of technical at the IPP Office Pervelan Govender said the required energy for a preferred bidder's program will be between 50MW to 450MW of energy.

"The facility should include plant and equipment, be on green field or cleared brown field sites. If a bidder brings with them more than one facility, at least one of them must be a dispatchable facility," said Govender.

Regional manager of Eskom's grid access unit Nonhlanhla Miya said in order to get grid access, bidders must begin with paying a process fee and collecting and completing an application form from the grid access unit office.

"Once the feasibility studies are done on the generation facility. They can go onto the grid access website to initiate their application form to get access to the grid. The form is submitted to the unit's relevant regional office," said Miya.

Miya said engineers will compile an engineering proposal with a design to indicate the capacity of the bidder's project and then a process letter will be submitted to the IPP and the designs and scope must be approved by Eskom.

Head of infrastructure finance at the IPP Office Elsa Strydom said the cost evaluation process in the programme will assess the price, robustness of the price and robustness of the model.

"There is no evaluation price cap, but pricing makes a considerable difference. A bidder is required to include bid connection costs, carbon details, non-fuel-based charge rates and fuel charge rate must be adjusted on a monthly basis based on the indices provided," said Strydom.

Strydom said the evaluation price must extend value for money for the buyer and seller and a benchmarking exercise will be used to ensure that the outcome of the evaluation is value for money. She said that a "best and final offer" process can be included at the discretion of the department.

Acting head of economics at the IPP Office Deon Fourie said the programme includes economic development requirements such as skills development, job creation, transformation and local content.

*This article has been amended to reflect the accurate official titles of Bernard Magoro, Pervelan Govender and Elsa Strydom. Fin24 deeply regrets the errors.