here. Renewable Energy IPP Program. SOUTH AFRICA. IRENA. Renewable
Energy Policies. 12 January 2013. Abu Dhabi. Yousuf Haffejee. Head of Single ...
Renewable Energy IPP Program SOUTH AFRICA IRENA Renewable Energy Policies 12 January 2013 Abu Dhabi Yousuf Haffejee here
Head of Single Buyer Office Eskom
South Africa Background to Policy
• South African energy policy has favored the entry of IPPs and the development of renewable industry • 1998 White Paper on Energy proposed liberalization of the power sector • 2001 Cabinet decision proposed a 70/30 split between Eskom generation (100% Government owned) and IPPs • 2004 White Paper on Renewables proposed renewable targets • National Government extremely supportive of creating a green economy that supports localization and job creation • 3 725 MW from Renewable IPP before 2016 (Ministers Determination)
• 17 800 MW allocated to Renewable Generation in IRP by 2030
REIPPPP Policy Drivers Driver 1: Reduction in carbon intensity • IRP 2010 predicated on reducing CO2 emissions from 912 g/kWh to 600 g/kWh by 2030 • Diversifying current generation supply mix Driver 2: Additional generation capacity
• Quickest to build • Builds on learning from previous IPP initiatives
• Simpler than other IPP transactions Driver 3: Economic development opportunities
• Creating a Green Economy • Job Creation
REIPPPP Policy Path
1998 White Paper on Energy Policy
1998
2004 White Paper on Renewab le Energy
Dec 2008 NERSA paper on REFIT
Apr 2009 NERSA regulatory guideline on REFIT for wind, PV, landfill gas, CSP
2004
2010 Inter Ministerial Committee
Jul 2009 NERSA consultation paper (+ six technologies, draft PPA)
Aug 2009 Minister gazettes New Generation Regulations
Oct 2009 NERSA publishes REFIT tariffs
3 years to market 2008
Nov 2010 Minister gazettes amended New Gen Regulations
2009
2010
Dec 2010 National Treasury PPP Unit appoints consultants
2011
Aug 2011 RFP issued
2012
Dec 2011 Round 1 Preferred Bidders
Capacity in 2030
Committed 1125 New 17800
Existing 35515 Committed 10133 Decomm. (10902) New 6250
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Existing 1800
Implementation: Firm commitments New build options
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total
Coal (PF, FBC, imports, own build) MW 0 0 0 0 5001 5001 0 0 0 250 250 250 250 250 250 250 1 000 250 1 000 250 1 000 6 250
Nuclear MW
Import hydro Gas – CCGT MW
0 0 0 0 0 0 0 0 0 0 0 0 0 1 600 1 600 1 600 1 600 0 1 600 1 600 0 9 600
0 0 0 0 0 0 0 0 0 0 0 0 1 1432 1 1832 2832 0 0 0 0 0 0 2 609
MW 0 0 0 0 0 0 0 0 0 2373 2373 2373 0 0 0 0 0 0 474 237 948 2 370
Peak – OCGT
Wind
CSP
MW
MW
MW
0 0 0 0 0 0 0 0 0 0 0 0 805 805 0 805 0 0 690 805 0 3 910
0 0 0 0 400 400 400 400 4004 4004 400 400 400 400 800 1 600 400 1 600 0 0 0 8 400
Solar PV MW 0 0 0 0 0 0 100 100 1004 1004 100 100 100 100 100 100 0 0 0 0 0 1 000
0 0 300 300 300 300 300 300 3004 3004 300 300 300 300 300 1 000 500 500 500 1 000 1 000 8 400
Firm commitment now Final commitment in IRP 2012 1. Built, owned & operated by IPPs 2. Commitment necessary due to required high-voltage infrastructure, which has long lead time 3. Commitment necessary due to required gas infrastructure, which has long lead time 4. Possibly required grid upgrade has long lead time and thus makes commitment to power capacity necessary
Essential Policy Alignments Inter-Governmental Framework Agreement (Government Guarantee)
Supportive
Presidency
Eskom 20 year PPA
DTI Dept of Econ. Development
Credit Rating Agencies
National Treasury
IPP Unit
PPP Unit Implementation Agreement
Equity 3 year lock-in No change in control without DOE consent
REIPPPP Project
Lenders
EPC
OEM
Department of Energy
Contractor s
O&M
Land Lease
Typically 5-10 years
20 years +5 years
NERSA
Generation License
Dept. of Environment
ROD
Dept. of Water Affairs
Water use license
Dept. of Min. Affairs
Mining rights
Local Permits Land use Building
Logistics
Government has succeeded in aligning its’ elements.
REIPPPP Outcomes
Awards (MW)
Available
Round 1
Round 2
Balance
Wind
1,850
634
563
653
Solar PV
1,450
632
417
401
CSP
200
150
50
0
Other
125
14.3
111
1,044
1,165
Total
3,625
1,416
Bidders
Round 1
Round 2
Round 3
Bidders
53
79
??
Preferred bidders
28
19
??
53%
25%
Success rate Tariffs
Round 1 ZAR/kWh
Round 2
USc/kWh
ZAR/kWh
Procurement model changed BW 1 to BW2 (Capped allocation)
Shift to real competition
Change
USc/kWh
%
Wind
1,143
14.3
897
11.2
-22%
Solar PV
2,758
34.5
1,645
20.6
-40%
Significant drop in average bid tariff
REIPPPP (Wind Tariff Evolution)
Wind Tariff Evolution
?? 2013 REFIT Round 3 average bid
Lessons Learned • Timelines were not realistic • Bureaucracy (time to approve) of Government approvals • Some concern around Alignment of Provincial Approvals and National Approvals (Land rezoning etc) • Lack of skills transfer from external consultants to sustain future procurement programs • Must create competitive environment to enable lowest possible price (Round 1 no real competition)
• Create some flexibility in renewable resource categories and its allocation (CSP fully subscribed by round 2) • Get your ceiling price close to market prices (BIOMASS and BIOGAS no takers) • Need to communicate better to Industry and Bidders
Future Challenges • GRID CONNECTION • Ability to Connect • Time it takes to connect
• Capital Markets • ZAR debt constraints • Innovative instruments to access capital markets? • Foreign lenders?
• Can the retail tariff path continue to fund the Renewable IPP program • Build / Logistics / Operations ….not yet tested
Successes • Creating a supportive enabling environment • Policy (New Generation Regulations Regulations) • Integrated Resource Plan (IRP 2010, 20 year country energy plan) • Regulatory support and commitment • Government Commitment (All Ministries: Energy, National Treasury, Public Enterprises, Environmental Affairs, Agriculture Ministry, etc) • International Best Practice (International Consultants brought in to assist developing the Request For Proposal) • Being a first of a Kind for South Africa (Engaged with lending institutions to ensure bankability of Agreements) • Social and Economic Development Criteria • Competitive pricing for round 2 • Maintaining Lender, Developer interests
DOE proposed further determinations Draft 2012 REIPPPP Determination
Capacity (MW)
CSP
400
Wind
1,470
Solar PV
1,075
Biogas
47.5
Biomass
47.5
Small hydro (≤40) Small projects (≤5MW) Total
60 100 3,200
Draft Legislation: ERA 2nd Amendment Bill and ISMO Bill
Eskom Holdings
Imp Exp
Eskom Gx
Minister of Energy
IPPs
Scenarios
ISMO Buyer
Allocation Final PPA
System Operator
Transmission
KSACS
D (Regions 1-6)
Mun Mun KIC
C
Planning
C
C
C
Integrated Resource Plan
Determinations
Procurement
Effect of the draft legislation • ISMO reports to MOE • ISMO performs just two of the six functions • MOE takes the key decisions on Planning and Allocation • MOE mandates a Procurer • Transmission ?? Will this be effective?
Thank you
[email protected] +27 11 871 3344
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Please partner with us
• Embrace energy saving as a national culture, joining the global journey towards a sustainable future • 49M campaign aims to create a culture of energy efficiency in SA • Remember the three Ps: save
power, save your pocket and save our planet . If you’re not using it, switch it off!
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High level process* for the renewable energy IPP programme and possibly other programmes
Grid application Accountability with Eskom or Municipality Procurement process Accountability with Department of Energy
NERSA to concur
* Aligned to the New Generation Regulations, May 2011
Supported by various Government departments, including NT
Evaluation, selection of preferred bidders and negotiations Accountability with DoE
License application Accountability with NERSA
Approval of PPAs Eskom Governance
NERSA and PFMA approvals
Section 34 Ministerial Determination and inclusion in IRP
RE IPP programme
Preparation of procurement documentation Accountability: DoE with Text support from NT & advisors
PPA awarded to successful bidders signed by Buyer (Eskom currently)
Bidder enters into Implementation Agreement with DoE Bidder enters into connection agreements with network owner 17
Agreements entered into with IPPs Once preferred bidders are announced, Eskom will support the DoE to financial close • Preferred bidders will enter into an Implementation Agreement (IA) with the DoE
• Eskom will enter into the following key agreements: Eskom and the Project Company: Power Purchase Agreement (PPA)
Standard PPA per technology
Transmission Agreement (TA)
Standard connection and use of system agreement
Distribution Agreement (DA)
Standard connection and use of system agreement for Eskom networks
Eskom and the Lenders: PPA Direct Agreement
Standard PPA Direct Agreement
TA/DA Direct Agreement
Standard TA and DA Direct Agreement
• Signing of all agreements is subject to PFMA and NERSA approvals 18
REIPPPP Timelines
REIPPPP milestones
2011 Q1
RFP published
Q2
Q3
2012 Q4
Q1
Q2
Q3
2013 Q4
Q1
Aug
Round 1 Bid submission
Nov
Round 1 Preferred bidders
Dec
Round 1 Financial close target
Jun
Round 1 Financial close (revised)
Sep
Round 1 Planned COD..from Round 2 Bid submission Round 2 Preferred bidders Round 2 Financial close target
Jun Mar May Dec
Round 2 Financial close (revised)
Round 3 Bid submission Round 3 Bid submission (revised)
Q2
Mar
Oct May
Q3
2014 Q4
Q1
Q2
Q3
Q4
Carbon intensity reduction Net energy supplied by all power sources shown in TWh p.a.1 PV
Hydro Nuclear
CSP
CCGT/OCGT
Wind
Coal
337 3% 4% 4% 255 5%
437
4%
1% 1%
3% 5% 5% 20% 1%
5% 91% 91%
86%
87%
65%
90%
Status quo 2020
2030
5%
8%
14%
10%
12%
34%
912
820
600
2010 Share renewable s Share CO2-free CO2 intensity in g/kWh
Policy-Adjusted IRP
-34% 20
1. "Other" generation sources not shown
1%