GIZ Municipal Solar PV Training Solar Procurement For Local Government

Transcription

1 GIZ Municipal Solar PV Training Solar Procurement For Local Government 1

2 Agenda Solar Procurement For Local Section Government Heading 1. Existing Municipal project overview 2. Business models for RE Own Generation IPP s Wheeling Other 3. CSIR Procurement approach 2

3 Existing Section Municipal Heading RE Projects 3

4 Existing Small and Medium Power Section Heading Generation Several local government entities have established alternative energy power generating plants, for example: Solar pv on municipal buildings: Cape Town ±250 kwp ethekwini ±300 kwp Ekurhuleni: ±500 kwp Umhlathuze, others Solar pv in WWTW: Camdeboo: 10.8 kwp Hessaqua: 33 kwp Biogas to energy in WWTW: Johannesburg ±2MW biogas to energy Several other projects under appraisal Landfill gas to electricity: Ekurhuleni: 1 MW ethekwini: 7.5 MW Johannesburg: up to 18.6 MW Micro hydro (hydro turbine in Greening municipal infrastructure: water reticulation): Taxi ranks: Cape Town, ethekwini Bloemfontein, national pilot Green buildings Several other projects under appraisal 4

5 Business Section models Heading for RE - Business Models structure on Owning Generation and Procuring RE - CSIR 5

6 Business Section models Heading for RE New opportunities for municipalities relating to RE : 1. Own generation of RE (Solar PV, Mini Hydro, Wind, Bio) a) Embedded power systems i.e. Roof-top PV systems on municipal buildings Funding: Financing through the municipality s balance sheet, debt or grants b) Building stand-alone power plants i.e. large PV or wind Funding: Financing through debt or grants Entering into a public-private partnership (PPP) Sign a Build-Operate-(Own)-Transfer agreement Set up a special purpose vehicle with other municipalities / partners 2. Procuring ( Off-taking ) of RE and selling on to customers a) Procuring electricity from embedded generators (e.g. procuring electricity from rooftop PV systems installed by residential customers) Funding: Purchase based on feed-in tariff / net metering / net billing 6

7 Business Section models Heading for RE b) Procuring electricity from an independent power producer (e.g. procuring electricity from an independent solar park / wind farm in the vicinity of the municipality) Funding: Purchase (R/kWh) based on a power purchase agreement (PPA) 3. Wheeling of power from RE generators to buyer in municipality Funding: Billing through the electricity tariff (with potential premium) 4. Other Options Leasing scheme in stead of a PPA to bypass the PPA process Joint investment with a split in savings between the developer and customer Ignoring the process all together Reference: The Role of South African Municipalities in Renewable Energy - A Review of Business Models, GIZ (2017) 7

8 Business Section models Heading for RE Conventional Eskom Gx Eskom Dx & Tx Municipal Grid Wheel REIPPP power Across Eskom Dx/Tx REIPPP Residential SSEG Industrial Munic Own Use WWTP WTP Commercial SSEG Munic own Gx SSEG Large Industry Wheel RE power Across Munic Dx Wheel REIPPP power Across Eskom Dx/Tx 8

9 1. Section Municipal Heading Own Gx Municipalities invest in own RE projects such as: Landfill /biogas to electricity PV in WWTP Hydro in water reticulation systems PV systems on municipal buildings 9

10 Business Section models Heading for RE 1.b) Stand Alone Power Systems - Examples ethekwini (Africa s first landfill gas-to-electricity project in 2007) Extraction of methane from three council-owned landfill sites for electricity generation Electricity generation capacity of 0.5 MW, 1 MW and 6.5 MW was installed at La Mercy, Mariannhill and Bisasar respectively Overall, the project had an estimated payback period of four years, thanks to both the sale of electricity generated and the sale of Certified Emissions Reductions to the World Bank as part of the Clean Development Mechanism Reference: The Role of South African Municipalities in Renewable Energy - A Review of Business Models, GIZ (2017) 11

11 Business Section models Heading for RE 1.b) Stand Alone Power Systems - Examples Ekurhuleni Metropolitan Municipality (2007) Simmer and Jack landfill site gas-to-electricity grid-tied power plant with a capacity of 1MW The project is owned, developed and financed entirely by the Ekurhuleni Metropolitan Municipality from the municipality s capital expenditure budget The electricity generated by the landfill gas-to-electricity plant entirely feeds back into the municipal grid In September 2016, a tender was issued by the city of Ekurhuleni for project proposals under the Ekurhuleni Energy Generation Program. Projects will be offered at power purchase agreement of at least 20 years. Note: A major challenge for municipalities in South Africa in the procurement of green energy power plants has been the need to obtain a generation license in the case that the electricity is not for own use. Reference: The Role of South African Municipalities in Renewable Energy - A Review of Business Models, GIZ (2017) 12

12 Business Section models Heading for RE 2.a) Procuring from Embedded Power Systems Small-scale embedded generation (SSEG) refers to power generation installations less than or equal to 1MW which are located on residential, commercial or industrial sites where electricity is also consumed. Mainly from Solar photovoltaic (PV) panels but also other technologies (wind, biogas, etc.) A SSEG customer generates electricity on the customer s side of the municipal electricity meter, where the generation equipment is connected to, and synchronised with, the municipal electricity grid (i.e. embedded ). 13

13 Benefits Section and risks Heading of SSEG Benefits for Municipality Provide greener services, CO 2 emission reduction Customer retention Investment costs are borne by the customers Risks of doing nothing Increased illegal connections, not known to the municipality Risk of grid-defection (high income and businesses going off-grid) Caution during Implementation Need to set-up balanced tariffs Need to protect customers who cannot afford such systems 14

14 Business Section models Heading for RE 2.b) Procuring from IPPs with PPA At the moment municipalities buy almost exclusively from Eskom Eskom generates 90% of the electricity produced in SA, about 5% is generated by Independent Power Producers (IPP) and a very small portion by municipalities Electricity produced by IPPs is only sold to Eskom Municipalities would like to diversify their sources of electricity for a range of reasons However this is very complex / not necessarily permitted within the current legal and regulatory environment (City of Cape Town took DoE to court) Reference: The Role of South African Municipalities in Renewable Energy - A Review of Business Models, GIZ (2017) 16

15 Benefits Section and risks Heading of a PPA Benefits Risks of Non- Action Caution during Implementation Provide greener services, CO 2 emission reduction Price and supply diversification Co-benefits (maximise the use of municipal assets, waste to energy) Job creation economic development Missed opportunities Limited security of supply Municipalities not able to control their electricity tariffs This should make economically sense nationally, to not penalise customers in other municipalities This should make financial sense for the municipalities (protecting the public purse) 17

16 REIPPPP Price reduction Business Section models Heading for RE 2.b) Procuring from IPPs with PPA Reference: The Role of South African Municipalities in Renewable Energy - A Review of Business Models, GIZ (2017) 18

17 Business Section models Heading for RE 2.b) Procuring from IPPs with PPA Eskom s average price increase from 2008 to 2016 Reference: The Role of South African Municipalities in Renewable Energy - A Review of Business Models, GIZ (2017) 19

18 Business Section models Heading for RE 2.b) Procuring from IPPs - Examples The Bethlehem Hydro-electric power project 3MW Sol Plaatje (2009) and 4MW Merino (2011) The plants sell their power to the municipality of Dihlabeng Municipality (through a 15-year PPA signed in 2009) as well as Eskom. Bethlehem Hydro generates income by selling electrical power and capacity and by selling Certified Emission Reductions. Reference: The Role of South African Municipalities in Renewable Energy - A Review of Business Models, GIZ (2017) 20

19 3. Business Sectionmodels Heading for RE Trading in Power - Wheeling A private generator of electricity sells electricity to a private buyer and uses the Eskom and/or municipal grid to transport electricity Reference: The Role of South African Municipalities in Renewable Energy - A Review of Business Models, GIZ (2017) 21

20 3. Business Sectionmodels Heading for RE Trading in Power Wheeling In the trading space, municipalities can o o o manage their power requirements better provide clean energy to their consumer ensure sustainable growth in their municipalities and protect their revenues Embedded power generation is becoming more and more affordable to power users. The result is a progressive loss of income for municipalities The trading business model provides an additional stream of revenue for municipalities At minimum, it covers the costs associated with the use of the system and the distribution network Needs to be a win-win solution for all parties Reference: The Role of South African Municipalities in Renewable Energy - A Review of Business Models, GIZ (2017) 22

21 3. Business Sectionmodels Heading for RE Wheeling Example In 2012 the Nelson Mandela Bay Metropolitan Municipality (NMBMM) council passed a resolution to source 10% of the total electricity consumption in the municipality from renewable energy source. The municipality would wheel such power from private producers to willing buyers. A 20-year wheeling agreement was signed between the Municipality and Amatola Green Power (AGP) now PowerX. About MWh are wheeled each year, from private renewable energy developers to willing buyers, through the municipal network. Reference: The Role of South African Municipalities in Renewable Energy - A Review of Business Models, GIZ (2017) 23

22 Business Section models Heading for RE Conventional Eskom Gx Eskom Dx & Tx Municipal Grid Wheel REIPPP power Across Eskom Dx/Tx REIPPP Residential SSEG Industrial Munic Own Use WWTP WTP Commercial SSEG Munic own Gx SSEG Large Industry Wheel RE power Across Munic Dx Wheel REIPPP power Across Eskom Dx/Tx 25

23 Procurement Section Heading of PV - The Solar Procurement Process - CSIR 26

24 Procuring own asset vs Power Section Heading Purchase Agreement CSIR 27

25 Municipal procurement process for Section different Heading bid sizes Must allow at least 30 days for bid GreenCape Sector Development Agency 28

26 National Treasury Section Designated Heading Sectors Instruction for local production and content for Solar pv Solar pv Components Minimum Local Content Threshold Conditionality Laminated PV modules 15% The local process will include tabbing & stringing of cells, encapsulation and lamination, final assembly and testing in compliance with IEC standards Module Frame 65% Aluminium Components: All Aluminium PV Module Frames, PV mounting structures, clamps, brackets, foundation components and fasteners are to be manufactured from locally produced extruded, rolled cast or forged products DC Combiner Boxes 65% DC Combiner Boxes: Enclosures must be made from SMC and moulded in South Africa Mounting Structures 90% All aluminium PV Module Frames, mounting structures/racks, clamps and fasteners are to be manufactured from locally produced extruded, rolled, cast or forged products Inverter 40% Must be assembled locally Must allow at least 30 days for bid 29

27 CSIR PV Solar Section Procurement Heading Approach The CSIR developed an comprehensive approach for procuring Solar PV assets where Levelized Cost Of Electricity (LCOE) is used as the primary parameter for ranking compliant bids. The LCOE captures the value that the PV asset brings to the procurer while also finding an optimized combination of the following parameters: EPC cost O&M Costs Performance Ratio Operational lifetime of asset 30

28 The Procurement Section Heading Process Preparatory work Develop a Request for Proposal (RFP) Administer the RFP Evaluate the bids based on predefined criteria Select the bidder and finalize the contract Five generic steps CSIR Cost efficient procurement of solar PV assents 31

29 Proposed Section Procurement HeadingProcess Overview 1. Preparatory Work 2. Develop RFP 3. Administer the RFP 4. Evaluate the bids 5. Select the bidder Energy demand and supply assessment Conduct background/ base level permitting Release tender documents Site assessment by bidder Provide fixed inputs for procurement process Service providers to submit parameters in standardized form Determine LCOE using inputs from prospective service providers Determine lowest LCOE (and verify inputs) Provide standard EPC and O&M Contracts Negotiate and finalize EPC and O&M Contracts CSIR Cost efficient procurement of solar PV assents 32

30 1. Energy Section Demand Heading Assessment Quantify an annual energy demand in terms of key metrics: kwh demand for each hour Peak demand per day Total demand per day Minimum or baseload demand CSIR Cost efficient procurement of solar PV assents 33

31 2. Conduct Section base Heading level assessment and permitting Rooftop PV Ground mounted PV Plans and technical drawings Architectural plans Electric single line diagram Investigate grid connection and main DB Structural assessment of rooftop Assessment by Structural Engineer Determine Maximum Loading Environmental permitting Environmental regulations Need for Environmental Impact Assessment Aerial plan drawings Spatial configurations surveyor drawings Buildable area and project sizing Geotechnical study Identify adverse land conditions Land-use permitting (if applicable) Investigate rezoning requirement Receive view on land-change permit CSIR Cost efficient procurement of solar PV assents 34

32 3. Release Section of Tender Heading document Core Sections Background and Context: Purpose and structure of the RFP Timelines for procurement process Functional specification for solar PV asset Governing procurement policies applicable to the RFP Definitions and Interpretation: The Rights of the Procurer Public Q&A session (if applicable) General bid rules Non-eligible persons Minimum requirement for compliance (on each section of the bid response) Contacts for clarification Technical Evaluation and Selection Criteria Procurement in the public Sector, is typically run via the following 2-step mechanism. Screening of Prospective Bidders via criteria for assessing competency 1. Organogram of Project Team (both EPC team and O&M team) 2. Professional profiles for all members of project team 3. Track record of installing and commissioning PV modules 4. Track record of installing and commissioning inverters 5. Track record of installing and commissioning mounting structure 6. Track record of managing subcontractors CSIR Cost efficient procurement of solar PV assents 35

33 4. Site Section Assessment Heading by bidder The site assessment is paid for by the prospective bidder and is encouraged by the procurer as a tool for their own benefit to assess ease of implementing the project and quality of the host site. Key elements of the site assessment report applicable to both rooftop and ground mounted PV units are as follows: Shading assessment Existing Electrical Service and Grid Connection Age and condition of roof (only applicable to rooftop PV) Obstacles (only applicable to rooftop PV) Space for Conduit Run CSIR Cost efficient procurement of solar PV assents 36

34 5. Fixed Section Inputs Heading from Procurer Minimum Installed Capacity Inflation Weighted Average Cost of Capital (WACC) Operational Lifetime Replacements as percentage of CAPEX Average Historical GHI Duration of O&M Contract OPEX after end of O&M Contract Penalty factor for Performance Ratio underperformance Efficiency loss under after O&M period CSIR Cost efficient procurement of solar PV assents 37

35 6. Provided Section Inputs Heading from Bidder The bidder will be expected to provide input parameters for the calculation of their LCOE, thereby setting the basis for their bid. The parameters to be provided by the bidder are as follows: Installed Capacity Guaranteed Performance Ratio (GPR) The performance ratio informs on how energy efficient and reliable the PV plant is. Tendered price for EPC Tendered price for O&M Contract (Year 1) Environmental Factors Temperature of the PV. module Solar irradiation and power dissipation Reference solar measuring station is in the shade or soiled PV module shading or covered in dust Other Factors Solar yield recording period Conduction losses Efficiency (degradation) factor of the PV modules Efficiency factor of the inverter Differences in solar cell technologies of the measuring gage (and of the PV modules) Orientation of the solar measurement station CSIR Cost efficient procurement of solar PV assents 38

36 7. Calculate Section LCOE Heading for each bidder By evaluating and selecting a winning bid according to the LCOE, the procurer is purchasing the PV assets that deliver energy at the lowest possible cost. The key point is that the PV assets of lowest capital cost is not necessarily the one that can deliver energy at the lowest cost. The equation for calculating LCOE incorporates the following input parameters: Energy production (or solar irradiation) Module efficiency (which influences the energy production) Capital expenditure Operations expenditure Maintenance expenditure Weighted Average Cost of Capital (WACC) In the LCOE calculation, the Net Present Value of all expenditures from the PV asset are determined over the operational life of the PV asset: Capital expense Operations and Maintenance Fuel expense CSIR Cost efficient procurement of solar PV assents 39

37 8. Determine Section Heading lowest LCOE Much care must be taken to ensure that the LCOE figure is in fact credible. This requires a background check of the 4 input parameters provided by the bidder. 1) Total installed capacity in kwp 2) Total EPC price in R 3) O&M contract price in R/ year 4) Guaranteed Performance Ratio in % Range of assessments to check for potential errors: Parameter for checking Tendered EPC price Tendered O&M price Guaranteed Performance Ratio (GPR) Nature of check Assess whether EPC price is in line with the given size of the PV installation Assess whether O&M price has been too aggressively reduced to produce a favourable LCOE Assess GPR against all competitors to see if all lie within reasonable range of each other. CSIR Cost efficient procurement of solar PV assents 40

38 9. Provide Standard EPC and O&M Section Heading contracts For major project internationally, it is most common to use either the NEC3 Contract Template or the FIDIC Silver Book. These two contract types offer fundamentally different approaches in terms of how project should be managed and conducted: FIDIC Silver FIDIC Silver is specifically designed as a turnkey contract, where an employer hands full responsibility over to the contractor for all design, engineering and construction. This approach expects the employer to "wait for the keys" and to have little day-to-day management of the project as work progresses. NEC3 NEC3 envisages the project as a collaborative process, with an emphasis on contract administration. The parties are obliged to "act in a spirit of mutual trust and co-operation", an obligation which is central to the philosophy and concept of NEC3. Criteria FIDIC Silver NEC3 Pricing Structure Programme Testing (Generally) Lump sum price basis Reasonably extensive provisions Reasonably extensive testing provisions included Flexible (6 different prices options with no amendments required) Extensive provisions including ability to withhold payment if programme is not submitted Limited testing provisions, with detail to be included in works information Testing (Performance Testing) Interaction between contractor and employer Provisions included to deal with this Turnkey Provisions do not deal with performance testing to be carried out by employer; if any kind of testing is to be carried out, detail must be included in works information Collaborative CSIR Cost efficient procurement of solar PV assents 41

39 10. Negotiate and finalize EPC and Section Heading O&M contracts The following contractual matters are not exhaustive but give a sound reflection of the issues that typically require discussion between the winning bidder and the procurer. EPC Payment terms Currency Risk Insurance Battery limits Retention bond The EPC contractor requires a high CAPEX to ensure cash flow for purchases. In many instances purchases are made in foreign currency. Clearly outline where this risk will lie. Stipulate an appropriate insurance package for the assets. The terms of such a bond should be discussed before finalizing the EPC contract. Clear indication must be given in terms of where EPC contract boundaries meet boundaries of the infrastructure belonging to the procurer. Outline responsibilities Outline regularity of maintenance check and performance monitoring Scope and division of responsibilities Agreement in terms of payment interval under the O&M Contract Payment terms Prescribed warranty period for critical components Extended warranty by O&M contractor Warranties CSIR Cost efficient procurement of solar PV assents 42

40 Demonstration Section Heading of CSIR model Fixed tilt rooftop Photo Voltaic (PV) solar facility to CSIR Energy Centre RFP No. 3029/08/04/2016 RFP: The Council for Industrial and Scientific Research (CSIR) (the Employer) invites tenders for the Engineering, Procurement and Construction (EPC) of a fixed tilt photovoltaic solar power facility of at least 300 kwp as well as Operations and Maintenance (O&M). The Project shall be executed under the NEC3 Engineering and Construction Contract (ECC) using Option A (Priced Contract with Activity Schedule) with selected Secondary Options. The PV facility shall generate in excess of kwh/year of electricity to supply the CSIR campus grid. 43

41 Thank You 44