South African IPP Procurement Programme December 2016
Where are We? Urbanisation with increasing electricity demand, especially around urban areas; Looking for economic growth, which can be incentivised by affordable electricity; Prices for renewable energy dropped below the cost of fossil fuel; Looking at gas to balance the intermittence of renewables.
Population Growth vs Sustainable Energy Supply 3
Where to Go? Different solutions required for different countries depending on their needs; Renewable energy provides an opportunity to increase the generation capacity in a modular form and keep up with the growing demand; We need to keep up with the latest trends, rooftop PV will dominate the market as electricity prices continue to increase; PV with storage might look expensive for now but things might look different in few years from now; and Every decision will have an impact on something, but we need to take a decision with the least impact taking into account long term objectives of the country.
South Africa Planning Objectives Ensure Security of Supply Promote Energy Access Minimise Cost of Energy Promote Energy Efficiency IEP Promote Job Creation and Localisation Diversify Supply Sources Minimise Environmental Impacts Minimise Water Consumption 5 INTEGRATED ENERGY PLAN
Integrated Resource Plan New build options Coal (PF, FBC, imports, own build) Nuclear Import hydro Gas CCGT Peak OCGT Wind CSP Solar PV MW MW MW MW MW MW MW MW 2010 0 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 0 2012 0 0 0 0 0 0 0 300 2013 0 0 0 0 0 0 0 300 2014 500 1 0 0 0 0 400 0 300 2015 500 1 0 0 0 0 400 0 300 2016 0 0 0 0 0 400 100 300 2017 0 0 0 0 0 400 100 300 2018 0 0 0 0 0 400 4 100 4 300 4 2019 250 0 0 237 3 0 400 4 100 4 300 4 2020 250 0 0 237 3 0 400 100 300 2021 250 0 0 237 3 0 400 100 300 2022 250 0 1 143 2 0 805 400 100 300 2023 250 1 600 1 183 2 0 805 400 100 300 2024 250 1 600 283 2 0 0 800 100 300 2025 250 1 600 0 0 805 1 600 100 1 000 2026 1 000 1 600 0 0 0 400 0 500 2027 250 0 0 0 0 1 600 0 500 2028 1 000 1 600 0 474 690 0 0 500 2029 250 1 600 0 237 805 0 0 1 000 2030 1 000 0 0 948 0 0 0 1 000 Total 6 250 9 600 2 609 2 370 3 910 8 400 1 000 8 400 First Determination Second Determination 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
Aug 2011 Dec 2012 Apr 2015 Dec 2012 May 2016 May 2012 Dec 2012 Apr 2016 Dec 2012 Apr 2015 - Domestic - Cross Border Dec 2012 - Gas to Power Determinations Renewables - 17 334 MW Non-Renewables - 11 546 MW 3 200 13 22 5 M W 6 300 2 6 0 9 2 609 1 5 0 0 1 500 1 0 2 0 1 020 6 2 5 0 M 3 750 W 1 8 0 0 1 000 M 3 126 May 2016 - Strategic Partner 3 7 2 6 600 M W 3 725 2 500 800 1st 2nd 3rd REIPPPP 1st Hydro 1st Solar Parks 1st Peakers 1st 2nd Coal 1st 2nd Cogen 1st 2nd Gas SECRET 7
EVALUATION APPROACH Evaluation report 8
CONTRACTUAL ARRANGEMENT Independent Power Producer Direct Agreement also signed by the Lenders Direct Agreement also signed by the Lenders Eskom Government Government Support Framework Agreement 9
RENEWABLE IPP PROCUREMENT PROGRAMME Four Determinations - 14 725 MW 6 300 MW Apr 2015 1 500 MW May 2016 PROCURED 6 376 MW to date through the rolling bid-window programme 6 Bid rounds completed Large REIPPP Bid Windows 1, 2, 3, 3.5, 4 Smalls BW1) 102 Preferred bidders announced Large REIPPP Bid Windows 1, 2, 3 and 3.5 (1 project) 51 Operational IPPs - 2 738 MW reached Commercial Operation by 30 Aug 2016 SIGNED 4 006 MW to date 64 Projects signed from Large REIPPP Bid Windows 1, 2, 3 and 3.5 (1 project) 3 725 MW Aug 2011 3 200 MW Dec 2012 PROCURED, ANNOUNCED BUT NOT YET SIGNED 2 370 MW 38 Projects contracted from Large REIPPP Bid Windows 3 (1 project) and 3.5 (1 project) 4 (26 projects) and Smalls (10 projects) PROCURED, NOT YET ANNOUNCED 1 850 MW Projects (19 Expedited Bid Window projects, with option to double-up to 38 29 projects totalling 3,500 MW and 10 Smalls projects totalling 50 MW) 1st 2nd 3rd SP REIPPPP Solar Parks PLANNED Release Requests for Proposals for Large REIPPP Bid Window 5, Smalls Bid Window 3, and Solar Parks Programme
RENEWABLE ENERGY DECREASING PRICE PATH Price trend (R/kWh) - April 2016 terms - Onshore Wind -22% 1,51-27% 59% decrease 1,19 0,87-13% 0,75-18% 0,62 BW 1 (649 MW) BW 2 (559 MW) BW 3 (787 MW) BW 4 (1363 MW) Future Trend Average 1,51 1,19 0,87 0,75 0,62 Min 1,47 1,06 0,78 0,62 0,58 Max 1,52 1,29 0,94 0,84 0,64 Note: All tariffs are contracted to increase by CPI or less per annum over the PPA term. 4 BW 2 and 1 BW 3 projects are partially indexed resulting in a reduced tariff in real terms over the PPA term. Further tariff reductions are possible through refinancing i.e. sharing of the refinancing gain with consumers. 11
RENEWABLE ENERGY DECREASING PRICE PATH Price trend (R/kWh) - April 2016 terms - Solar Photovoltaic -40% 3,65 83% decrease -46% 2,18 1,17-22% 0,91-32% 0,62 BW 1 (627 MW) BW 2 (417 MW) BW 3 (435 MW) BW 4 (813 MW) Future Trend Average 3,65 2,18 1,17 0,91 0,62 Min 3,22 1,85 1,02 0,86 0,60 Max 3,77 2,54 1,30 0,97 0,64 Note: All tariffs are contracted to increase by CPI or less per annum over the PPA term. 6 BW 2 and 1 BW 3 projects are partially indexed resulting in a reduced tariff in real terms over the PPA term. Further tariff reductions are possible through refinancing i.e. sharing of the refinancing gain with consumers. 12
RENEWABLE ENERGY DECREASING PRICE PATH Price trend (R/kWh) - April 2016 terms - Concentrated Solar Power -6% 3,55 3,32-42% 65% decrease -7% -31% 1,93 1,80 1,25 Storage: 2-2.5 hours Storage: 9 hours Storage: 5-6 hours Storage: 5-6 hours Storage: 12 hours BW 1 (150 MW) BW 2 (50 MW) BW 3 (200 MW) BW 3.5 (200 MW) Future Trend Average 3,55 3,32 1,93 1,80 1,25 Min 3,48 3,32 1,92 1,70 1,15 Max 3,63 3,32 1,94 1,90 1,36 Note: All tariffs are contracted to increase by CPI or less per annum over the PPA term. Further tariff reductions are possible through refinancing i.e. sharing of the refinancing gain with consumers. It should also note that BW1 and BW2 cannot be compared with the BW3 and later bid windows due to a structural change. 13
Changing the Generation Spatial Footprint Current Generation Footprint Future Generation Future Generation Potential Footprint Footprint Irrespective of Generation scenario
Renewable Energy 6 Bid rounds (bid windows 1, 2, 3, 3.5, 4 and 1S2 1 ) completed R 194 billion Investment attracted for energy infrastructure in bid windows 1,2,3,3.5, 4 and smalls First Stage 2 334 Bids received and evaluated 102 (17.9 GW total capacity) Selected as preferred bidders 6 376 MW electricity capacity 2 144 MW actual capacity delivered from 43 IPPs Note 1. bid window 1S2 Small scale projects, first completed procurement window comprised of a two stage bidding process The REIPPPP is most advanced and already making a significant contribution in 5 years to power supply in the country SECRET 15
THE IPPPP IS PROVIDING BENEFITS TO ALL NINE PROVINCES R5.8 billion R824 million R157 million 7 405 job years Commitments for bid windows 1, 2, 3, 3.5, 4. and smalls R126.9 billion 223 275 megawatts megawatts R7.0 billion R349 million R601 million 2 832 job years R11 902 million R18 256 million 66 191 job years R14.3 billion R1 109 million R1 636 million 11 067 job years R33.7 billion R 4 489 million 3 581 megawatts 606 megawatts 1 509 megawatts R7 434 million Northern Cape 51 projects Western Cape 14 projects 18 132 job years 16 North West 5 projects Free State 8 projects Eastern Cape 17 projects Limpopo Gauteng 1 project SECRET 3 projects Mpumalanga project KwaZulu Natal 1 project R1.1 billion 2 R78 million 118 megawatts 17 megawatts 30 megawatts R3.6 billion R284 million R929 million 2 917 job years 18 megawatts R55 million R1.5 billion R196 million R133 million 2 709 job years R0.3 billion R40 million R26 million 336 job years 246 job years Total project costs Socio Economic Development Community trusts Job creation
Thank You November 2016