South Africa issues massive 3725 MW Request for Proposals (RFP) from Independent Power Producers (IPPs) for wind, solar PV, biomass, biogas, landfill gas and small hydro

Selection for the projects will be by way of a competitive request for proposals (RFP) process with a pre-qualification phase.

Important details regarding the RFP follow below:

Generation Allocation

3725 MW of renewable generation will be allocated in the first round as follows:

- Onshore wind – 1850 MW;
- Concentrating Solar Power (CSP) – 200 MW;
- Solar photovoltaic (PV) – 1450 MW;
- Biomass – 12.5 MW;
- Biogas – 12.5 MW;
- Landfill gas – 25 MW;
- Small hydro – 75 MW;
- Small projects (1 MW-5 MW), using wind, solar PV, biomass or biogas technologies – 100 MW.

Price Caps

The price caps are as follows:

- Wind – $157.33 CAD/MWh;
- Solar PV – $390.29/MWh;
- CSP – $390.29/MWh;
- biomass – $146.63/MWh;
- biogas – $109.63/MWh;
- landfill gas – $82.21/MWh;
- small hydro – $141.13/MWh.

A respondent will be non-compliant and automatically rejected during the qualification phase if the price cap is exceeded.To put the wind cap into perspective for those in Saskatchewan, SaskPower is paying $96.09 CAD/MWh for wind power under the Green Options Partners Program (GOPP). Under the South African RFP, Eskom will pay nearly 40% more than SaskPower for wind generation and almost 75% more than SaskPower for solar PV.

Evaluation and RFP

Norton Rose, counsel for the South African Department of Energy (DoE) and Eskom, who structured and will likely run the procurement process have provided some details about the evaluation criteria and the RFP:

- If a respondent is successful in the pre-qualification phase, their submission will be evaluated based primarily on price and economic development.
- In regard to price, a formula will be used to calculate an "equivalent annual tariff" for the MWh price proposed.
- As to economic development, a scorecard has been formulated to which bidders are obliged to respond, thereby enabling the department to determine bidders’ commitment to economic development requirements.
- Each technology will have their own economic development matrix, but common to all are requirements for job creation, local content (with special emphasis on local manufacturing), rural community development, skills development and education, enterprise development, socio-economic development, and participation by the historically disadvantaged.
- The points allocation between price and economic development is 70/30.
- Bidders whose responses rank the highest will be appointed "Preferred Bidders" with as many being appointed as may be necessary in order to provide the maximum allocation of MW for each technology.
- In the event of selection, a Preferred Bidder will be held to compliance with the price and economic development proposals in its bid, with regular reporting to demonstrate compliance during the life of the project.
- Non-compliance will result in progressive demerits, and may eventually result in cancellation of the PPA and other agreements.
- The draft PPA, Implementation Agreement, Direct Agreement and Connection Agreements are non-negotiable, although the DoE reserves the right to revise the templates of any of these draft agreements during the course of the procurement program.
- Bidders will be required to lodge, along with their bids, a bid guarantee issued by a first class South African bank for an amount equal to R100,000.00 per MW proposed in the bid.
- There are 5 bidding "windows"- November 4, 2011; March 5, 2012; August 20, 2012; March 4, 2013; August 13, 2013.
- If the maximum allocatable MW for any particular technology has been allocated during any particular window, then the subsequent windows will not be opened for that technology.

Given the significant amount of generation allocated and the relatively high prices, it is anticipated that there will considerable interest from developers around the world. South African law firm Deneys Reitz merged with Norton Rose along with Canadian law firm Ogilvy Renault on June 1, 2011. A number of Canadian renewable energy developers formerly represented by Ogilvy Renault (now Norton Rose) are expected to participate in the South African procurement process but will likely have to seek alternate counsel in Canada given Norton Rose is already acting for the utility. I have renewable energy experience working in Namibia, bordering on South Africa and serviced by Eskom, and would be happy to discuss a possible submission further with any interested wind, solar PV/CSP, biomass, biogas, landfill gas or small hydro developers.