Home  »  Articles   »   DMRE Shines Light on Risk Mitigation IPP Procurement Programme

DMRE Shines Light on Risk Mitigation IPP Procurement Programme

April 21, 2021

Department of Mineral Resources and Energy

The outcomes of the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) will, once the contracts are concluded, provide Eskom with “powers system services procured in a fair, transparent and competitive way”.

The mineral resources and energy department highlighted this in a report providing context on the RMIPPPP.

The department added that the “projects will be available to generate energy output when called upon (to avoid load shedding) and provide ancillary services to reduce the significant cost of using diesel that is currently the only option available to the Buyer”.

The programme is also designed to support socio-economic development, job creation, local manufacturing and South African participation.

Preferred bidders for the RMIPPPP were announced in March 2021.

The RMIPPPP was released to the market in August 2020.

According to the mineral resources and energy minister, Gwede Mantashe, the “aim was to alleviate the electricity supply constraints and to reduce the extensive utilisation of diesel-based peaking electrical generators in the medium-to-long-term”.

At the close of the Bid Submission on 22 December 2020, 28 bid responses had been received with a potential contracted capacity of approximately five thousand one hundred and seventeen megawatts (5 117MW).

Speaking at the announcement, the minister pointed out that the “quantity and quality of the bid responses and potential megawatt of contracted capacity allowed for a competitive price evaluation”.

8 Preferred Bids totalling one thousand eight hundred and forty-five megawatts (1 845MW) and a further 3 Eligible Bids totalling one hundred and fifty megawatts (150MW) were selected.

According to the minister, the “three Eligible Bids are subject to value for money proposition in line with the provisions in the Request for Proposal”.

The Preferred Bidders are required to reach Financial Close by no later than the end of July 2021 with connection to the grid targeted for August 2022.

In the report, the department pointed out that the minimum dispatch commitment under the RMIPPP is for a 50% load factor in a year, over the lifetime of the Power Purchase Agreement (20 years).

The department also emphasizes that Bidders were scored on the commitment made on Local Content in the Bespoke Scorecard, which was developed in consultation with the trade, industry and competition department and national treasury, and for which exemptions were required under the Preferential Procurement Policy Framework Act and Broad-Based Black Economic Empowerment legislation.

“The Compliant Bids that achieved the highest scores in terms of the 90/10 principle based on the lowest bid evaluation tariff and highest economic development commitments, and within a cumulative contracted capacity of 2,000MW, were then selected as a Preferred Bidder for the RMIPPPP.”

In order for the projects to reach financial close, preferred bidders need to obtain the necessary final environmental authorisations and finalise relevant rights and permits from other entities, including the National Port Authorities, as well as generation licences from the National Energy Regulator.