What is the REIPPPP? How does it work? What does it mean for the future of South Africa and the renewable energy sector as a whole? Energy Intelligence explores all these questions to provide a greater understanding in which is one of the greatest driving factors of renewable energy in South Africa.
Renewable Energy Independent Power Producer Procurement Programme
Otherwise known as the REIPPPP, is a programme developed to encourage private investment to help further develop the renewable energy sector within South Africa. South Africa, with large levels of sun shine and wind throughout the year, coupled with the availability of large open tracts of land, provides the country with a huge potential to take advantage of renewable energy. The national renewable energy target is for 18 800MW to be supplied by renewable energy by 2030. In just four years, the REIPPPP alone has already delivered 5 243 MW, throughout 79 different projects, which accounts for over a quarter of the target.
How does the REIPPPP work?
The REIPPPP is designed to contribute to meeting the national renewable energy target while encouraging foreign investment and developing socio-economic and environmentally sustainable growth. Ultimately the programme aims to stimulate the renewable industry in South Africa.
The main evaluation criterion for the bid selection process is pricing, with a 70% weighting, however there is a 30% weighting for other factors such as job creation, local content and black economic empowerment. This encourages joint ventures with local renewable energy companies, as well as a number of foreign firms to set up local factories which cater for export. As a result, some international PV production facilities such as JinkoSolar, SMA Solar Technology, ILB Helios, JA Solar, ABB, SunTech and SunPower have set up local production units.
Some factories are even being developed to cater entirely for export to countries such as the United States of America. Renewable solutions implemented also provides jobs for local communities in remote areas where such opportunities would normally be extremely limited. This stimulates employment growth as well as local skills development.
So far four rounds of bidding have been completed with the fourth round to start commissioning at the end of 2016 and the fifth round of bidding to be held in the next few months. Projects covered by the programme are onshore wind, solar photovoltaic, concentrated solar power and others such as biomass, landfill gas, small hydropower and biogas.
Funding is provided through a variety of foreign private equity, local private equity and large commercial and development banks. Some of the funding is composed of local private equity funds for black economic empowerment purposes to represent surrounding communities. Approved projects of the programme thus far represent R192.6 billion rand of which 28% is attributed to foreign investment.
The REIPPPP is proving to be extremely successful in assisting to meet South Africa’s energy demand, which has had a number of concerns over recent years due to demand exceeding supply capabilities. Apart from mitigating slowed economic development growth due to unpredictable provision of power, the programme also encourages foreign investment, as well as a number of socio-economic benefits due to job creation and skills development. The programme will continue provide benefits over the upcoming bidding periods as well as permanent benefits due to the development of local factories, as well as job creation and skills development.
(Source: International Investment in the South African renewable energy market – New Energy Update)