Page 32 - Energize May 2021

VIEWS AND OPINION

A closer look at REIPPPP Bid Window 5

Information from SAWEA “The wind industry has further submitted its vision
to practically increase local content in the next few
he Department of Mineral Resources and Energy (DMRE) recently launched the years and remains fully supportive of growing the local
Request for Proposals (RFP) for the Fifth Bid Window (BW5) under the Renewable manufacturing sector,” explained Ntuli.
TEnergy Independent Power Producer Procurement Programme (REIPPPP), which The Association is further heartened by the
calls for proposals from Independent Power Producers (IPPs) to develop new generation establishment of the South African Renewable Energy
capacity of 2600 MW, being 1600 MW from onshore wind energy and 1000 MW from Masterplan (SAREM), which is set to contribute
solar photovoltaic (solar PV) power plants, in line with the government’s intention to immensely to fast tracking the establishment of
increase generation capacity and ensure the security of energy supply to society. local manufacturing capacity. It is intended that
Ahead of the expected DMRE Bidders’ Conference, to be hosted on an e-platform this framework will provide a blueprint from which
during May 2021, which will provide more information on the qualifying criteria and government departments such as the DTIC and the
bid submission expectations, the South African Wind Energy Association (SAWEA) has DMRE can provide incentives for investment into local
shared its impression of BW5. manufacturing.
“There are two key aspects of BW5 that are worth unpacking, namely the local This is once again important for future Bid Windows
content requirements and the bid evaluation weighting, which has now shifted in and the renewable energy sector’s ability to deliver jobs
line with governments standard procurement norms,” said Ntombifuthi Ntuli, CEO and investment, in the post-COVID-19 recovery period.
of SAWEA. “SAREM represents an opportunity to identify
jobs and investment in our sector linked to the
Local content country’s resource plan, as well as to clearly outline
The BW5 local content threshold has been retained at 40%, in line with previous how job creation and investment might be enhanced
rounds. The difference in this round is that there is no local content target, only the if impediments are removed and replaced rather with
threshold is prescribed. Furthermore, for the first time, the REIPPPP introduced supportive policy,” added Ntuli.
designated local content, which, over and above the threshold, requires bidders to
procure certain specified components locally. Should these components be unavailable, Bid evaluation weighting
bidders can apply for exemption, which needs to be lodged with the Department of A noted change in BW5 is the evaluation weighting,
Trade, Industry and Competition (DTIC). which has changed from a 70/30 weighting to a 90/10
The wind industry held extensive consultations with the IPP Office and DTIC prior weighting, indicating a distinct emphasis on tariff. Black
to the issuing of the BW5 RFP, specifically on local content requirements and what the Women Ownership in the project company is a new
industry can achieve in the short and medium terms. To achieve a successful localization requirement and has a 5% threshold, otherwise all other
programme with incremental local content thresholds, a consistent procurement Economic Development requirements as per BW4 have
pipeline should be established. This would be a positive development as it facilitates been retained.
augmented job creation and skills development as the economy recovers from the In previous rounds, the REIPPPP used a 70:30 (price:
Covid-19 pandemic and looks to accelerated economic growth. economic development), weighting, attaching higher
“Consecutive bidding rounds will enable local manufacturing facilities to be re- priority to Economic Development objectives than the
established and the potential expansion of already operating manufacturers, which is typical government structure of 90:10 at the time.
very crucial in creating long term sustainable jobs” added Ntuli. In closing, SAWEA has noted that the DMRE’s
SAWEA has, however, cautioned that the stop-start nature of procurement, and the statement reveals that given the energy challenges the
latent bid windows, severely damaged the meaningful momentum, pre-2015, which country is facing, the qualification criteria have been
established new manufacturing capacity within the wind and solar value chains in South developed to promote the participation of projects that
Africa. Significant manufacturing capacity was lost in the delay between BW4 and BW5, are fully developed and will be able to be constructed
with many companies being forced to shut down as a result of the delays, unable to and connected to the national grid as soon as 12 months
carry the cost of overheads indefinitely. from financial close, but not later than 24 months post
Looking at the recovery of the manufacturing sector and the possibility of re- Financial Close.
investment, Ntuli commented, “Whilst we wholeheartedly celebrate the
new impetus, one must be mindful that regaining the investor confidence
will not be an overnight process. To enable the required quantity and
very importantly, quality, of components will require at least two to three
years of investment and development. It is therefore crucial that further
interruptions or delays are not encountered. A controlled roll out of
procurement will allow all aspects of the value chain, and not only the
manufacturing sector, to expand.”
SAWEA confirms that the industry remains confident in its ability
to meet local content requirements and reiterates that it has no doubts
that the sector will respond positively. The Association has facilitated
conversations between the DMRE, DTIC and the other key sector
stakeholders, to align strategically and map the way forward to deliver on
increased local content requirements.

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