Energy Minister Gwede Mantashe.
- Mineral Resources and Energy Minister Gwede Mantashe says bid window 5 for energy producers could be reopened to all bidders.
- Projects have been unable to reach financial close due to changes in input costs
- While renewables will help, SA’s “base-load problem” must be solved, he said.
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Mineral Resources and Energy Minister Gwede Mantashe says the government is looking at reopening bid window 5 of the renewable energy independent power producer programme (REIPPP) in light that most projects have failed to reach financial close.
Bid window 5 is a critical part of the plan to end SA’s power shortage. The bidding closed in 2021, and it aimed to add 2 583MW to the grid within the next two years. But, global events – such as the war in Ukraine and increased demand for renewable energy and storage components – have radically altered the input costs on which the bidders based their prices.
READ | SA’s new renewable energy programme in trouble, many projects no longer financially viable
Mantashe, who was briefing journalists on progress made in government’s Economic Recovery and Reconstruction Programme (ERRP) in Pretoria, said that one bidder in round 5 had reached financial close on Wednesday. Financial close refers to the process of securing bank finance for a project, which is based on its viability.
In response to questions, Mantashe said:
“Those who do not reach financial close, we can look at. But what is not possible is to wake up and say we are reopening it for those who were successful because there were bidders whose applications were not accepted. If you adjust conditions, you will have to reopen the whole process.”
Mantashe, who is not known for his love for the renewable energy industry, said: “We will have to consider the material conditions bidders are facing and not deal with them as the enemy.”
As part of the energy plan announced by President Cyril Ramaphosa in July, bid window 6 which was to procure capacity of 2 600MW will be doubled to 5 200MW. Mantashe reiterated his concern about SA’s “base-load problem” as renewable energy will not be sufficient to fill the gap, he said.
Human Settlements Minister Mmamaloko Kubayi, who is the head of the economic cluster in Cabinet, was also present at the briefing. She acknowledged that when it came to infrastructure development, a central pillar of the ERRP, the “construction mafia” – gangs that demand a stake in projects – posed a risk and made development more expensive.
While communities in the vicinity of large projects legitimately want to participate, there are also criminals who take advantage of the situation.
“When I go to communities and interact, some say big companies bring their own small and medium-sized contractors and do not assist them (to participate). But there is also the criminal element that goes there to demand protection fees or certain amounts. We do have to categorise them. To engage communities we will use social facilitation, that is what the Cabinet lekgotla agreed. Where there is no trust between government and the public lets utilise outside bodies even private companies to do that. Then we can isolate the criminal element so the law enforcement agencies can deal with that,” she said.
Kubayi said the construction mafia was making it more expensive to build in SA.