Summary of key points of the Cogeneration IPP RFB

Publication | June 5, 2015

Introduction

What follows below is a summary of the key points of the Cogeneration Independent Power Producer Request for Bids issued on 4 June 2015 by the IPP Projects Office of the South African Department of Energy. This is presented for information purposes only, as permitted under clause 18.1.2.2 of the RFB. This does not constitute, nor is to be taken, as advice on the Cogeneration IPP RFB or the Cogeneration IPP Procurement Programme. Interested Parties should register in the programme on the IPP Cogeneration website (https://www.ipp-cogen.co.za/Home) and obtain a copy of the RFB.

Structure

  • 800MW is available for allocation in the first bidding round of the RFB.
  • More megawatts may be added at a later stage, should the Ministerial determination for such additional capacity be approved.
  • 3 permissible technologies, with no mixing of technologies:
    • Combined Heat and Power (RFB maximum allocation: 200MW)
    • Waste-to-Energy (RFB maximum allocation: 250MW)
    • Industrial Biomass (RFB maximum allocation: 350MW)
  • 3 categories of “new generating capacity”
    • newly constructed facility
    • existing facility not yet commissioned
    • existing facility/part of facility, where energy output is increased through upgrade/extension/refurbishment/increased efficiency
  • The RFB expressly states that the Cogen IPP PP in its current form prefers existing brownfield upgrades/expansions and all refurbishments which can supply commercial energy in a relatively short space of time.

Facility Contracted Capacity and technical requirements

  • Minimum: 1 MW
  • Maximum: 50 MW
  • Baseline Annual Energy Output: historical annual facility power generation (specified method of calculation).
  • Baseline Monthly Energy Output: historical monthly facility power generation during a year of operation (flexibility for Seller to distribute the Baseline Annual Energy Output across a calendar year).
  • Contracted Capacity = (Average Maximum Annual Energy Output – Baseline Annual Energy Output) / (8760 hours*0.9).
  • Further technical requirements are summarised in the table on the IPP Cogen website (https://www.ipp-cogen.co.za/Home/About)

Host and Connection

  • There must be a clear linkage between the Facility and the Host – the Facility either takes primary fuel from the Host, or provides energy to the Host (e.g. steam, heat, etc., but not electrical energy generated by the Facility).
  • The Facility must connect to the Host network.
  • The Host must connect to the grid.

PPA terms

  • Term – 15 years.
  • Structured around brownfield upgrade/extension/refurbishment.
  • The Seller must project, in good faith, a Maximum Annual Energy Output for each contract year of the PPA, and warrant this (this remains fixed for the contract year).
  • Commercial Energy: the monthly energy output of the Facility produced in excess of the Baseline Monthly Energy Output.
  • Commercial Energy Limit (for a contract year) = Maximum Annual Energy Output – Baseline Annual Energy Output.
  • The Seller must sell to the Buyer, which must buy from the Seller, all of the Commercial Energy produced by the Facility, up to the Commercial Energy Limit.
  • The price of the Commercial Energy (Energy Rate) will be as bid by the Seller in its bid response. The price caps in the Cogen IPP RFB are as follows:
    • Waste-to-Energy: R0.90/kWh
    • Combined Heat & Power: R1.00/kWh
    • Industrial Biomass R1.20/kWh
  • The Energy Rate is to be adjusted on 1 April of each calendar year according to the following formula:
    Pn = Pb*(In/Ib)
    where:
    Pn is the new indexed Energy Rate for that new contract year
    Pb is the energy rate for the first contract year (base rate)
    In is the Consumer Price Index as published in the new contract year
    Ib is 100, being the Consumer Price Index (Dec 2013 = 100) as published in respect of the month of December 2014, as rebased by Statistics South Africa (or its equivalent successor entity) from time to time
  • The Energy Rate is adjusted further by a TOU (time-of-use) factor, depending on whether the Commercial Energy is generated in peak hours or during off-peak periods. In this regard:
    • The Peak TOU factor is 1.309
    • The Off-Peak TOU factor is 0.485

Bid compliance and evaluation

  • Only parties who have registered in the Cogeneration IPP Procurement Programme, obtained the RFB, and have submitted the requisite information to the Department of Energy will be entitled to bid projects in the programme.
  • Bids are subject to a two stage evaluation process:
    • Satisfaction of compliance and functionality criteria.
    • Evaluation on price (90 points) and Contributor Status Level per the Preferential Procurement Policy Framework Act (10 points).
  • Compliance and functionality criteria have 3 elements:
    • Legal
    • Technical
    • Financial
  • These criteria are not summarised here. However, particularly noteworthy in the legal qualification criteria is the apparent absence of any stipulated benchmarks as to local ownership of the project SPV, economic development obligations, and community trust participation, as distinguished from these types of obligations which have been key features in the Renewable Energy IPP Procurement Programme and the Coal Base Load IPP Procurement Programme.
  • That does not mean that these criteria will not be introduced into later rounds of the Cogeneration IPP RFB process.

Timetable

 RFB issued 4 June 2015
 DoE information session To be advised
 Bidder written questions Up to the last day prior to Bid Submission
 Bid Submission Notification (detailed information) 22 July 2015
 1st Bid Submission Date 10 August 2015
 Bid evaluation 11 August 2015 to 16 September 2015
 Preferred Bidder announcement 17 September 2015
 Signed PPAs and Commercial Close 18 November 2015
 Commercial Operation No later than 17 November 2016

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