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How to enter the Independent Power Producers market in the Power Sector in South Africa

South Africa has been suffering from chronic power shortages with regular load reductions since 2007. Up to 2030 the country will need environmentally friendly energy sources in order to retire the current fleet of coal-fired power stations, providing interesting opportunities for Swiss companies. How can they obtain lead time information and enter the power sector in South Africa?

How to enter the Independent Power Producers market in the Power Sector in South Africa

The country’s aging fleet of coal-fired power stations with high unreliability will be retired in stages. Up to 2030 about 10500MW’s will be retired and they will need to be replaced with more environmentally friendly energy sources. There is a strong emphasis on Renewable Energy & Gas in the Integrated Resource Plan (IRP). The Department of Energy has a program of procurement from Independent Power Producers (IPP’s) to replace these megawatts. Exporters can obtain lead time information of Power Programs which are planned by the Department of Energy and thus know which products and components will be required in those projects and the extent of market demand.

Power Sector in South Africa

South Africa has a highly regulated Power Sector but it is slowly undergoing changes to enable IPP’s to operate in the market. There is still a high degree of regulation restrictions the channels to market for private IPP’s.

There are two ways to enter the power generation market in South Africa:

  • using the IPP Procurement Programs being run by the Department of Energy according to the IRP
  • approaching private companies directly who require reliable power supply and are highly exposed to load-shedding

 

Independent Power Producer (IPP) procurement program: How does it work?

The IPP procurement programs are the best access for IPPs currently into the market for large scale power generation projects. These programs are supported by government backed Power Purchase Agreements (PPA’s) which facilitate project financing and licensing (see link to Procurement Programs already executed by the Department of Energy). The latest Procurement RMIPPPP Bids closed on 22 Dec 2020 comprised 2000MW’s of emergency power from IPP’s. See link to this Procurement for relevant information. Find more information about it here.

South Africa’s aim to reduce carbon footprint dramatically provides opportunities

South Africa is acutely aware that it has a very large carbon footprint per capita and has to reduce this dramatically. There are already plans to procure a further 11 800 MWs of power over the next 10-15 years according to the Department of Energy’s IRP which should provide Exporters of components and systems in the power space with a lot of opportunity.

Exporters can access the market at various levels:

  • Directly bidding into IPP programs as an IPP operator.
  • Directly contacting Engineering Houses locally who assist IPP’s to submit their Bids – these companies can provide information on technical solutions which match the bid submissions. Many private clients also seek power solutions from these engineering houses making them a good source of market information.
  • Numerous small renewable energy solutions (Solar PV and Wind) companies have formed in the last 7 years and seek “smart” solutions for their private sector clients often providing hybrid solutions.
  • The replacement of power capacity with a lot of non-dispatchable generation has opened the market for large scale power storage devices. Countries which have such advanced technology will be well placed to export to South Africa over the next 10 years.

Exporters can approach private companies whose businesses are highly dependent on stable power supply such as the mining industry, agriculture and manufacturing. “Inside the fence” projects are being considered for “own use” by many customers. This sector has slowed down due to global economic slump through Covid-19 but remains an important sector in South Africa. Increasing digitisation of industrial systems is placing a higher demand on power supply quality which has been adversely affected by load-shedding. Customers are therefore looking to provide “in-house” solutions. For private power projects, it is important to observe the regulatory requirements for obtaining approvals.

S-GE can help you enter the South African power sector

We have a network of trusted legal and technical experts who can help you benefit from above opportunities. Reach out to Suhail el Obeid, Senior Consultant for Africa to discuss you internationalization project

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