Approximately 50% of the projects awarded in South Africa’s re-launched renewable power purchase program have encountered difficulties, posing challenges to addressing the nation’s power crisis using wind and solar energy, as reported by two anonymous government sources to Reuters.
The regular breakdowns at Eskom’s aging coal-fired plants have resulted in daily planned power cuts, leaving the country’s most developed economy facing an electricity production deficit of 4,000 to 6,000 megawatts (MW), according to President Cyril Ramaphosa.
Following a hiatus lasting six years, South Africa held a bidding round in 2021 to seek proposals for wind and solar projects, which garnered intense interest from more than 100 companies and consortia.
While initially optimistic about the tariff announcements for the fifth renewable round, the government official involved in the renewables program stated that only half of the 2,583 MW capacity expected from the auction is likely to be realized.
The Ikamva Consortium, which secured 12 projects with record-low tariff bids, has faced difficulties, leading to the projects’ failure, according to the sources.
South Africa’s energy department, overseeing the renewable rounds, has not responded to Reuters’ email seeking comment.
The Ikamva Consortium explained that factors such as higher interest rates, increased energy and commodity costs, and equipment production delays post-pandemic have affected their calculations, leading to construction cost inflation beyond the Round 5 bid tariff.
Of the total 25 projects, only nine have reached financial close due to obstacles complicating fundraising for other companies.
Engie and Mulilo, with a financial closure deadline of September 30, have not responded to email inquiries, but the government official expects them to secure the necessary funds for construction.
Ikamva stated that its projects are “construction-ready,” and discussions with the government are ongoing to find an agreed way forward.
A scarcity of transmission capacity has emerged as a significant constraint in South Africa’s efforts to resolve the energy crisis, as private investors back projects aimed at increasing power production. However, the consortium has not addressed the question regarding the expected grid transmission capacity allotted for its projects.