Progress for first biomass plant under South African energy scheme

The biomass facility comes under South Africa’s initiative to increase the number of independent power suppliers, a programme designed to diversify electricity supply and increase the proportion of renewable sources in the energy mix.

The Ngodwana Energy Biomass Project, South Africa’s first under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), has reached financial close. The 25 MW waste wood chip plant was one of the 27 power purchase agreements (PPAs) under rounds 3.5 and 4 of the REIPPPP signed by South African Energy Minister Jeff Radebe last week.

Only four of the 105 projects in the IPP database are biomass powered, with the majority of projects being solar or wind facilities.

The government is aiming for 17,800 MW in new power production from renewable sources by 2030. 7000 MW of that is due by 2020; according to the database 7405 MW has been procured according to the database.

The economic and social implications of each project, like job creation and its effect on the community, are considered alongside costs. The programme weights the cost of a prospective project and its economic and social benefits 70/30.

The programme is designed to diversify the supply of electricity in South Africa, which has often struggled to maintain a reliable power supply. The state-owned power company Eskom currently supplies 95% of the country’s energy and the majority of its plants are coal-fired.

Agreements made under the REIPPPP concern three parties: the IPP, Eskom and the Department of Energy (DoE). IPPs are obligated to deliver its ‘Economic Development obligations’, Eskom signs on to a Power Purchase Agreement with the IPP, and the DoE agrees to take on the risk of Eskom defaulting on its payments to the IPP.

The legal giant Baker Mackenzie advised on the project. Jen Stolp, a partner in the Banking and Finance Practice at the firm, said in a statement: “After a long period of uncertainty, the signing of power purchase agreements (PPAs) and implementation agreements for the latest round of renewables is a very positive step for all South Africans, and for renewing investor confidence in the country.”

REIPPPP is only one part of the DoE’s wider Independent Power Producers Procurement Programme (IPPPP) that contracts power from renewable and non-renewable sources.

The renewable aspect does however constitute the majority of the power capacity mandated by the DoE. The programme’s latest available quarterly review says 17,334 MW of the 29,110 MW of the new power generation needed to ‘ensure the continued uninterrupted supply of electricity’ (as determined by the Minister of Energy) will come from renewable sources.


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