Stalled 1.8GW in power projects risk losing grid access

Companies yet to complete financing arrangements to build 1.85GW of power generation capacity in South Africa in terms of a government tender in 2021 may lose the right to connect to the national grid at the end of this month.

The access for projects by Karpowership, Acwa Power and others relating to contracts for 2GW awarded more than two years ago expires on 31 July, Eskom said in an e-mailed response to questions. Scatec has achieved so-called financial close for its 150MW of projects.

The emergency power programme has been beset by delays. Karpowership, the provider of gas-fired plants mounted on ships that won about 60% of the tender, has seen its plans thwarted by lawsuits and environmental challenges. A surge in construction costs globally has also complicated attempts by the bid winners to make financial arrangements.

Grid access is in short supply in South Africa. The amount of transmission capacity is insufficient, and in the wrong part of the country, for the swathe of renewable energy projects being erected in a race to alleviate the country’s worst-ever blackouts. In December, a government award for 3.2GW of wind energy failed because there was no grid connection available.

The amount of electricity that could be affected this month is equivalent to peak demand for Cape Town in winter.

Eskom is in talks with the Independent Power Producer Office (IPPO), which ran the tender, to decide on whether to extend the access, the company said.

The department of minerals resources & energy didn’t respond to requests for comment. The Development Bank of Southern Africa referred questions to the IPPO, which referred queries back to the department. The department and the Development Bank oversee the independent producer authority.

Further delays

If they lose entry to the grid, the companies will need to reapply, potentially incurring further delays to a process that was supposed to see electricity provided by August last year. It’s not clear whether new rules related to access, which will increase the amount of money developers must spend before they know whether they can access the network, will apply.

Read: R4.7-billion funding sought for Kariba solar project

The IPPO has extended the deadline for financial close for the projects to 31 December from the end of June, two people familiar with the decision said, declining to be identified as the decision isn’t public.

Read: No, minister, solar won’t collapse the national grid

In addition to Karpowership and Acwa, companies that hold stakes in winning bid consortiums include TotalEnergies and Électricité de France.  — (c) 2023 Bloomberg LP

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