Buyer Wholesaler Agreement

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					      South Africa’s Renewable Energy Feed-in Tariff
                        (REFIT) and
            the Role of the Single Buyer Office

                                         25 November 2009
    Solar Thermal
                                          Innovation Norway
                                      Renewable Energy Seminar
                                             Cape Town

1                                                        Single Buyer Office

•       Background to Single Buyer Office (SBO) establishment
•       Current regulations and the “System Operator”
•       Procurement process
•       Key issues for successful REFIT programme
•       SBO commitment

    2                                                           Single Buyer Office
Background to the SBO establishment
    As per cabinet memo dated 5 September 2007:
    – Eskom designated as single buyer for attracting and purchasing power from
      Independent Power Producers (IPP’s)
    The National Energy Regulator of South Africa (NERSA) published the renewable
    energy feed-in tariff (REFIT) in March 2009:
    – Supports government target of 10 000GWh from renewable energy sources by 2013
    – Four technologies under REFIT Phase I:
             Technology                                                      R/kWh
       1     Wind                                                             1.25
       2     Concentrated solar power trough with 6 hours storage             2.10
       3     Small hydro (less than 10 MW)                                    0.94
       4     Landfill gas                                                     0.90

    – NERSA also designated SBO as Renewable Energy Purchasing Agency (REPA) in
      line with Regulation Act 2006

3                                                                         Single Buyer Office
… Background
    NERSA published REFIT Phase II at the end of October 2009:
    – An additional five technologies under REFIT Phase II:

              Technology                                                           R/kWh
       1      CSP trough without storage                                            3.14
       2      Large scale grid connected photovoltaic (PV) systems (≥ 1 MW)         3.94
       3      Biomass solid                                                         1.18
       4      Biogas                                                                0.96
       5      CSP tower with 6 hours storage                                        2.31

    – “After due examination of the cost structures and energy output, the tariff for
      Concentrated PV was considered too high and it was removed from REFIT
      Phase II” NERSA, October 2009

4                                                                               Single Buyer Office
Current Regulations and the System Operator (SO)
    Following REFIT Phase I, the Department of Energy (DoE) published the New
    Generation Regulations in August 2009:
    – “Buyer” to be determined by Minister
    – Does not refer to REPA but the “System Operator” and assigns the following
        Developing the Integrated Resource Plan (IRP)
        Feasibility study to determine whether procurement of generation capacity should be
         undertaken by Eskom, another utility provider or an IPP, but Minister shall make
         determination - in concurrence with the Minster of Finance
        Activities related to procurement under the IPP bid programme
    – The procurement process stages for IPP bid programmes:
       1. Request for prequalification (RFQ)
       2. Request for proposals (RFP)
       3. Negotiation with preferred bidder
    – NERSA to develop procurement rules and review renewable energy tariffs

5                                                                                  Single Buyer Office
The current System Operations and Planning Division
in Eskom

                             System Operations
                                and Planning

                   Energy Planning
System Operator                                           Business Strategy
                          and             Grid Planning
                                                            and Planning
                  Market Development

                  Single Buyer Office

6                                                           Single Buyer Office
The Procurement Process as per the New Generation
Regulations can be summarised as follows:
       Section 34 Ministerial
                                                    Project?                     Eskom

                    IPP Bid Programme:                 IPP               Develop Project
    Consult         RFQ                                                  Procure & Construct
    Buyer           Negotiations             NERSA:
                                             License Generator
                    IPP Selection
                                                  Conclude PPA
                                    Feedback to
    NERSA:                                               License Buyer
                                    DoE / NERSA
    Rules for selecting REFIT
                                         NERSA:                    NERSA:
                                         PPA development           Rules for information keeping
                                                                   and publication
7                                                                                Single Buyer Office
    Summary of main issues related to the Procurement

•       Independent Power Producers (IPP’s), local or regional, will be introduced at the
        determination of the DoE and in line with the New Generation Regulations and the
        Integrated Resource Plan (IRP)
•       Technologies and dates for REFIT to be determined by DoE through the IRP
•       NERSA to determine tariffs and procurement rules and approve the Power Purchase
        Agreement (PPA) and generation licence
•       Network owners are obliged to connect generators to the grid in accordance with the
        grid code and the network agreements

    8                                                                           Single Buyer Office
    Key issues for a successful REFIT programme
•       Government and Stakeholder alignment for programme and process
        – Clarity on practical implications of New Generation Regulations
        – Procurement rules from NERSA
•       Enabling environment to support IPP’s
        – Appropriate Cost Recovery Mechanisms [due for NERSA approval November 2009]
        – Appropriate government support package
•       Renewable technology and capacity to be included in the IRP
•       Appropriate risk allocation in the PPA
•       Lead time to financial close [procurement and approval process]
•       Grid connection and grid stability issues
•       Environmental impact assessment and approvals
•       Sourcing of alternative funding to expedite possible extended RE Programme

    9                                                                       Single Buyer Office
Proposed programme timelines – Phase I
DRAFT – still to be approved by stakeholders

          Project Milestones – Renewable IPP’s          Proposed timeline

     1    Establishment of enabling environment         May 2010

     2    Issue of RFQ

     3    Receipt of Statement of Qualification (SOQ)   Two months after RFQ

     4    Issue of RFP                                  Two to three months after SOQ

     5    Bid submission date                           Three to four months after RFP

     6    Bid evaluation and selection of preferred     Two months
     7    Financial close                               Two to six months

10                                                                             Single Buyer Office
    Single Buyer Office commitment

•        Single Buyer Office is committed to Renewable IPP Programme and REFIT
         – Single Buyer Office currently staffing up to deliver on its obligation
•        Will fast track conclusion of PPA’s in accordance with policy, rules and governance
•        Will engage on a meaningful basis with all interested parties

    11                                                                              Single Buyer Office
           Thank you

              Single Buyer Office
            Eskom, Megawatt Park
              tel: 011 800 4952

12                                        Single Buyer Office
Criteria for selecting successful renewable IPP
     – compliance with the integrated resource plan and the preferred technologies
     – acceptance by the IPP of a risk profile predetermined by the regulator
     – preference for a plant location that contributes to grid stabilisation and mitigates
       against transmission losses
     – preference for a plant technology and location that contributes to local economic
     – compliance with legislation in respect of the advancement of historically
       disadvantaged individuals
     – preference for projects with viable network integration requirements
     – preference for projects with advanced environmental approvals
     – preference for projects demonstrating the ability to raise finance
     – preference for small (>1 MW), distributed generators over centralised generators
     – preference for generators that can be commissioned in the shortest time

13                                                                             Single Buyer Office

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