Independent power producers (IPPs) Mulilo and Scatec have been named as preferred bidders to develop 616 MW/2 464 MWh of new battery storage capacity at a cost of R9.5-billion across five substation sites in the Free State province.

Electricity and Energy Minister Dr Kgosientsho Ramokgopa made the announcement following the conclusion of the third bid window of South Africa's Battery Energy Storage Independent Power Producer Procurement Programme (BESIPPPP), which was launched on March 28 last year.

A total of 33 bid responses were received by the November 28 bid submission date and Ramokgopa announced that South African IPP Mulilo had emerged as the preferred bidder across four of the sites, with the following projects:

The 124 MW Bloemhoek BESS project at the Theseus substation, which had an evaluation price of R1 801.24/MWh;

The 123 MW Erfdeel BESS project at the Everest substation, with an evaluation price of R2 157.29/MWh;

The 123 MW Vanilla BESS project at the Harvard substation, with an evaluation price of R2 169.80/MWh; and

The 123 MW Retreat BESS project at the Merapi substation, with an evaluation price of R2 477.86/MWh.

Meanwhile, Scatec, of Norway, which has a large South African presence, prevailed with its 123 MW Haru BESS project at the Leander substation, with a R2 037.10/MWh evaluation price.

All the projects would use lithium-ion battery technology, and the Minister indicated that the projects were expected to reach commercial close in the coming eight months and enter into commercial operation by January 2028.

Interim IPP Office head Elsa Strydom said there had been a 40% decrease in the average evaluation prices during the third bid window when compared with the first bid window of 2023. That round involved five projects in the Northern Cape, four of which were currently under construction, with one aiming to reach commercial close in June.

She indicated the evaluation prices were also 8% better than those achieved during the second bidding round for eight projects in the North West province, which were bid only months prior. Those projects are expected to achieve commercial close by March next year.

Strydom attributed the decline in costs to a combination of technology learning and the fact that South African financial institutions had become more comfortable with battery storage.

As with the previous two bidding rounds, the projects had been procured under a 15-year power purchase agreement framework and had been evaluated primarily on price, but were also scored using socioeconomic and transformation criteria.

Across the three rounds, projects with a combined investment value of R30-billion and 1 744 MW, with four hours storage, had been procured in line with a Ministerial determination published under the 2019 edition of the Integrated Resource Plan (IRP).

Ramokgopa said any additional battery procurement would be based on the 2025 edition of the IRP, which was currently being discussed at the National Economic Development and Labour Council (Nedlac).

He indicated that the Nedlac process should be concluded during June and that he was optimistic that Cabinet would approve the update before the end of July, making no reference to ongoing disquiet both over the content of the draft and unhappiness with the lack of consultation.

Besides storing mostly solar-generated electricity for use during the morning and evening peaks, the Minister said the projects would also provide ancillary services to the National Transmission Company South Africa, which had selected the five sites, as had been the case in the previous rounds.

The ancillary requirements include instantaneous reserves, regulating reserves, ten-minute reserves, and supplemental reserves.

He also announced that the IPP project companies would have a minimum 40% shareholding by black-empowerment entities, while there would be a minimum 30% black shareholding by construction contractors, and up to 42% in operations contractors.

However, he expresse...