Some of the preferred bidders that participated in the Small Renewable Independent Power Producer Programme (Smalls), which has subsequently been terminated, are considering legal action against Eskom and the Department of Mineral Resources and Energy (DMRE) to have the projects reinstated or to be reimbursed for costs incurred.

The 100 MW programme was launched in 2013 for projects between 1 MW and 5 MW in size and was open to bidders employing onshore wind, solar photovoltaic, biomass, biogas or landfill technologies.

It was specifically designed to open the market to emerging and smaller-scale South African independent power producers (IPPs), which had struggled to compete in the larger Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Following two bidding rounds, a total of 20 projects were identified as preferred bids in 2013 and 2015 but, as with the REIPPPP, the Smalls programme was disrupted by a power purchase agreement (PPA) signing impasse between 2014 and 2018.

The impasse arose after the then Eskom leadership refused to conclude new PPAs with renewables IPPs on the basis of a supposed return to a surplus generation position by the State-owned utility.

The argument has since been proven to be false, with the progressive intensification of load-shedding to the point where Eskom has recently been implementing 6 000 MW of rotational cuts to stave off a blackout.

When government finally moved, in 2018, to sign outstanding PPAs for the projects concluded under Bid Window 4 of the REIPPPP the Smalls projects were not included.

The programme was, nevertheless, still referenced in a 2020 Government Gazette published by the Presidential Infrastructure Coordinating Commission, which listed infrastructure programmes that had been officially designated as Strategic Integrated Projects in line with the Infrastructure Development Act.

The DMRE reportedly undertook “value for money interactions” with the preferred bidders and provided a report to Eskom in December 2020.

By November 2021, however, the Smalls preferred bidders were informed by the DMRE that the programme had been terminated based on an “Eskom board decision and an Eskom board request to cancel the Smalls projects”.

In its correspondence confirming the cancellation, the DMRE expressed regret at Eskom’s decision, but said that it had been left in a “precarious position”, as proceeding had become impossible in the absence of a buyer.

“The department did not contemplate that the Eskom board would not approve the projects,” the DMRE told Engineering News in response to questions.

“The department and preferred bidders had ongoing engagements with Eskom for several months prior to the decision to improve the value for money outcomes to meet buyer requirements.”

The DMRE adds that the conclusion of a procurement process is contingent on the approval of Eskom board to enter into the PPA as the buyer of the energy output as contemplated in the Ministerial Determination and the Request for Proposals.

“Without such an approval, the department could not further pursue the closure of the preferred bidders,” it said, adding that it is unaware of any possible legal action by the preferred bidders.

Eskom tells Engineering News that the board decision was made after the utility adopted a “uniform risk profile with respect to the IPP programmes” that took account of drafting improvements made to procurement documentation “as a result of valuable contract management learnings” over a nine-year period.

“Consequently, by December 2020 Eskom together with the IPP Office had agreed drafting updates to the PPA for the Smalls Projects, which was aligned with the risk profile adopted by Eskom under the Bid Window 5 REIPPPP PPA and the Risk Mitigation IPP programme.

“Eskom was advised that the Smalls projects were not amenable to concluding their projects on the basis of this updated PPA and were insisting that their projects be concluded using the PPA and the r...