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    Tuesday, October 16, 2012


    Concentrated Solar Power South Africa Market Guide 2012-2013

    September 2012 (CSP Today)

    Renewable Energy Independent Power Producer Programme 2010-2013

    In March 2011 South Africa’s Department of Energy (DOE) finalised details of the Integrated Resource Plan (IRP), a 20-year blueprint that showed the government’s commitment to energy from renewable sources.

    The IRP indicated that renewable energy will make up a substantial 42% of all new electricity generation (totaling 17,800MW) from 2010-2030, and gave strong backing to Wind, Solar Photovoltaics (PV) and Concentrated Solar Power (CSP) within this new energy mix.

    Under the IRP the DOE committed to produce 8400MW from PV, 8400MW from Wind and 1000MW from CSP through the Renewable Energy Independent Power Producer Programme (REIPPP).

    In August 2011 the first request for proposals for renewable projects was opened by the government allocating 200MW to CSP in this initial stage, leaving 800MW available for future rounds.

    REIPPP Round I

    By December 2011 the Department of Energy had received 53 bids across all the different technologies, awarding 28 projects to independent power producers made up of 632MW of PV, 150MW of CSP and 634MW of Wind.

    The two CSP tenders were awarded to Abengoa, a leading Spanish multinational renewable energy developer, that included the 50MW Khi Solar One plants and the 100MW KaXu Solar One plant (For further information on these projects see tables 1.2 and 1.3).

    REIPPP Round II

    The bidding for window II of the REIPPP closed on 5 March 2012 with a total of 79 bids received. The total capacity of bids amounted to 3,255MW, far exceeding the cap that was set at 1,275MW across all technologies.

    The CSP allocation for window II was a maximum of 50MW (the capacity remaining from the 200MW assigned to CSP in the initial request for proposals).

    REIPPP Round III Delays

    In September 2012 the DOE announced delays to Round III of the REIPPP. These delays are mainly due to the difficulty in advancing first round projects to financial close, with this deadline initially scheduled for 20 June 2012, now pushed back to October.

    The need to focus on financial closure for projects selected during the first two bidding rounds has had a knock on effect, currently CSP’s MW allocation in Round III remains unclear and the bid submission date is set for 7 May 2013, more than 9 months later than expected.

    On 21 May 2012 this 50MW was allocated to a consortium led by ACWA Power International, the Saudi Water and Power giant, and the South African energy company Solafrica to develop the Bokpoort CSP Power Plant. For further information on this project see table 2.2.

    The significance of the REIPPP delays for CSP in South Africa is the impact this has had on long-term market certainty. Pancho Ndebele, Founding Member of SASTELA, (a leading association created to support the emerging South African CSP sector) and CEO of Emvelo, recently told CSP Today that large investments have been made by developers, EPCs and others in the development of projects. However, the push back in financial close for Round I has resulted in a lack of clarity in how many MW will be available in the 3rd, 4th and 5th Rounds. This in turn makes it difficult for developers, EPC groups, manufacturers, investors, and lenders to commit more resources to the development of projects.

    Future of the REIPPP; CSP Today examines the potential of concentrated solar power to support social and economic development in South Africa, as well as explains current tariff rates and the expected market growth from 2010-2025.

    Local Content & Job Creation

    Within the initial request for proposals the DOE placed sustainable employment as a central pillar of their 20 year plan for renewable technologies, focusing on manufacturing development and balanced job creation to tackle the high unemployment rates in South Africa. Substantial progress has already been made on the local content levels reached in CSP projects selected in the first two rounds of the programme, with this rising from 21% in Round I to 36% in Round II.

    Furthermore, to date each project has taken important steps to unlocking the strong opportunities for Job creation in this region. (See table 4.1 below).

    Local content levels are expected to increase again in Round III. The ability to reach higher percentages will become more feasible as CSP is deployed on a larger scale, as this will provide manufacturers with the assurance and economies of scale needed to set up local plants and manufacture key components within South Africa.

    Tariff & Future

    Under the current REIPPP, tariffs had been capped for each technology. Bidders for CSP projects have to offer a tariff below the ZAR 2.85/kWh cap. The bid will be ‘non-compliant’ and automatically rejected during the qualification phase if the price cap is exceeded or the bid does not meet the gate-keeping qualification criteria as stipulated in the Request for Proposal document issued within the REIPPP.

    After the qualification phase, the bid is evaluated against strict evaluation criteria. The two main criteria are tariff price (70%) and economic development (30%). Bidders whose responses rank the highest will be appointed as Preferred Bidders and will be awarded a PPA for a period of 20 years under their proposed tariff. For the following procurement rounds, a further allocation of CSP-specific megawatts and a reduction of the tariff cap for some technologies are expected. However, so far, there has been no official announcement from the government in this regard. The IRP suggests that from 2014, 100MW of CSP should be built each year until an accumulated capacity of 1,200MW from CSP is reached in 2025. Of the 1,200MW CSP target, 200MW are already committed to be built by Eskom, the local and state-owned utility in South Africa. Therefore, the South African government is planning to let IPPs build the remaining 1,000MW of CSP in the country.

    CSP Potential in South Africa - interview with Pancho Ndebele of SASTELA

    CSP Today speaks to Pancho Ndebele, Founding Member of SASTELA and CEO of Emvelo about the long-term potential of CSP in South Africa, including the development of local manufacturing in the region.

    CSP Today: South Africa has received a lot of positive feedback with regards to the bidding process for CSP allocation. What factors do you think have contributed to this success?

    South Africa has come up with its own unique process to introduce renewables into the country’s energy mix and the government must be congratulated for its efforts. The Integrated Resource Plan (IRP) has set the framework to introduce renewables and whilst the initial CSP allocation of 200MW was taken up in Round 1 and 2, I am confident that DOE will allocate at least another 200MW for Round 3, it would make sense for DOE to allocate similar MW for Rounds 4 and 5 as this would provide the market certainty that industry requires.

    CSP Today: One of the major barriers faced by CSP allocation in South Africa is its relatively high cost in comparison to other sources of renewable energy. Does CSP have a competitive edge in South Africa that will encourage investment despite higher costs involved?

    The CSP value proposition is not yet understood by policy makers and that is part of SASTELA’s role: to engage policy makers on the value proposition of CSP and that is going to be one of the roles of the new CEO (Jonathan Devries). Costs can be brought down if there was certainty on the MW allocation available for CSP as this would encourage both local and international players to set up manufacturing facilities for CSP components in South Africa and this in turn would drive down costs.

    CSP Today: In terms of the 200MW cap that has been placed on the government allocation to CSP in the REIPPPP process, do you see room for private investment in CSP over and above this allocation?

    As indicated earlier, Round 3 will see an additional allocation for CSP on top of the 200MW that has already been taken up, if government allocates the remaining 800MW available for CSP in the IRP for Rounds 3, 4 and 5 of REIPPP this will attract private CSP investments and will help South Africa lay the foundations to become a major industrial player in CSP component manufacturing for the domestic, regional and international markets.

    CSP Today: As a Founding Member of SASTELA and CEO of Emvelo you are in a relatively unique position in terms of having a dual perspective on the South African CSP Industry, both from a lobbying point of view and through your work as a developer. Therefore what do you see as the major challenges facing CSP in South Africa?

    The major challenge is market certainty, large investments have been made by developers, EPCs and others in the development of projects and without any clear picture of how many MW will be available in the 3rd, 4th and 5th Rounds makes it difficult for developers, manufacturers, investors, lenders and EPCs to commit more resources in the development of projects.

    CSP Today: Do you think further legislative and policy adjustments are needed to foster CSP growth?

    Definitely, the IRP needs to be revised and at least a minimum of 300MW must be procured annually.

    CSP Today: What is the potential for the development of local content? Does South Africa have the infrastructure to support an emerging CSP market?

    With a procurement process that has a set number of MW that will be procured on an annual basis for CSP, like Spain South Africa could easily achieve 80% local content.


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