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15 Jul 2022

Independent Power Producers Procurement Programme (IPPPP)

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Independent Power Producers Programme

The purpose of this report is to provide an overview of the IPPPP and IPP Office activities for reporting Quarter 3 of the 2021/2022 Financial Year (1 October to 31 December 2021).

The Department of Mineral Resources and Energy’s (DMRE) Independent Power Producers
Procurement Programme (IPPPP) was established at the end of 2010 as one of the South African
government’s urgent interventions to enhance South Africa’s electrical power generation capacity.
The DMRE, National Treasury (NT) and Development Bank of Southern Africa (DBSA) established the IPP
Office for the purpose of delivering on the IPPPP objectives. In May 2016, a new Memorandum of
Agreement (MoA) was agreed by all parties to provide the necessary support to the IPP Office to
implement the IPPPP for a further 3-year period. This MoA was subsequently extended to 2023.
The primary mandate of the IPP Office is to secure electricity from renewable and non-renewable
energy sources from the private sector. Energy policy and supply is, however, not only about
technology, but also has a substantial influence on economic growth and socio-economic
development. As such, the IPPPP has been designed to go beyond the procurement of energy to also
contribute to broader national development objectives, such as job creation, social upliftment, local
industry development and increasing opportunities for economic ownership.

The Integrated Resource Plan for electricity (IRP) provides South Africa’s long-term plan for electricity
generation. It primarily aims to ensure security of electricity supply, minimise the cost of that supply,
limit water usage and reduce greenhouse gas (GHG) emissions, while allowing for policy adjustment in
support of broader socio-economic developmental imperatives. The IRP 2019 was promulgated in
October 20192 and replaced the IRP 2010 as the country’s official electricity infrastructure plan.
It calls for 37 696 MW3 of new and committed capacity to be added between 2019 and 2030 from a
diverse mix of energy sources and technologies as ageing coal plants are decommissioned4 and the
country transitions to a larger share of renewable energy. By 2030, the electricity generation mix is set
to comprise of 33 364 MW (42.6%) coal, 17 742 MW (22.7%) wind, 8 288 MW (10.6%) solar photovoltaic
(PV), 6 830 MW (8.7%) gas or diesel, 5 000 MW (6.4%) energy storage, 4 600 MW (5.9%) hydro5,
1 860 MW (2.4%) nuclear and 600 MW (0.8%) concentrating solar power (CSP). Additionally, a shortterm gap at least 2 000 MW is to be filled between 2019 and 2022, thereby further raising new capacity
requirements, while distributed or embedded generation for own-use is positioned to add 4 000 MW
between 2023 and 2030. The IRP is intended to be frequently updated, which could impact future
capacity allocations from various energy sources and technologies.

The execution of the IRP is informed by Ministerial determinations, made by the Minister of Mineral
Resources and Energy in accordance with section 34 of the Electricity Regulation Act No.4 of 2006 (i.e.
new generation capacity). Once released and concurred with by the National Energy Regulator of
South Africa (NERSA), the determinations signify the start of a procurement process and creates
certainty for investors. Ministerial determinations made in accordance with the IRP 2010 has expired
(apart from capacity procured under the IRP 2010 to date). New determinations for the continued
procurement of energy from IPPs under the IPPPP in fulfilment of the capacity allocations in the IRP
2019 has been promulgated. In July 2020 the first determination under the IRP 2019, for the
procurement of various technology solutions to close a 2 000 MW gap between 2019 and 2022, was
gazetted. A second determination, for the procurement of 11 813 MW6 new generation capacity, was
promulgated in September 2020.