South African public utility Eskom has signed lease agreements with four independent power producers (IPPs) for the production of renewable energy around its power plants.
The utility estimates the IPPs will produce up to 2GW of renewables at two of its power stations in the Mpumalanga province – the land parcels will be around the Majuba and Tutuka power stations – with 6,184 hectares of land leased for a period of 25-30 years each.
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Eskom is pursuing its increased investment in renewables after South Africa’s government unveiled a raft of measures in July 2022 to respond to the shortfalls of electricity and provide relief to the constrained grid in the shortest time possible.
The announcement comes after the utility launched a request for proposal in April 2022 which received high interest from investors with bids being three times oversubscribed.
Going forward the utility will issue new tenders every quarter for the lease of other parcels of its land and accelerate the investment in renewable generation capacity, with up to 30,000 hectares that can be made available for similar projects.
The next phase of land will focus on properties around the Kendal and Kusile power stations in Mpumalanga, as well as the retired Ingagane Power Station in Newcastle, KwaZulu-Natal, and will be offered to the market in the coming months, according to Eskom.
“By making Eskom land available close to the power stations, where there is sufficient grid capacity, we have taken an innovative step to find the quickest way possible and within our scope of influence to boost the country’s generation capacity,” said Eskom group chief executive, André de Ruyter.
The successful bidders for this round were HDF Energy South Africa, Red Rocket, Sola Group and Mainstream Renewable Power, which has been awarded 1,650 hectares to build its renewable energy plants.
The bidders will have to undergo comprehensive feasibility studies to determine which technologies they will implement – solar, wind and battery storage – with Eskom expecting the plants to be connected to the grid in two to three years from financial closure, subject to environmental, land zoning and other regulatory approvals.
Moreover, the bidders will be able to sell the electricity through power purchase agreements (PPAs) while the electricity will be wheeled through Eskom’s grid, generating revenue for Eskom from its existing assets.
Hein Reyneke, general manager for Africa at Mainstream Renewable Power, said: “As one of the most established and successful renewable energy companies in South Africa, Mainstream is proud to support Eskom in its initiative to expedite the connection of large quantities of much-needed clean, affordable power to the grid as part of the just transition to renewable energy.”
Furthermore, the land leases will attract investments of ZAR40 billion (US$2.2 billion) in areas traditionally associated with coal-fired electricity and will accelerate the connection of added capacity to improve the reliability of supply, said De Ruyter.