Eskom on Friday signed land lease agreements with four independent power producers for the commercial lease and use of land at Majuba and Tutuka power stations.
This is the first batch of lease agreements to be signed. It is anticipated that the first electricity will become available within 24 to 36 months.
The four successful bidders are HDF Energy South Africa, Red Rocket SA, SOLA Group and Mainstream Renewable Power Developments South Africa.
The companies will now embark on a round of feasibility studies to ascertain the exact nature of the generation they will create and how big the power plants can be. However, two of the companies did have some detail on hand.
Speaking at the signing of the lease agreements, Nicolas Lecompte, HDF Energy Director for Southern Africa, said their project would closely mirror a Namibian project they are currently constructing: a solar power plus green hydrogen for storage project. “It looks like a PV farm, but in services, it is closer to a gas-fired or coal-fired project,” he explained.
“We need just a bit of patience, but we’ll go as fast as we can. With this project, we are looking at a massive cluster of green energy projects, possibly the first and largest [of its kind] in Africa,” said Lecompte.
Sharief Harris, Head of Development at Red Rocket, indicated they are looking to develop two 150MWac solar power plants with a battery energy storage component on the Dwars-in-de-Weg parcels of land they have been allocated Alpha, Mpumalanga.
“Solar irradiation is quite good in Mpumalanga. It’s an area we’ve been trying to get into for quite some time, so we appreciate the opportunity,” said Harris.
Eskom issued a request for proposal in April 2022, and investor appetite for the land with grid connection was demonstrated by bids that were three times oversubscribed. Further land parcels will be made available in quarterly tenders, said Eskom.
The four investors will lease a total of 6,184 hectares (ha) of land for a period of 25-30 years each and contribute an estimated 2,000MW to the national electricity grid.
What makes this land lease project different from the REIPPPP bid windows is there are no requirements for Eskom to sign a PPA and no price negotiation, according to Eskom Group CEO André de Ruyter.
“It’s the beginning of the electricity market enabled by the President’s announcement of … the lifting of the cap for new generation,” said de Ruyter.
He said there is no need for a guarantee from Treasury for these projects, which will not occupy a space on the national balance sheet as they will be funded entirely through the project developers. This is, however, a way for the private sector to create generation assets that will create more power on the national grid.
Future energy
Next, Eskom will assist the companies in dealing with the Department of Forestry, Fisheries and Environment to obtain environmental impact assessments.
The bidders will eventually sell the electricity on a bilateral basis to customers that will sign power purchase agreements with the developers. The electricity will be wheeled across the Eskom grid, generating revenue for Eskom from its existing assets.
“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,” de Ruyter.
“Eskom’s land leasing programme is a first of its kind and can be used as a case study in the electricity supply industry (ESI) in terms of partnering with private electricity generators to accelerate the connection of additional capacity to the national grid to improve the reliability of supply.
“The fact that these land leases will attract an estimated investment of some R40 billion to areas traditionally associated with coal-fired electricity generation makes this a compelling proof point for the just energy transition to a lower carbon economy,” De Ruyter added.
Eventually, up to 30,000ha 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 and the retired Ingagane Power Station in Newcastle, KwaZulu-Natal. ESI
