South Africa's latest round of PV projects faces cost challenges

    Solar projects in South Africa’s latest round of renewable Solar System Kits For Sale energy procurement may struggle to achieve financial settlement due to issues such as rising supply chain costs.

    Some bids have had trouble meeting deadlines for financing arrangements because the information is not public. South Africa's Department of Mineral Resources and Energy (DMRE) expects the projects to close in April.

    Photovoltaic plants have had supply chain problems as transportation costs have ballooned. For example, the BloombergNEF report shows that between January 2020 and November 2021, freight rates in China increased by 476%, and polysilicon prices increased by 365%.

    Mainstream Renewable Power, backed by Kjell Inge Rokke's Aker ASA, is developing the 450 MW solar project, which was selected in the fifth round of private developers' clean energy auction in South Africa last year. Their six projects are the cheapest at R374.79/MWh.

    "We have not received any official submissions from preferred bidders on these issues," a DMRE spokesman said. "Our intention is to have the fifth round of projects reach financial close as planned."

    Any delays to these projects would mean further delays in South Africa's efforts to add generation capacity to a grid that is currently unable to meet demand, which caused record blackouts last year. Plans to expand renewable energy auctions and bring more power plants online are already behind schedule.

    In the fifth round, a 1,000 MW solar project with a weighted average price of R429/MWh was selected, and a 1,600 MW onshore wind project with a price of R495/MWh.