Independent power producers (IPPs) Mulilo and Scatec have been named as preferred bidders to develop 616 MW/2 464 MWh of new battery storage capacity at a cost of R9.5-billion across five substation sites in the Free State province.

Electricity and Energy Minister Dr Kgosientsho Ramokgopa made the announcement following the conclusion of the third bid window of South Africa’s Battery Energy Storage Independent Power Producer Procurement Programme, which was launched on March 28 last year.

A total of 33 bid responses were received by the November 28 bid submission date and Ramokgopa announced that South African IPP Mulilo had emerged as the preferred bidder across four of the sites, with the following projects:

• The 124 MW Bloemhoek BESS project at the Theseus substation, which had an evaluation price of R1 801.24/MWh;
• The 123 MW Erfdeel BESS project at the Everest substation, with an evaluation price of R2 157.29/MWh;
• The 123 MW Vanilla BESS project at the Harvard substation, with an evaluation price of R2 169.80/MWh; and
• The 123 MW Retreat BESS project at the Merapi substation, with an evaluation price of R2 477.86/MWh.

Meanwhile, Scatec, of Norway, which has a large South African presence, prevailed with its 123 MW Haru BESS project at the Leander substation, with a R2 037.10/MWh evaluation price.

All the projects would use lithium-ion battery technology, and the Minister indicated that the projects were expected to reach commercial close in the coming eight months and enter into commercial operation by January 2028.

Interim IPP Office head Elsa Strydom said there had been a 40% decrease in the average evaluation prices during the third bid window when compared with the first bid window of 2023. That round involved five projects in the Northern Cape, four of which were currently under construction, with one aiming to reach commercial close in June.

She indicated the evaluation prices were also 8% better than those achieved during the second bidding round for eight projects in the North West province, which were bid only months prior. Those projects are expected to achieve commercial close by March next year.

Strydom attributed the decline in costs to a combination of technology learning and the fact that South African financial institutions had become more comfortable with battery storage.

As with the previous two bidding rounds, the projects had been procured under a 15-year power purchase agreement framework and had been evaluated primarily on price, but were also scored using socioeconomic and transformation criteria.

Across the three rounds, projects with a combined investment value of R30-billion and 1 744 MW, with four hours storage, had been procured in line with a Ministerial determination published under the 2019 edition of the Integrated Resource Plan (IRP).

Ramokgopa said any additional battery procurement would be based on the 2025 edition of the IRP, which was currently being discussed at the National Economic Development and Labour Council (Nedlac).

He indicated that the Nedlac process should be concluded during June and that he was optimistic that Cabinet would approve the update before the end of July, making no reference to ongoing disquiet both over the content of the draft and unhappiness with the lack of consultation.

Besides storing mostly solar-generated electricity for use during the morning and evening peaks, the Minister said the projects would also provide ancillary services to the National Transmission Company South Africa, which had selected the five sites, as had been the case in the previous rounds.

The ancillary requirements include instantaneous reserves, regulating reserves, ten-minute reserves, and supplemental reserves.

He also announced that the IPP project companies would have a minimum 40% shareholding by black-empowerment entities, while there would be a minimum 30% black shareholding by construction contractors, and up to 42% in operations contractors.

However, he expressed a desire for the emergence of fully-fledged black-owned IPPs in future.

The two successful project companies had also committed to preferential procurement of R3-billion from broad-based black economic empowerment companies and to a local content spend of R3.7-billion.

The projects were expected to create 852 job opportunities during construction and operations, and Mulilo and Scatec had also committed to invest R184-million over the lifetime of the projects on skills and supplier development, as well as on socioeconomic development initiatives.

In a statement, Scatec said the estimated total capital expenditure for its project was R2.2-billion, which would be financed by 90% nonrecourse project debt and equity from the owners.

Scatec will own 50.01% of the equity in the project with Stanlib’s Greenstreet and Redstreet Funds owning 44.99% and a Community Trust holding 5%.

Scatec will provide engineering, procurement, and construction, as well as operations and maintenance, and asset management services to the project.

Scatec CEO Terje Pilskog said the award reaffirmed its standing as a leading renewable energy player in South Africa and added that it would build on the experience it had garnered from its hybrid solar and battery storage projects at Kenhardt, and the ongoing construction of Mogobe BESS.

“Dispatchable energy and grid infrastructure are now more important than ever, in the pathway to unlock the sustainability of South Africa’s current and future energy system,” Alberto Gambacorta, Scatec's GM and EVP for Sub-Saharan Africa, added.