SA fails to award gas-to-power projects

South Africa has failed to award gas-to-power projects in an initial round to procure generation from the technology, threatening to slow the pace of the nation’s transition away from coal.

The government-auction process to buy electricity from power plants fuelled by gas opened for proposals a year ago and received four bids in May, the Department of Electricity and Energy said in a statement on Wednesday.

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The bids were for a combined capacity of 2 830MW, compared with 2 000MW sought.

“Even though South Africa is potentially well endowed with natural gas, it imports most of its gas-supply requirements from Mozambique and the country has no LNG receiving terminal,” the department said, referring to imports of liquefied natural gas (LNG) that require specialised facilities.

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“The bidders were unable to provide gas-supply assurances to the level required.”

Read: South Africa is sleepwalking toward a gas crisis, businesses warn

Africa’s biggest economy, which relies on coal to generate about 80% of its electricity, had planned to shut 8GW of coal-fired capacity by 2030, according to its Integrated Resource Plan 2025. But the plans for its replacement – 6GW of gas-powered generation – had already fallen behind schedule.

Securing the fuel presents an ongoing challenge.

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The country lacks domestic gas production and only receives supply from a pipeline starting in Mozambique, where output from gas fields is declining.

Import facilities to receive LNG are still in planning stages and typically need anchor offtakers to progress.

State-owned utility Eskom is tied up in a legal process over its own planned gas plant.

The company has noted a wait of about five years for gas turbines from suppliers such as Siemens AG and General Electric Co. Such a timeline would miss deadlines indicated in the IRP.

“Our responsibility now is to address the infrastructure, commercial and institutional conditions required to translate market interest into viable and deliverable projects,” Minister of Electricity and Energy Kgosientsho Ramokgopa said in the statement. “South Africa is not retreating from our gas-to-power objectives.”

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