South Africa Puts First Large IPP Project Online

South Africa reached a milestone this September when it put online its first large-scale project owned by an independent power producer (IPP). The inauguration of the 335-MW Dedisa Peaking Power plant located in Port Elizabeth, in the Eastern Cape’s Coega Industrial Development Zone, marks a shift in the way electricity is produced in the power-strapped country.

The plant is owned by Dedisa Peaking Power (a subsidiary of French firm ENGIE, formerly GDF Suez), Legend Power Solutions, Mitsui & Co., and The Peaker Trust. Built by Italian firms Ansaldo Energia and Fata, the plant is currently an open cycle gas turbine (OCGT) peaking facility (Figure 6) that will operate on diesel for about four hours a day. Power will be sold to Eskom Holdings, the state-owned utility that generates 95% of South Africa’s power, under a 15-year power purchase agreement. “In the longer term, the project’s sponsors envisage a conversion to gas-fired, combined cycle facility in the framework of the Department of Energy [DOE] gas master plan. The facility is designed to allow such conversion,” Dedisa CEO Arnaud de Limburg told POWER in September.

6. IPP kickstart. The newly opened 335-MW Dedisa Peaking Power Plant in Port Elizabeth, South Africa, is the first large-scale power project built in the country by an independent power producer. Courtesy: Dedisa Peaking Power

The project got its start in 2006 as Eskom realized it would face debilitating power shortages if new generation wasn’t built quickly, and it called on the government to encourage a greater role for the private sector in meeting the country’s future electricity needs. Eskom argued that the measure would reduce the government’s funding burden, relieve the utility’s borrowing requirements, and introduce generation technologies that it might not consider part of its core function, such as distributed generation, co-generation, and small-scale renewable projects.

The DOE relented, and in August 2011—as the country battled chronic power supply issues—it issued a request for proposals, inviting IPPs to bid in a competitive process. The open cycle gas turbine (OCGT) program calls for 1,000 MW of IPP-built power plants, of which Dedisa is the first to begin operations.

“Being the very first IPP project in South Africa, it took several years of development before execution of contracts with DOE and Eskom, and reaching financial close in mid-2013,” said de Limburg. While the DOE and Eskom have plans for more large IPP-built projects (including for coal and combined cycle gas turbines), he noted that only one other large-scale IPP-built project is under construction in South Africa: the 670-MW Avon Peaking Power OCGT project near Durban (KwaZulu-Natal).