Cape Town shares its successes and challenges of own build renewable energy plants

Exclusive interview with Marlyn Hendricks, Renewable Energy Project Manager, Energy Directorate, City of Cape Town. At the recent Enlit Africa in Cape Town, Hendricks shared the challenges and successes of own build renewable energy plants, particularly focusing on the case study of the Atlantis 10 MW ground-mounted solar photovoltaic plant. 

Let’s start with some background about the Atlantis project.
I started at the city about 3 years ago and the project was basically already initiated. So, I took it from the early days’ initiation right up to where it is now, where the contractor has been appointed, we are busy with the detail design and we’ll probably do construction within August. The project really is one of a number of initiatives that the city is busy with, and the main reasons are around mitigating climate change, reducing our carbon emissions so that we can meet the 2030–2050 targets, Eskom’s performance in terms of load shedding, we need to also diversify our energy mix and Eskom’s tariff increases. With the city generating the electricity from solar, we can do it much cheaper, and we’ll have savings in terms of Eskom purchases. Therefore, we can mitigate some of the tariffs.  

Atlantis is a 7 MW plant and it can possibly become a 10 MW plant in the future with battery energy storage as well.

What is unique about this project?
Typically, you’ll have a private company that will develop such a project. They will build it and then they will sign a power purchase agreement with the local government, Eskom. So in this case, we’re doing all of that ourselves. We’re using our internal staff resources and funding to actually develop the project, build it and then we’ll also own it for the next 20 years. So, I think from that perspective, it’s unique. It hasn’t been done in Cape Town yet, and a lot of the municipalities are now starting to catch on as well.  

What are some of the challenges that you faced?
The procurement is definitely one of the biggest challenges. With the current procurement supply chain policies that we have in place are not set up for generation type projects. The policies are more set up for normal construction projects where you have a consultant and the consultant develops a bill of materials, quantities and specifications, and then you go out on another contract to do the construction.  

However, in our case, with the generation plant, you need it to perform at a certain level, be available when you need it and operate at a certain performance. So, there really needs to be one point of accountability, and for that reason, the typical procurement or contracting strategy is engineering, procurement and construction, but in terms of our supply chain policy and regulations, they are not geared for that type of strategy. So, we had to face many procurement challenges by, first of all, getting a new form of contract. And then we went out on tender, and we didn’t get a tender the first time around. We had to go out again. And that was really also because we didn’t understand the market and what the market requires in terms of evaluating their experience. We were hoping the mainstream IPPs would tender, but they didn’t, because they were not interested in our small 7 MW plant. The ones that were interested in it didn’t qualify because our criteria was a little bit too stringent. Therefore, not knowing those kinds of things made it really difficult because we had to go out and tender twice. 

Then, doing this for the first time, you also want to maximise the operations and maintenance because you need to transfer the skills. Once the operations and maintenance are complete, you need to take over the plant, operate it and you need to make sure that that period is long enough for you to transfer the skills, train all the people and gain the competence that you need.  

But with this project being schedule-driven and time-pressured, we needed to complete it as fast as possible. Therefore, we needed to reduce the operations and maintenance to avoid some of the procurement processes that we had to go through if we had to commit longer than 3 financial years. So, definitely procurement was one of the main challenges. Another challenge was justifying spending money that could possibly go for housing or basic services on a generation plant. I think from that business case perspective, we also had a big challenge in terms of getting buy-in from the council and the different investment committees as well.

What are some of the successes with this project?
One of the big successes in my opinion was the fact that the City of Cape Town adopted the project management framework. That really gave us the required governance to make sure that we do proper development before going to the next phase. Because typically what could have happened was, not having a project management framework or any type of governance in place, we as a project team would go out and assume this is feasible and viable, and then we would spend R200 million, and then we would end up with a big mistake and loss.  

So, having that governance in terms of the project management in place really gave us the opportunity to first develop a certain part of the project, go back and review it, get our investment committees to basically agree and then go to the next phase, until we got to this point now. And we’re going to continue moving forward with the project management structure as well. So, I think in terms of getting that in place was definitely one of the big successes. 

Obviously also having gone through the procurement and getting a successful tender. I think even though it was a challenge at the beginning, we now know what to do and for other projects that we’re embarking on, we can incorporate those changes as well.

And then the land, there’s also competition for housing, for example, or to develop it for business or industrial uses or even selling it and using that funding. So, getting the land and being able to develop the solar PV plant on it was also one of the big successes.

Anything you would like to add?
I think it’s very important for the industry, because we don’t want another municipality to make the same mistake that we made and we want to share these lessons, because at the end of the day, it’s all money that we pay as taxpayers that is being wasted. If you make mistakes, for example, going out on procurement twice or agreeing on certain contract terms that were not feasible at the beginning. Therefore, going out and sharing and actually collaborating as municipalities, I think we can do it a lot quicker, faster and more successfully.