Scatec: South Africa's Green Procurement Plan in Action

Scatec ASA, a prominent renewable energy company based in Norway, has finalised the financial arrangements for its Mogobe Battery Energy Storage System (BESS) project in South Africa.

Construction of the 103 MW/412 MWh facility will soon begin, as Scatec progresses under the country’s Battery Energy Storage Independent Power Producer Procurement Programme (BESIPPPP).

The project follows the successful award of a 15-year power purchase agreement (PPA) and positions Scatec as a leading provider in this emerging sector.

The PPA ensures Scatec will be compensated for making storage capacity available to the National Transmission Company of South Africa (NTCSA), which will use the Mogobe BESS to balance and stabilise the national grid.

This development highlights the growing importance of battery storage solutions in mitigating South Africa’s energy challenges and supporting the integration of renewable energy.

The total cost for the Mogobe BESS project is estimated at ZAR 3bn (US$170m), with around 90% of the funding coming from non-recourse project debt. Standard Bank of South Africa, which is serving as the mandated lead arranger, is providing the debt component of ZAR 2.7bn (US$154m).

Remaining funds will come from equity contributions, with Scatec responsible for 51% of the project’s equity. Other stakeholders include Perpetua Mogobe with a 46.5% share and a holding company representing the Mogobe Local Community Trust, which holds the remaining 2.5%.

In terms of project execution, Scatec is taking on multiple key roles. The company will act as the engineering, procurement and construction (EPC) provider and will also deliver operations and maintenance (O&M) services, as well as asset management (AM) services throughout the lifetime of the project.

The procurement of equipment and services for this project will follow Scatec’s established processes, with the company leveraging its prior experience from similar ventures like the Kenhardt hybrid solar and battery storage project.

Terje Pilskog, CEO of Scatec, expressed his optimism for the project’s impact: “This is a significant milestone not just for Scatec but also for the energy transition in South Africa.

"Mogobe BESS will set a new standard as one of the first and largest standalone dispatchable battery storage systems in Africa.

"We see plenty of opportunities for growth in this space and our strong local team is ready to deliver.”

Procurement programme key to South Africa’s energy future

The BESIPPPP is part of South Africa’s broader efforts to modernise its energy system and tackle the frequent blackouts that have hampered the country’s economy.

By increasing grid stability and creating more capacity for renewables, the programme aims to address the ongoing load-shedding crisis.

Launched by the Department of Mineral Resources and Energy (DMRE), the programme’s first bid window targeted 513 MW/2,052 MWh of battery energy storage capacity. Five projects were awarded contracts under this round, with the Mogobe BESS facility accounting for 103 MW/412 MWh of that capacity.

The BESIPPPP’s focus on procurement of battery storage systems underlines the importance of dispatchable energy solutions.

Battery systems like Mogobe will provide the energy storage and frequency control services needed to balance supply and demand, ensuring more consistent electricity access across the grid. These storage solutions are crucial for integrating more renewable energy into the national grid, as they help offset the intermittency of solar and wind power.

The programme’s second bid window, now in progress, is targeting an additional 615 MW/2,460 MWh of battery energy storage. The DMRE has already extended its bid submission deadline to June 2024, with the third bid window opening shortly after, targetting further capacity increases.

These procurement rounds are designed to secure the energy storage needed to stabilise South Africa’s strained electricity grid and open the door for further renewable energy investments.

Roar Haugland, Scatec’s EVP for Sub-Saharan Africa, commented on the importance of this procurement-driven project: “The Mogobe BESS will support grid infrastructure and unlock capacity for South Africa’s energy system.

"By doing so, we enable not only greater electricity access but also pave the way for future renewable energy connections.”

Standard Bank supports innovative financing

Standard Bank, as lead financial arranger for the Mogobe project, continues its partnership with Scatec following the success of earlier ventures like the Kenhardt hybrid project.

“We're proud to collaborate with Scatec on the Mogobe BESS project, which represents a major step forward for South Africa’s energy transition," adds Rentia van Tonder, Head of Power at Standard Bank.

"This project, like Kenhardt, demonstrates our commitment to financing innovative energy solutions that drive both economic growth and environmental sustainability.”

With Mogobe BESS breaking new ground as one of the largest standalone battery storage systems in Africa, Scatec is set to play a pivotal role in South Africa’s energy procurement landscape.

By contributing to the stabilisation of the national grid and facilitating more renewable energy connections, projects like Mogobe are crucial to achieving the country’s renewable energy goals.

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