South Africa is making strides in renewable energy storage, thanks to a new financing deal for a 77 MW Battery Energy Storage System (BESS) project. Copenhagen Infrastructure Partners (CIP) and EDF—through a consortium including Mulilo Energy Holdings—have successfully raised debt from local financial institutions, Absa Group and Standard Bank, to fund the Oasis Mookodi BESS project. This development is a major step forward in strengthening the country’s energy infrastructure and supporting grid stability with renewable storage solutions.
The Oasis Mookodi BESS Project 💡🔋
The Oasis Mookodi BESS project is part of a larger 257 MW cluster of three battery storage projects. These projects were awarded to the Mulilo-EDF consortium under the first round of the Department of Mineral Resources and Energy’s Energy Storage Independent Power Producers Procurement Programme (ESIPPPP). The total cost for these three projects is estimated at ZAR 7 billion (EUR 367 million), although the individual value of the Oasis Mookodi project has not been disclosed.
The other two projects, Oasis Aggeneis and Oasis Nieuwehoop, have also reached commercial close, marking significant progress for the entire 257 MW BESS portfolio. Once commissioned, these energy storage systems will dispatch electricity under 15-year power purchase agreements (PPAs) with the South African government, contributing to grid reliability and reducing dependence on fossil fuels. 🔌
Role of Financial Modelling in BESS Projects 💰📊
The financing of large-scale BESS projects like Oasis Mookodi involves detailed and sophisticated financial modelling to evaluate feasibility, risks, and returns. Here are some of the crucial aspects specific to project finance modelling for battery storage:
- Debt Structuring and DSCR: The debt provided by Absa Group and Standard Bank will be paid back over the term of the PPAs. Financial models must determine the Debt Service Coverage Ratio (DSCR) to ensure that the expected cash flows are sufficient to cover debt repayments. This is critical for demonstrating project bankability to lenders.
- Revenue Streams: Revenue modelling for BESS projects typically includes income generated from the PPAs. In the context of South Africa, the government is the primary offtaker, providing a level of revenue stability. Financial models must take into account the contractual terms and escalation clauses in the PPA, which may influence income projections.
- CapEx and OpEx Assumptions: Battery storage systems require significant upfront capital expenditure (CapEx) for procurement, installation, and integration with the grid. Additionally, ongoing operational expenses (OpEx) must be accurately projected, including battery degradation costs and periodic maintenance requirements to ensure system longevity.
- Battery Degradation and Replacement: Unlike traditional energy assets, batteries degrade over time. Financial models must include degradation curves and factor in potential battery replacements or upgrades over the project lifespan. This affects both Net Present Value (NPV) and long-term profitability calculations.
- Grid Services Revenue: In addition to energy arbitrage, BESS projects often provide ancillary services like frequency regulation and reactive power support. These additional revenue streams need to be modelled to understand the project’s full economic potential.
Other Notable Projects under ESIPPPP 🌍📈
The Energy Storage Independent Power Producers Procurement Programme (ESIPPPP) aims to bring 513 MW of energy storage capacity to South Africa, enhancing the stability of its renewable energy grid. Besides the Mulilo-EDF projects, other awarded storage projects include:
- Africa Green Ventures: Awarded a 153 MW BESS project.
- Scatec: Awarded a 103 MW BESS project located near Kathu, Northern Cape, which recently reached financial close with ZAR 2.7 billion of debt from Standard Bank.
These projects are pivotal in helping South Africa mitigate intermittency challenges associated with renewable energy, thereby supporting a more resilient and sustainable energy system.
Strategic Investment and Market Growth 📊✨
The Copenhagen Infrastructure Growth Markets Fund I made a strategic move in March 2023 by acquiring a controlling stake in Mulilo Energy Holdings, positioning CIP to leverage South Africa’s growing renewable energy market. Partnerships like these bring international expertise in infrastructure development and help local markets achieve their energy transition goals more effectively.
With the completion of the Oasis Mookodi, Aggeneis, and Nieuwehoop projects, South Africa’s capacity for battery energy storage will significantly increase, enabling better utilization of renewable energy sources like wind and solar. This supports the broader energy mix transition, aimed at reducing carbon emissions and improving grid reliability. 🌱⚡
Conclusion
The successful financing of the 77 MW Oasis Mookodi BESS project by local lenders is a testament to the growing confidence in South Africa’s renewable energy sector and its potential for energy storage solutions. Financial modelling plays a key role in ensuring these projects are economically viable while also addressing the technical challenges associated with battery storage. As South Africa continues to advance its renewable infrastructure, projects like these will be instrumental in stabilizing the grid and reducing dependency on fossil fuels.
Finteam 