Plan­ning the fu­ture of South Africa’s en­ergy sup­ply

The Star Early Edition - - OPINION&ANAL­Y­SIS - Brenda Martin

BASED on ev­i­dence of tech­nol­ogy ma­tu­rity and es­tab­lished global ca­pac­ity, wind power was an­tic­i­pated by the In­te­grated Re­source Plan for Elec­tric­ity 2010 (IRP2010) as the tech­nol­ogy most likely to con­trib­ute sig­nif­i­cantly to the fu­ture South African en­ergy mix.

The IRP2010 an­tic­i­pated that 10 per­cent of South Africa’s power mix by 2030 would be pro­vided by wind power. South Africa of­fers ex­cep­tional wind re­source po­ten­tial through­out most of the coun­try, but par­tic­u­larly along our 3 000km coast­line.

The de­vel­op­ment of any new gen­er­a­tion ca­pac­ity is steered by South African plan­ning and elec­tric­ity pol­icy frame­works and given ef­fect by min­is­te­rial de­ter­mi­na­tions. Min­is­te­rial de­ter­mi­na­tions pro­vide suitable process flex­i­bil­ity to al­low ad­just­ments aimed at ac­com­mo­dat­ing power sys­tem re­quire­ments, tech­nol­ogy de­vel­op­ments and price trends.

In 2011, favour­ing a com­pet­i­tive ten­der ap­proach, the South African gov­ern­ment ini­ti­ated the Re­new­able En­ergy In­de­pen­dent Power Pro­ducer Pro­cure­ment Pro­gramme (REI4P). After six bid rounds, this pro­gramme has proven to be ex­cep­tion­ally suc­cess­ful at at­tract­ing sub­stan­tial pri­vate sec­tor in­vest­ment into grid-con­nected re­new­able en­ergy at com­pet­i­tive prices.

Built on time

Projects have been fi­nanced eas­ily, built on time, and com­pleted within bud­get 98 per­cent of the time. The REI4P has at­tracted ap­prox­i­mately R194 bil­lion of new in­vest­ment in 4 years, of this R74bn is for on­shore wind in­de­pen­dent power pro­duc­ers (IPPs).

Wind project de­vel­op­ers in South Africa in­clude both lo­cal and in­ter­na­tional com­pa­nies, with some lo­cal com­pa­nies part­ner­ing with for­eign com­pa­nies to es­tab­lish joint own­er­ship on projects.

Of the 6 327MW re­new­able power pro­cured from 92 IPPs, 34 are wind IPPs, which col­lec­tively stand to con­trib­ute 3 357MW.

The ver­ti­cally in­te­grated mo­nop­oly na­tional util­ity Eskom has signed 64 power pur­chase agree­ments for projects pro­cured un­der the REI4P to-date. Since the end of 2015, Eskom has re­fused to sign fur­ther power pur­chase agree­ments. By 2015, un­der the REI4P, the price for wind power had dropped by 50 per­cent to R0.71/kW/h, with the price at that point di­rectly com­pa­ra­ble with the per kW/h price of new coal gen­er­a­tion. While the first three REI4P pro­cure­ment rounds have been pointed to as re­sult­ing in high tar­iffs, the price trend for wind power is clearly de­clin­ing.

Pro­duc­ing more for less

In fact, as the Coun­cil for Sci­en­tific and In­dus­trial Re­search (CSIR) has pointed out, while the op­er­a­tional so­lar PV and wind projects (of BWs 1 and 2) trig­gered tar­iff pay­ments of roughly R12bn in 2016 and pro­duced roughly 6TW/h in the same year, the en­tire BW4 so­lar PV and wind projects (BW4, BW4 Ad­di­tional and BW4 Ex­pe­dited) will trig­ger tar­iff pay­ments of merely R6.6bn per year while they will pro­duce more than 9TW/h a year.

This means that in fu­ture bid rounds, re­new­able power will cost 45 per­cent less in an­nual pay­ments while gen­er­at­ing 50 per­cent more en­ergy.

The re­al­i­sa­tion of any suc­cess­ful value chain po­ten­tial de­pends on steadily grow­ing lo­cal de­mand un­der­pinned by pol­icy cer­tainty. The power pur­chase agree­ment im­passe with Eskom is cur­rently di­rectly lead­ing to job losses within the 4-year old South African re­new­able en­ergy sec­tor.

Nev­er­the­less, to-date, the REI4P has cre­ated 26 790 jobs, of which 47 per­cent are oc­cu­pied by youth and women. The wind power value chain pro­vides sig­nif­i­cant po­ten­tial for job cre­ation.

Wind tur­bines re­quire steel, con­crete, cop­per, fi­bre­glass, ad­he­sive, core, and other in­put ma­te­ri­als to pro­duce. Steel ac­counts for al­most 90 per­cent of the to­tal ma­te­ri­als used in pro­duc­tion of wind tur­bines. This steel is mainly used to man­u­fac­ture tow­ers. Tow­ers ac­count for 14 per­cent of project value, Na­celles and hubs 30.5 per­cent, and blades ap­prox­i­mately 9.1 per­cent of project value. Given this, where wind power is con­cerned, the coun­tries that boast util­ity-scale wind en­ergy in­stalled ca­pac­i­ties are also the coun­tries that can boast large jobs-in­ten­sive wind tur­bine man­u­fac­tur­ing in­dus­try mar­ket share.

Two fur­ther ar­eas of sig­nif­i­cant job-cre­ation po­ten­tial within the wind power value chain are trans­port and con­struc­tion. Th­ese costs con­sti­tute around 13.4 per­cent of project value. In na­tional pol­icy and plan­ning, most of South Africa’s ex­ist­ing coal power plants are sched­uled to re­tire by 2050 any­way. Aligned with this, and as nu­mer­ous Eskom an­nual re­ports will con­firm, the util­ity has been plan­ning coal-fired power sta­tion re­tire­ments for many years. Nev­er­the­less, it is clear that the tran­si­tion away from a coal-dom­i­nant power mix will take decades.

So­cial plans

As owner and op­er­a­tor of coal-fired power sta­tions, Eskom and its coal sup­pli­ers must put so­cial plans in place to ad­dress the con­se­quences of plant and mine clo­sures.

Re­new­able en­ergy pro­duc­ers will cre­ate many more jobs over this pe­riod, but will not be able to ad­dress all coal-re­lated job losses. So­cial plans should con­sider how best to tran­si­tion jobs to this grow­ing new in­dus­try, as well as look­ing to other ar­eas of South Africa’s econ­omy. Brenda Martin is the chief ex­ec­u­tive of the South African Wind En­ergy As­so­ci­a­tion (Sawea).

Of the 6 327MW re­new­able power pro­cured from 92 IPPs, 34 are wind IPPs, which col­lec­tively stand to con­trib­ute 3 357MW.

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