Planning the future of South Africa’s energy supply
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.