SA at work: Our green is as good as gold

2013-12-15 14:00

Despite its growing pains, South Africa’s renewable energy expansion programme is viewed as one of the biggest in the world.

At the moment, more than 3?900 megawatts (MW) of renewable energy projects are under construction across the country at a cost of about R150?billion.

The roll-out is now being driven by the Presidential Coordinating Commission, the body set up by President Jacob Zuma in 2011.

The plan coordinates infrastructure relating to energy, transport, broadband and social infrastructure such as health and education.

The programme will see renewable, independent energy coming on to the grid, giving South Africa’s pressured grid an added injection of greenenergy.

Just under 7?000MW of renewable energy power will be produced under the programme and close to 4?000MW has already been allocated.

Solar and wind farms are rising between the koppies on farms from the Soutpansberg in Limpopo to Boshoff in the Free State and De Aar in the Northern Cape.

Zahra Omar, Cliffe Dekker Hofmeyr projects and infrastructure practice director, says that since its roll-out, the programme has become hugely successful and is attracting important investment.

But the country’s Renewable Energy Independent Power Producer (IPP) Procurement Programme has not been without controversy.

Before 2011, it was slow to get going and was stuck in politics. But after South Africa hosted the annual climate change conference, COP17, in Durban at the end of 2011, the process started to gather momentum.

The tender process to select preferred bidders consists of rounds or windows where they present their cheapest tariff and most competitive economic development plan to a panel that scores each bidder.

But it is a strict and bureaucratic process.

Successful bidders are then awarded a 20-year Power Purchase Agreement with Eskom as the offtaker.

Bidders trying to have their projects approved by the department of energy have described the process to be selected as a preferred bidder as one of the most complex bidding processes ever seen in the world in this industry.

Siemens says it has one of the strictest grid codes to incorporate clean energies on to its grid.

Industry research also indicates that the transaction costs for IPPs to comply with the requirement of producing each megawatt of power is probably the highest in the world.

Yet power producers from across the globe are flocking to South Africa.

The department appointed 17 new renewable energy developers last month which were selected in the third window.

This will add to the 47 other preferred bidders already selected in the previous bidding windows.

Countries such as Spain and Italy are showing interest in investing in the projects as are nontraditional investors like search-engine giant Google, which recently took a stake in a solar photovoltaic plant, says Omar.

While much of the funding for the projects originates from private or overseas investors, South African banks like Nedbank have also invested considerable resources in the programme.

Nedbank Capital has underwritten debt funding for seven of the 11 debt-funded projects selected in November.

Energy minister Ben Martins said at the announcement last month that investors were giving South Africa’s programme their vote of confidence, with R15.6?billion of foreign funding earmarked for the 17 new projects.

Solar energy group SunEdison also recently announced it had secured R1.8?billion in development finance from the US government’s Overseas Private Investment Corporation for its 60MW Boshoff solar park project in the Free State.

Johan van den Berg, CEO of the SA Wind Energy Association, said at a Nedbank dialogue session that foreign companies had benefited greatly from the programme, but that if South Africa wanted to establish a viable local green economy, it was critical that local firms also come to the party.

The wind energy industry estimated at the recent Windaba that about 1?200MW would be under construction at the end of this year.

And with a good wind blowing, they hope that the target of 9?000MW could be expanded by 2030.

The South African Photovoltaic Industry Association has also called on government to expand solar capacity because of the huge manufacturing advantages it could bring to a new green industry in South Africa.

More rounds and windows are planned for the future.

But Martins is cautious about adding more capacity than that planned for by government without proper research.

He says expansion is definitely up for consideration, but the government will rule on this after an internal assessment was completed.

Already, projects selected in the first window are coming online. Solar energy has been especially popular.

Global energy provider Scatec Solar headed a utility-scale renewable energy facility plant in the Northern Cape that connected to the grid in September, the first to do so in South Africa.

The 75MW Kalkbult solar photovoltaic PV plant near Petrusville in the Karroo will generate 135 million kilowatt-hours a year, equivalent to the annual electricity consumption of 33?000 households.

It was fully commissioned in 10 months with construction starting last November and electricity delivery to the grid in September.

And two weeks ago, the 50MW De Aar solar power project, which is majority owned by power company Globeleq, started supplying power into Eskom’s power grid in the De Aar municipality.

A month ago, the Droogfontein solar farm near Kimberley became one of the first batch of solar projects to export power in South Africa onto the national grid.

At the moment, the 50MW farm is consolidating its Eskom link and testing the waters before it is expected to go fully commercial in April next year.

However, wind energy is becoming very competitive in the bidding process.

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