Calls for wind energy localisation road map

June 14, 2012 by  
Filed under Green Energy News

The South African wind energy industry had the potential to become more competitive and cost effective in the long term than coal-generated energy, said South Africa Wind Energy Association representative Johan van den Berg on Thursday.

He said the current grid price of about 65c/kWh would increase by 16% a year, while the cost of wind-generated electricity had been reduced to an estimated average of 89c/kWh.

“There is a perception that what we are doing [developing wind energy] is expensive, but a coal-fired power generating plant could not be built and deliver energy at 89c/kWh,” he said.

State-owned power utility Eskom on Thursday announced that it would submit its third multiyear-price determination-period application to the National Energy Regulator of South Africa during July, in an attempt to moderate the rate of tariff increases.

Department of Trade and Industry (DTI) director for renewable energy Ntombifuthi Ntuli said that, as South Africa entered its third round of renewable energy preferential procurement bidding, the localisation target was increasing and the average price was becoming more competitive.

Round one of the preferential bidders process resulted in a selection of 28 wind projects, equalling 1 415 MW, and a wind energy localisation threshold of 25% with a 45% target. Many of the projects offered an average price of 114c/kWh.

A total of 1 820 MW was allocated to wind energy in the preferred bidding process.

Minimum targets were required to be met for companies to participate in the Renewable Energy Independent Power Producer Programme, including a 70:30 balance between price and socioeconomic development. The socioeconomic development initiatives could include local content, local ownership, job creation and community development.

Nineteen projects accounting for 1 044 MW were selected during round two of the bidding process, at a value of R28.1-billion, of which R11.8-billion comprised local content.

The local content threshold remained at 25%, but the target increased to 60%, which she believed could create a potential 7 059 construction-related jobs and 328 operational jobs. The projects could also deliver energy at an average price of 89c/kWh.

Ntuli pointed out that since 2000, manufacturing jobs declined from 1.3-million, to 1.15-million in 2011. Further, the contribution of the manufacturing sector to South Africa’s gross domestic product (GDP) dropped from 17% in 2002, to 15.5% in 2011.

Concrete Growth’s Santie Gouws said that a study undertaken by the Council for Scientific and Industrial Research, in conjunction with a number of partners, found that the construction of generically designed wind towers with South African construction materials and expertise would result in a higher number of direct, indirect and induced jobs created as opposed to the number of jobs created using imported materials. She also commented that the country’s GDP would also register a higher growth.

Ntuli added that, as round three aimed to target 65% localisation with a threshold of 40%, the percentage of local content in the wind projects would increase, while wind technology prices would decrease.

However, Van den Berg said that the expectation of further decreases in prices was unsustainable and that, should it fall further, it could result in bidders being unable to move projects forward as it would not be viable.

Meanwhile, he stated that, while the wind sector was gaining momentum, with a current 10 MW capacity, government and the private sector needed to engage and collaborate on the future development and localisation of the industry.

Department of Science and Technology (DST) technology localisation director Vincent Zondi said that South Africa needed to develop a wind energy localisation roadmap to ensure clarity and relevant guidelines.

He commented that the DST aimed, through partnerships, to increase the capability, competitiveness and scope of local production and reduce the country’s reliance on wind energy-related imports, while creating and saving local jobs.

Zondi said that the human capital, shared-technology facilities and research and development infrastructure needs of the wind energy industry had to be examined to develop a sustainable and viable industry roadmap, with established short-, medium- and long-term targets for localisation.

Further, to ensure clarity on localisation, the DTI was incorporating the South African Bureau of Standards SATS 1286:2011 standard into requests for proposals, as well as finalise the levels of required local content.

The DST would also possibly shift the third bidding process’ August deadline to allow more time for companies to adjust to the local content requirements.

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