Industrial investment will flow if South Africa ‘consistently’ builds 1.6 GW of wind yearly
Publication: Engineering News
Publication Date: 2020/10/27
By: Terence Creamer, Creamer Media Editor
Leading wind-energy project developers and original equipment manufacturers (OEMs) are convinced that South Africa’s plan to install 1.6 GW of new wind capacity yearly until 2030 is more than sufficient to attract large-scale industrial investment.
These captains of industry warn, however, that the country will need to back-up the policy certainty currently being provided by the Integrated Resource Plan 2019 (IRP2019) with consistent implementation.
Regular and reliable procurement at the volumes outlined in the IRP2019 is particularly important, they say, to rebuild investor confidence, which was shattered by government’s previous failure to implement policy, which resulted in a five-year stall in new procurement and a three-year delay in the finalisation of projects procured in 2014.
Speaking during the opening virtual plenary session on the second day of the 2020 edition of the Windaba event, Enel Green Power country manager William Price said that the Economic Reconstruction and Recovery Plan unveiled by President Cyril Ramaphosa on October 15 set a positive tone for the industry, particularly in light of the emphasis given to renewable energy in the plan.
However, South Africa still needed to show its full commitment to developing a friendly environment for investment, recognising that the “momentum of capital is consistency”.
Similarly, Mainstream Renewable Power Developments GM Hein Ryneke said that, while the IRP2019 represented a “significant step in the right direction”, an atmosphere of risk lingered, owing to South Africa’s recent poor record in implementing energy policy.
The five-year hiatus in procurement had also exacted a toll on local industry, with the highest-profile casualty being the DCD Wind Towers manufacturing facility, established at Coega, in the Eastern Cape, which had since been liquidated and its equipment auctioned off.
Vestas Southern Africa business development director Malte Meyer said the failure demonstrated how fundamental policy certainty and consistent implementation were to industrialisation success.
A second lesson from the failure, he added, was that South Africa’s relatively remote location from other wind markets made it impossible for DCD to swing its production towards export markets, as these were generally served by factories with bigger efficiencies of scale.
Therefore, to promote wind industrialisation consistent domestic volumes would be essential, even though some export opportunities might begin opening up in the rest of sub-Saharan Africa in future.
Siemens Gamesa MD Janek Winand concurred, noting that some suppliers were still departing South Africa, despite the favourable IRP2019 outlook.
These disinvestments were arising as a result of the gap that had emerged between the implementation of Renewable Energy Independent Power Producer Procurement Programme round-four projects, which were currently entering into production, and the start of procurement for the fifth bid window.
Some suppliers were hoping to bridge the gap through successful bids under the Risk Mitigation Independent Power Producer Procurement Programme of 2 000 MW of ‘emergency power’, but others simply lacked the resources to do so.
Nevertheless, the recent gazetting of the Ministerial determination opening the way for the procurement of 4.8 GW of wind by 2023 could stimulate industrial investment again, including in steel tower fabrication, as South Africa’s remaining tower plant manufacturers did not have sufficient capacity to supply the full demand.
It was possible, however, that developers could instead opt for concrete towers, which had become increasingly popular.
In fact, Nordex Group MD Enrique Lopez Ponce indicated that it had already established four factories in South Africa to support projects using concrete towers, which some IPPs favoured largely because it gave them more cost certainty and control over their supply chain and logistics.
Concrete towers were also relatively labour intensive and opened up construction opportunities for members of surrounding communities.
As with all the other participants, though, Lopez Ponce also argued that without “policy certainty, volumes and continuity” it would be all but impossible to stimulate industrial investment around the wind sector.
There was less agreement, however, as to whether consumers should be expected to pay a price premium to support industrialisation, with some in favour and others arguing that the main goal should be to ensure that the wind plants produced the lowest-cost electricity possible.
One proponent of a possible premium was Enercon country sales manager Allan Palmer, who argued that South Africa should possibly consider using its wind deployment to develop the country as a niche producer of 2-MW to 3-MW turbines, rather than seeking to deploy the new 5-MW-type solutions that were emerging.
Palmer argued that, although the cost of electricity would be marginally higher, South Africa could secure low-cost tooling and use these machines to produce turbines not only for its own industry, but also for the rest of Africa.
Regardless of the approach South Africa adopted towards localisation, all participants agreed that there was significant opportunity to attract investment around the country’s renewables-heavy energy plan.
There was an initial opportunity to further localise towers and tower internals and to consolidate the role that local firms were already playing in logistics, construction, operations and maintenance.
Once the programme was fully under way the next step could be the assembly or manufacture of nacelles and possibly also the establishment of a blade facility, particularly if these blades could be used by multiple OEMs.
In all cases, skills development and transfer would be key to ensuring the creation of a sustainable industrial platform.
Edited by: Creamer Media Reporter