Wind REIPPP round 1 PPA's signed:
Everything that happened before has been the count-down - and a long and slow one at that. Monday was the rocket launch. With about 9,000 MegaWatts to be installed in the next 18 years in terms of the Integrated Resource Plan, the growth of wind power will be exponential.
South Africa is to be a beneficiary of the global economic situation and procure the wind power at extremely competitive prices - in fact, at prices that will be lower than any other bulk generation option for new power - inclusive of coal and nuclear. Three to four years ago, the global economy was white hot. Wind turbines and related equipment were almost impossible to procure in less than eighteen months and buyers were price takers. Today, with the global manufacturing capacity exceeding demand by about 80%, prices are extremely competitive and equipment is available almost immediately. This trend will probably continue for the medium term, with the result that South Africa will be greening its economy at negative cost by the purchasing of wind power.
The second windfall (no pun intended) has been that international expertise and experience have become more readily available to South Africa as the wind sectors in other parts of the globe have slowed down. This means that world-leading experts are now assisting the country in the rapid move from a negligible wind sector to a large one. In this respect it needs to be remembered that we will move from somewhere near the bottom of the global list of wind power installed to about 15th globally - within three years. Just in round 1, two wind farms of approximately 130 MW installed capacity each will be erected - enormous by international standards. There are many ways in which such rapid growth could go astray - but we have the advantage of a highly skilled pool of international developers and experts who have experienced these pitfalls and can point them out while they are still well and away and manageable.
The biggest beneficiary of this new infra-structure sector will be the South African Economy. Our electricity reserve margin is still extremely low by international standards. In 2008, during the rolling black-outs, the National Energy Regulator found that the cost to the economy of not having electricity was ZAR 75/kWh. This is about 84 times more than the cost of wind power today. More electricity will enable the economy to grow.
The consumer should also benefit in at least the short term. At present South Africa is using open cycle gas turbines to generate extra electricity in peak periods at a cost between 4 and 5 times that of wind power. The electricity generated by wind turbines will partially or wholly remove the need for this. But perhaps the biggest way in which the consumer will benefit is that, because these wind farms are built by private developers and not the national utility, the capital needed doesn't need to be raised from the rate payer or tax payer. It is provided by equity providers and commercial debt and South Africa Incorporated only pays for the output (the electricity). In practical terms it is the difference between buying a new car for cash or buying it over 240 months.
The knock-on benefits to the South African economy are likely to be considerable. Already, there has been a very significant injection to local banks, construction companies, firm of attorneys, financial advisors, logistics companies, hauliers, and many others in the services industry. One insurance expert with decades of experience says that he has never worked so hard in his life. A primary challenge to our industry will be to ensure that these benefits are leveraged as far up the value chain as possible, with the highest possible degree of local content, job creation and local manufacturing being achieved. This will ensure that the industry plays its part in creating the vision of the Green Economy Accord.
Somewhere near the end of 2013 the first commercial wind farms will be commissioned in South Africa. The wind industry has arrived and is here to stay.