Sarah Stands, Wind for Communities Working Group, South African Wind Energy Association at African Utility Week 2015
Sarah Stands, Wind for Communities Working Group, South African Wind Energy Association at African Utility Week 2015
Ayanda Nakedi, Senior general manager: Renewables Business, Eskom
19 May 2015
Energy Minister Tina Joemat-Pettersson reports that South Africa’s competitive-bidding model for the procurement of renewable-energy projects from independent power producers (IPPs) has delivered major cost reductions since its introduction in 2011.
Speaking to lawmakers on Tuesday, the Minister said that, in April 2014 terms, the average per kilowatt hour tariff for onshore wind had declined by 55% to an average of 62c, while the solar photovoltaic (PV) tariff had declined by 76% to 79c.
Following four bidding rounds under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), 5 243 MW had been procured, with 37 projects, or 1 827 MW, already connected the national grid.
The programme had also secured capital investment commitments of about R170-billion.
“On average, 15% of this energy was delivered to the power system during system peak periods, alleviating pressure on the power system. The energy contribution should grow to approximately 7 000 Gigawatt-hours per annum with the first 47 renewable-energy IPPs fully operational and producing at full capacity by mid-2016,” the Minister said.
By 2022, 17 000 MW of IPP capacity would be added to the South African electricity mix from renewable-energy, cogeneration, coal and gas sources, with the Department of Energy (DoE) set to procure the capacity at a rate of 2 400 MW a year.
The department had submitted new determinations to the National Energy Regulator of South Africa (Nersa) to enable the procurement of an additional 6 300 MW under the REIPPPP, while a request for proposals (RFP) for an additional 1 800 MW from existing bid submissions was on course for release by June 2015.
The DoE was also seeking Nersa’s concurrence for a determination relating to the procurement of 1 800 MW from co-generators, to be procured under a revised model.
A co-generation RFP would be issued soon and an announcement of the preferred bidders was expected during the third quarter of 2015. “The new approach will ensure that the approval process is expedited and financial close accelerated.”
Global Wind Day is a worldwide event that occurs annually on 15 June.
It is a day for discovering wind, its power and the possibilities it holds to change our world.
It is also a day for discovery of the work that has already begun by pioneers around the world.
In more than 80 countries around the world, wind farms are in operation, generating energy from a clean and renewable source.
Thousands of individuals are involved in the production of energy from the wind, but for many people, wind energy is a mystery.
As the world celebrates Global Wind Day 2015, South Africa proudly showcases its wind energy industry with a short film that shares its immense achievements since 2011.
In appreciation of Global Wind Day being in its seventhyear, the South African Wind Energy Association (SAWEA) has produced this film which highlights seven amazing facts about wind power in South Africa, along with footage from some of the outstanding community projects already underway as a result of funding from our wind farms.
SEVEN AMAZING FACTS ABOUT WIND POWER IN SA
Fact 1: It’s here
South Africa has gone from having just 8 wind turbines in 2012 to 294 – just 3 years later.
Fact 2: It empowers communities
More than ZAR 7 Billion has already been allocated to community uplift and socio-economic development from wind farms being developed under the Government’s Renewable Energy Independent Power Producers Procurement Programme (REIPPPP). This figure will increase significantly over the next three to four years as thousands more megawatts of wind energy are built.
Fact 3: It creates jobs
19, 414 person years of jobs were created by wind farms given the go ahead in REIPPPP Rounds 1 -3. 93.5% of those jobs were/are being carried out by South Africans and locally trained technicians.
Fact 4: It avoids load shedding
Wind energyguaranteed that 117 hours of load shedding were avoided in 2014 – this equals 9 Gigawatt hours and an equivalent value of ZAR 800 million. Wind energy also saved ZAR 1.7 billion in coal and diesel fuel in 2014.
Fact 5: It’s cheap
Newest prices for wind power under the REIPPPP are 40% cheaper per electricity unit than the newest coal (based on latest estimates for Medupi Coal Power Station, currently under construction).
Fact 6: Right now, it’s free
Wind power in 2014 saved more money than it cost: it was cash positive by ZAR 300 million (that's cash benefit for Eskom directly) and it avoided ZAR 800 million worth of unserved energy.
Fact 7: It’s all built with private money
ZAR 55 billion of private funding has been invested in the wind industry over the last 3 years. South Africa only pays for the power produced.
One final thought to share: If 294 wind turbines on the ground can do this for our country and our people, think what 2,500 will do by 2020 – that’s the plan!
We hope you will join us in celebrating our flourishing industry by sharing our film with the world to ensure everyone can share in our success.
For further information or to interview SAWEA CEO Johan Van den Berg, please mail: firstname.lastname@example.org or call +27 (0) 11 2140664.
Follow us on Twitter @_sawea
SAWEA is a non-profit, industry organisation representing the wind industry in South Africa. Its members include both national and international entities active in the entire wind energy supply chain. Its aim is to promote the sustainable use of commercial wind energy in South Africa; to contribute knowledge and human resources to the streamlining of the policy and regulatory framework for wind in SA; to facilitate synergy between the growth of the industry and the achievement of the broader socio-economic aims of Government (including training, job creation and localisation); to disseminate information; to act as a focal point for discussion between members, government, the media and the public.
For more information visit: www.sawea.org.za
Join us at our annual conference in association with the Global Wind Energy Council: Windaba 2015 on November 4-5 in Cape Town www.windaba.co.za
ENGINEERING NEWS – 8 May 2015
By Natalie Greve
The University of the Western Cape (UWC) has launched an energy storage innovation facility that aims to create an interface between energy storage technology development projects, innovation partners and potential industrial customers in need of advanced energy storage solutions, to cross the so-called “innovation chasm”.
The university said the strength of the Energy Storage Innovation Lab (ESIL) lay in the development, validation and localisation of wide-range energy storage systems for the South African industry and community.
According to ESIL head Professor Bernard Bladergroen, the facility was the culmination of years of research, development and innovation at the UWC’s South African Institute for Advanced Materials Chemistry in the field of lithium-ion (li-ion) and sodium-halide batteries, battery modules and integrated energy storage systems.
ESIL would support an existing research programme aimed at driving the local production of li-ion batteries at a competetitive cost through the use of local raw materials.
A primary output of this programme was the development of a li-ion battery cell production line, where battery modules suitable for automotive and renewable-energy system battery packs could be manufactured on a pilot scale.
The laboratory also boasted an extensive network with energy storage developers, manufacturing and system integrators from South Africa, China, India, the US, Germany and other countries.
It would further develop low-cost thermal cells for grid-scale stabilisation and energy storage.
Bladergroen added at the launch of the facility on Wednesday that, with the current strain on the electricity grid and the growing deployment of renewable energy, there was a clear need for reliable and cost-effective energy storage systems.
“It is the right time for customers, innovators, researchers and entrepreneurs in the energy storage arena to get together and work towards sustainable solutions.
“Energy storage can mitigate the negative effects of power outage, assist in improving national grid stability and enable South Africa to tap into its vast renewable-energy potential, specifically from wind and solar sources,” he commented.
23 April 2015
By Johannes Horstmann
In a long awaited announcement, which attracted intense media attention, the South African Department of Energy (DoE) recently published the list of preferred bidders for round 4 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) – 415 MW of solar photovoltaic (PV) and 676 MW of wind projects will now soon be constructed.
Favourably to the economy, electricity prices have again dropped significantly. Solar PV generated electricity will cost on average R786/MWh, 29% cheaper in real terms than round 3 projects. Similarly, electricity generated by wind is priced at R619/MWh, a drop of about 25% in real terms. This followed the trend of rounds 2 and 3 where prices already fell by between 30% and 40% in each round for both technologies.
A hot topic for the market is now: how far can this go? How will bidders price their projects in the next tendering rounds 5 and 6?
From a pure time trend perspective, it seems as if PV prices could decrease further by some 19% and wind by 8% in real terms (see graphics above). Those tariffs would follow a nice statistical learning curve. But can the market deliver these price cuts?
Developers and financiers will review their projects with regards to development cost, engineering procurment and construction cost, cost of capital, operations and maintenance expenditure and potential energy yields on a case-by-case basis.
However, the market is maturing and is becoming more and more competitive. The DoE received 77 bids in August 2014 and only awarded preferred bidder status to 13.
From market responses, transaction costs and return on equity have decreased and are starting to resemble international benchmarks more closely, as healthy competition is still inducing development efficiencies. Favourable project development locations are also becoming scarcer with incumbent projects having secured the best areas, limiting the potential to improve energy yields further. In addition, grid connection is now becoming more difficult, creating cost pressure for developers.
International learning rates (the level of cost reduction when doubling the capacity), estimated and published by institutions such as the International Energy Agency or the International Renewable Energy Agency, are currently between 18% and 22% for solar PV and between 5% and 9% for onshore wind.
These global trends and the capacities for the next bid windows could translate to levelling out bidding prices. Solar PV tariffs could decrease by only 6%, which would just cancel out inflation effects.
Notwithstanding the above, this aligns with the Integrated Resource Plan update report for crystalline and thin film PV module costs (7% and 6% decrease per annum respectively). Wind prices could fall by 3% in real terms or a slight first-time rise in nominal terms.
It is also worth benchmarking the South African practice with international markets.
The Dubai Electricity and Water Authority announced in January this year a new world record for solar PV. It awarded a consortium, led by Saudi Arabia’s ACWA Power, a 200 MW project based in the United Arab Emirates for not-yet-seen 5.84c/kWh (US cents).
Notwithstanding, the consortium has an advantage over the developers in South Africa – financing cost. The availability of a 27-year tenure for a loan of $344-million and a 4% interest rate are the biggest factors for the low bid.
To illustrate this, with a shorter tenure of 15 years, higher interest rates of 10% and amid higher inflation of 6% (as seen in the South African market), indicative modelling shows that ACWA Power would have needed to bid with 7.2 c/kWh (US cents). This is interesting, because this is exactly the average PV price of the latest round 4 projects, in 2014 US dollar terms.
In conclusion, based on the above observations, South Africa may now have reached global best-practice benchmarks and future prices may follow closer to those internationally observed market movements.
These international learning rates may be much less than the cost reductions experienced in the past few years. Developers and financiers will follow these trends with great interest to inform their own future bidding strategies.
This projected change in trends should not be discouraging but rather be seen as a reflection of the positive development of the renewable energy programme in South Africa, and the positive impact the REIPPPP is having on the South African economy as a whole.
A strong regulatory environment for renewables has led to this market confidence that increased competition and drew investors and project development companies to South Africa. It shows the achieved efficiency of the IPP programme and provides confidence for the prospects of new IPP programmes for coal and gas that are currently being implemented.
Let's face it – extreme weather, floods and droughts, melting ice and disappearing species as a result of climate change are enough to ruin anyone's day. So here's some good news for a change, brought to you by the wind industry:
1. Wind power had a fantastic year in 2014, led by China which installed more than 23 Gigawatts (GW) of clean renewable wind energy, enough to power about 25 million Chinese homes. The industry set a new global record with a total of more than 51 GW installed in a single year. Our new projections in our hot off the press Global Wind Report show that the trend will continue for the rest of the decade, with annual installations reaching 60 GW/year by 2018, and supplying 6-7% of global electricity supply by 2020, up from about 3% at present. Denmark already got 39% of its electricity from wind last year; Spain 20%, Germany almost 10%, the US 5%. The even better news is that most of the new growth now is in emerging markets, where emissions growth is slowing because of wind, solar and other renewables, and increasing energy efficiency.
2. Wind power is now the cheapest way to add new power generation to the grid in a long and growing list of countries: Brazil, South Africa, Mexico, Turkey, New Zealand, Australia and in large portions of the US and China. In fact, most of the growth in 2014 was not driven by climate policy, but rather by wind power's competitiveness, by its contributions to energy security, price stability, and the economic development and jobs that it provides. Add to that the need to rid the large cities of the developing world from the choking smog which threatens to make them unlivable, and wind power is increasingly becoming the power option of choice for large scale, clean electricity to power economic development. In the second quarter of this year wind will surpass nuclear in terms of total installed capacity globally, although it will be a few more years before it surpasses nuclear in terms of production.
3. China is set to pass the government's target of 200 GW of wind power by 2020 at least a year early, and last year China installed more renewable energy capacity than coal for the first time. Spurred on to clean up the air in Beijing, Shanghai and other urban areas, and to decrease its dependence on coal and contribute to stabilizing the climate. Wind is not the only technology growing by leaps and bounds: China now has the world's largest wind market, the world's largest solar market, and has twice as much solar hot water capacity as the rest of the world combined. While it is always the case that China could do more, they have become renewable energy leaders in an extremely short time.
4. Latin America's wind energy markets are booming, led by Brazil, which has come from nowhere to join the top 10 wind energy markets in 2014, and wind is on track to be the #2 energy source in that country by 2017 or so. Mexico's energy reform is about to unleash a renewables boom in that country, which will play an important role in meeting its recently announced ambitious climate targets; and Chile, Uruguay, Costa Rica, Nicaragua, Honduras and Panama all have major new wind installations.
5. Africa is moving to exploit its massive renewable energy potential to create clean, affordable power to increase energy access and fuel economic growth. Nearly 1 GW of new wind power was installed in Africa in 2014, and we expect the market to far surpass that number in 2015, and not look back. Led initially by South Africa, Morocco and Egypt, there are a host of new markets springing up in Ethiopia, Kenya, Tanzania and Ghana, with many more to follow. In fact, we expect a race between Africa and Latin America to be the 4th major market after Asia, Europe and North America. Latin America is leading at the moment, but Africa may catch up quickly.
Wind power's boom is not the only story in the renewable energy world. Solar PV is making great strides as well, and governments in Europe and elsewhere are making plans for managing an electricity system that is dominated by clean, affordable energy from the wind and sun. Whatever comes out of the Paris climate summit in December, the renewable energy revolution is well underway, and it's unstoppable.
Follow Steve Sawyer on Twitter: www.twitter.com/@GWECGlobalWind