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New power producers overwhelm ‘weak’ grid

THE government’s plan to bring more power into the national grid through procurement from independent power producers (IPPs) has a hit a technical obstacle — Eskom cannot connect all successful projects from the third window of the renewable energy bid until the grid is strengthened.

The procurement of energy from IPPs is the quickest way to increase SA’s energy supply, which will be precarious for the next five years.

Both Eskom acting CEO Collin Matjila and Public Enterprises Minister Lynne Brown have emphasised the importance of IPPs in closing the power gap.

Eskom has successfully facilitated the connection to the grid of 21 renewable IPP projects from two earlier windows, which will provide 1,076MW.

Just more than 467MW of this is now available to the system. An additional 17 renewable projects were approved in round three, to deliver 1,456MW.

But growing congestion on the grid as more producers begin to feed in at different points, insufficient investment in the backbone of the grid, and a failure to consider in advance the technical difficulties of connection for some of the projects have led to the finalisation of round-three projects stalling.

Because of the technical difficulties with connection to the grid, several bidders have received quotes for connection that are far higher than Eskom indicated at the start of the bid process last year. This has led to disputes, with the result that many round-three projects are unable to reach financial closure, a prerequisite for construction to begin.

Department of Energy acting director-general Wolsey Barnard said in an interview on Wednesday that the problem was primarily "a technical one". It was not possible to know at the start of the bidding process which projects would be selected and which would be technically difficult and therefore also more expensive to connect to the grid, he said.

"The delay is caused by technical issues. As Eskom works with very tight budgets and a tight timeframe, if there is something that they haven’t had on the radar when the bids close, they can find themselves with too many bidders that are all technical problems for them," Dr Barnard said.

The department evaluates and selects projects, but connection to the grid and the purchase of power are handled by Eskom.

Dr Barnard said the difference between the cost of connection at the start of the bidding and the cost once all the information was available at the end, had led to "quotations which some of the bidders did not agree with".

South African Photovoltaic Industry Association chairman Davin Chown said the variation in the costs for preferred bidders were from 8% to 70%. Because bidders were selected on price, no account was taken in the selection stage of how difficult or practical it was to connect to the grid.

"The priority for South Africa, given the crisis we are in, should be to award the projects that are quickest to connect," Mr Chown said.

The understanding had been that bidders would do the "shallow reinforcement" of the grid at substation level and Eskom the "deep reinforcement" further up the grid. "Eskom are now saying they have to look for more money to upgrade some parts of the grid."

University of Cape Town Graduate School of Business professor Anton Eberhard said it was in the deep connections that the grid needed strengthening.

"Eskom hasn’t invested sufficiently in strengthening the backbone to evacuate power. It is an issue of lack of co-ordination in planning and Eskom not taking care around preparing for the IPPs," he said.

Democratic Alliance energy spokesman Lance Greyling said the urgency of connecting IPPs to the grid was underlined by the recent news that the performance of Eskom’s fleet had deteriorated badly.

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Jeffreys Bay Wind Farm Powers Up

Over the past year, travellers on the N2 passing the turnoff to the surfing paradise of Jeffreys Bay have noticed the appearance of 60 space-age wind turbines towering above the landscape.

Social media reaction to the turbines, covering 3,700 hectares, has mostly been “enormously positive”, says Mark Pickering, GM of Jeffreys Bay Wind Farm.

Mikael Karlsson, CEO of the farm’s developer, Globeleq, asks: “What would you rather have: wind turbines or the plume of smoke from a coal-fired power station?”

Whatever one might think of the visual impact, the benefits of the wind farm, the biggest in Africa , are wide-reaching.

It represents income for the local community; additional and clean electricity for the country; technological and skills development, and a positive experience for the wind farm’s foreign developers that is encouraging them to invest more in South Africa.

The shareholders in the R3bn wind farm are a consortium including Globeleq, an independent power producer focused on Africa and the Americas; Old Mutual’s Ideas Managed Fund, in which local pension fund money is invested; black-owned Thebe Investment Corporation; a global renewable energy developer, Mainstream Renewable Power; the Amandla Omoya Trust, a local community entity with a 6% stake; Enzani Technologies and Usizo Engineering.

The farm was funded partly through equity and partly through debt. The lead arranger was Absa Capital. It has taken only three years from the consortium being awarded the project in the first bidding round of the renewable energy independent producer programme to bringing it into production on time and on budget in May.

Department of Energy deputy director-general of energy programmes and projects Wolsey Barnard said at the wind farm’s inauguration ceremony on Wednesday that South Africa has 14 active independent power producers.

About 1,000 MW of renewable power is due to come on line by the end of this year — there are 19 other projects under construction.

Dr Barnard says Energy Minister Tina Joemat-Pettersson will shortly announce the composition of an energy advisory committee, including a broad spectrum of energy experts. The government understands that it needs to facilitate, not hamper, energy projects.

The Jeffreys Bay Wind Farm can generate up to 138MW of electricity when all its turbines are operating at full speed. Eskom’s total power capacity is about 42,000MW.

Construction manager Tom Thoroughgood says the plant is expected to produce on average 41% of its maximum capacity, given the vagaries of wind.

Each turbine at Jeffreys Bay has an 80m tower, three 49m-long blades , a nacelle containing the generator and gearbox, and a transformer box on the ground . The power is fed into a 132kV transmission line from a substation built to Eskom specifications .

The land the turbines straddle is leased from eight farmers. At peak construction there were 602 people on site, of whom 45% were locals . In its operating phase the wind farm will employ only 11 people but the community will receive dividends to spend on development projects.

The minimum local content requirement in round one was 25%, achieved through the project’s civil works, cabling, transformers, substation and project management, says Mr Pickering . In subsequent bidding rounds, local content requirements have increased, encouraging the growth of new manufacturing industries .

Mainstream CEO Eddie O’Connor says the company will participate in the fourth bidding round, even though the price for renewable energy has fallen “dangerously low” since the first round as a result of increased competition .

Last year, another consortium including Mainstream was awarded 360MW of wind energy projects . It will finalise funding later this year and start construction soon afterwards. These projects will bring Mainstream’s investment in renewable energy in SA to R9bn. Its projects in the construction or development phase total about 5,000MW of power.

Mr Karlsson says there are several factors behind the success of the Jeffreys Bay Wind Farm.

The government provided clear and transparent procurement rules and worked with local and international advisers to ensure that the contracts attracted capital.

The private sector also played a role, through the consortium investing part of the capital and the community welcoming the project, he says.

Author: Charlotte Matthews
Source: BD Live

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Renewable energy projects deliver power to Eskom REIPPP initiatives

Standard Bank has been instrumental in funding more than 940MW of renewable energy as part of Eskom’s Renewable Energy Independent Power Producer Procurement Programme (REIPPP) initiated by government. Of these projects, three were connected to the Eskom grid in 2013 bringing 121.5MW of renewable energy production to the national grid. This is enough to power over 65,000 homes.

“The drive towards renewable energy is developing an entirely new energy market in South Africa, which requires both specialist skills as well as innovative funding models,” said Rentia van Tonder, Head of Renewables for Standard Bank.“ Given that these projects are greenfield investments for a newly-created consortium with  own equity, we opted for a project finance model with a fairly long repayment term as the facility is effectively unsecured backed by a 20 year PPA supported by the SA government.”

The Standard Bank-funded wind farm project in South Africa’s Eastern Cape Province has become the first of Eskom’s REIPPP initiatives to reach financial close in late 2012 and begin successfully delivering power to the national grid in 2013.

The 27MW (MW) MetroWind Van Stadens wind farm project, which was built at a total cost of R599m, is projected to have a 20-year life span and deliver 80,000MW hours of electricity a year to between 5,000 and 6,000 households in the Nelson Mandela Bay Metropolitan Municipality. Standard Bank concluded an agreement in October last year to provide R450m in debt financing to a consortium comprising Basil Read Energy, Afri-Coast Engineers, Old Mutual, Spilled Water Renewable Energy and the Van Stadens Community Trust, for the construction of the project.

The wind farm consists of nine wind turbines situated in the Van Stadens and Blue Horizon Bay communities and will produce enough power to meet almost 50% of Nelson Mandela Bay’s target of generating 10% of electricity from renewable sources. This development will offset approximately 80,000 tons of carbon dioxide emissions a year as well as offset the use of 80 million litres of water that would have been used for power generation from coal fired power plants  in the process. The nearby settlements of Fitches Corner and Witteklip have already benefited from the project thanks to the installation of solar-powered street lights in their communities.

“While this is a landmark project for the development of sustainable wind-powered energy in South Africa, it is also an important contributor to social upliftment in the area.” said Ms van Tonder.

As lead arranger and underwriter of the transaction Standard Bank was able to call on its strategic relationship with Industrial and Commercial Bank of China (ICBC) for the provision of over R190m for the project’s financing.

Standard Bank was also the sole mandated lead arranger and underwriter of both the Herbert and Kalkbult renewable energy projects in South Africa’s Northern Cape Province. Herbert is a 22 MW photovoltaic project that signed power purchase agreement with Eskom. It became fully operational on 7 April 2014 but has been producing early operating revenue since November 2013. Herbert is owned by AE-AMD Renewable Energy (Pty) Ltd, Old Mutual Ideas Fund, Tenesa, Exoport and the Herbert Educational Trust No 1, a local community trust. The construction of Herbert was completed on time with SunPower as the Contractor and module supplier. SunPower will also be responsible for the operations phase of Herbert.

The third commissioned plant, Kalkbult is a 72.5 MW photovoltaic power project that will produce clean energy that will also be sold to Eskom. The project, whose shareholders include Scatec Solar AS, Norfund, Old Mutual Ideas Fund, Stanlib, Simacel and the Kalkbult Local Community Trust, has been connected to the grid since September 2013 and will provide Eskom with up to 137,000,000kwh of power per annum, which is enough electricity to supply 33,500 households per annum. The Kalkbult project was one of the first renewable energy projects under REIPPP to connect to the grid and begin supplying clean energy to Eskom.

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The Untapped Potentials Of Wind Energy

VENTURES AFRICA – What is one of the most wasted sources of energy – a sustainable approach for delivering electricity to off-grid villages across the continent – it must be wind energy.

In the light of the global recognition for delivering electricity beyond city and industrial boundaries, EnergyNet has partnered with ‘Wind for Prosperity’, a Vestas initiative to deliver electricity to the poorest off-the-grid citizens across Africa.

More than 1.3 billion people across the globe lack access to affordable and reliable electricity. This has created a systemic and colossal backlog of demand on grids that only support urban and peri-urban areas. ‘Wind for Prosperity’ seeks to support government’s plans for industrial electrification by delivering electricity beyond the grid. Africa needs no less than $40 billion to supply at current rates of electrifications and this must be scaled to meet off-grid supply plus infrastructure.

Africa's most underused energy source has the potential to greatly reduce energy deficit across the continent

Africa’s most underused energy source has the potential to greatly reduce energy deficit

‘Wind for Prosperity’ will create a world of new opportunities by accelerating access to clean water, healthcare, irrigation, education, communications infrastructure, and other social and economic benefits. It is different to most other corporate initiatives to alleviate poverty as the concept is commercially based and is more scalable and sustainable than efforts purely reliant on philanthropy and donations – it is business as a force for good.

Morten Albæk, Group Senior Vice President and CMO of Vestas commented “Every day at Vestas we think about solutions to make the world’s energy mix more sustainable and maintain our position as the global wind leader and technology developer. With more than 61 GW of installed wind turbines, comprising close to 19% of total global capacity, we understand the importance of delivering viable energy programmes and we’re delighted to partner with EnergyNet in Africa to increase the chances of delivering electricity to important corners of the continent, often overlooked due to challenging financial conditions.”

A study by the World Future Council (WFC) and the Heinrich Böll Foundation found that Renewable Energy Feed-in Tariff (REFiT) policies are a favourable tool to cascade renewable-energy development in Africa.

REFiTs has successfully increased the use of renewable technologies worldwide, with 65 countries implementing some form of a REFiT by 2012. This drove 64% of global wind installations and 87% of the photovoltaic capacity installations worldwide.

EnergyNet’s MD Simon Gosling added, “The potential for such an off-grid solution to support government objectives is huge both economically and politically and we’re delighted to partner with Vestas on such a potentially game changing venture; indirectly supporting industrial development, directly supporting local development.”

Excitingly ‘Wind for Prosperity’ also has the ‘EnergyNet Student Engagement Initiative (ESEI)’ which supports African student engineers from across the continent.

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Nelson Mandela Bay on track as Africa’s ‘Green’ Energy hub

The Coega Development Corporation (CDC) – operator of the Coega Industrial Development Zone (IDZ) and the Eastern Cape’s leading catalyst for socio-economic growth – announced recently that Nelson Mandela Bay is well on its way to become the country and continent’s hotspot for ‘green’ energy components manufacturing and technologies.

This according to Sandisiwe Ncemane, CDC investment manager: energy division. In its 2013/14 financial year, the CDC secured foreign investments close to R1bn for ‘green’ energy component manufacturing in South Africa.

Investments attracted to the Coega IDZ in the last year include JA Solar and Powerway’s now operational R660m solar module manufacturing facility, and a R127m renewable energy components manufacturing facility owned by Powerway/Sungrow which will commence with production within the year.

A new ground-mounted solar energy harvesting plant was also commissioned for the Coega IDZ and announced by the CDC earlier this month.

The R300m DCD Wind Towers production facility also went online this year, and the plant will have an estimated annual production output of 110 and 120 wind towers.

Ncemane  said, “The CDC profile as a green technology manufacturing hub of South Africa has gained traction in renewable energy projects.  On-grid and off-grid green energy component manufacturing which includes, among others wind towers and solar photo voltaic (PV) panels in the Coega IDZ is alive and well.”

“These investments are critical in supporting 64 renewable energy projects valued at R100-billion approved by South African government since 2011, which will produce 3 900 megawatts (MW) for South Africa’s energy mix through wind, solar photovoltaic and concentrating solar power,” she said.

The organisation remains bullish over the future of alternative energy component manufacturing investments in the new financial year, according to Dr Ayanda Vilakazi, CDC head of marketing and communications.

“New legislation, government’s robust renewable energy strategy and other value propositions inherent to Nelson Mandela Bay will support future investment and investment interest in the Eastern Cape’s green manufacturing economy,” Vilakazi said.

“The new SEZ Act has introduced significant tax benefits, a reduction of red tape and labour productivity-enhancing mechanisms to investors, which will make the Coega IDZ attractive as a location for investment.This further supported by Nelson Mandela Bay’s long-standing position as an industrial and manufacturing economic hub and, the availability of deep-water sea port, and a commitment towards green energy research by our local university. 

“The sum of these parts provide a unique arrangement of value propositions which is driving the attraction for foreign and local investment in the Coega IDZ,” concluded Dr. Vilakazi.

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Renewable Energy Professional Training Going Carbon Neutral

The Energy Training Foundation (EnTF) will be hosting its second Certified Renewable Energy Professional (REP) training programme at the carbon neutral hotel and conference venue in Cape Town – Hotel Verde – from 14 – 17 October 2014. A tour of the hotel explaining its green aspects will be hosted on the 13th of October followed by a welcoming networking function where delegates and their guests will be able to view exhibits followed by a short welcoming speech and relevant speakers in the industry.

The REP training programme will be presented by Dr Stephen Roosa from the USA, and EnTF will also be running a train-the-trainer programme during this time to create local lecturing expertise in REP. REP is a copyright training course of the Association of Energy Engineers (AEE) in the USA, and EnTF is the sole approved training partner of the AEE for the southern African region. According to EnTF, AEE’s qualification programmes are recognised in 90 countries, and are unique in that experiential background is recognised for obtaining certification, as well as having to pass the AEE examination with 70%; no prior learning is necessary to attend REP; and REP carries 3 CPD credits with ECSA.

The training programme will take place at Hotel Verde, which is platinum accredited by LEED, and incorporates sustainability into its design and operations – evident from its grey water plant, water tanks, green roof, wind and PV generation, eco-pool, energy efficient lighting and use of natural lightingand other initiatives.

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2014 renewable energy investments in sub-Saharan Africa to reach $5.9 billion

Bloomberg reports that renewable energy investments in sub-Saharan Africa (predominantly South Africa, Kenya and Ethiopia) will in 2014 reach the $5.9 billion mark, and grow to $7.7 billion in 2016. These investments far-outweigh any efforts to increase renewable capacity in the region between 2000 and 2013. Approximately 1.8 gigawatts of wind and solar power capacity, excluding sizable hydroelectric power plants are still to be commissioned this year.

“What is different now is the breadth of activity, with wind, solar and geothermal exciting interest in many different countries and the potential for further growth,” Victoria Cuming, a Bloomberg New Energy Finance analyst, said in a company statement.

Renewable wind, geothermal, as well as  small and large scale utility solar projects are set to lead the way as “renewables can represent a cost-effective alternative, particularly compared to diesel generation but also to power stations burning coal or gas,” said the Bloomberg statement.

South Africa is estimated to have 3.9 gigawatts of wind and solar power installed between 2014 and 2016. During the same time, Kenya is expected to add 1.4 gigawatts and Ethiopia will install 570 megawatts stemming mostly from geothermal and wind capacity.

Climate Progress states that Africa has in the past come under the global spotlight for its potential to increase its share of renewable energy, and goes on to say that : In 2008, a World Bank report noted Sub-Saharan Africa’s “huge technical potential for clean energy projects,” and this year, the International Renewable Energy Agency said that, if “substantial flows” of investments are directed toward Africa, the continent’s renewable energy capacity could quadruple to about 120 gigawatts by 2030. Also this year, information company IHS ranked South Africa as the “world’s most attractive emerging country for solar energy,” due to South Africa’s goal of installing 8.4 gigawatts of solar photovoltaic capacity by 2030 and its success so far in securing funds toward that goal.’

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WWF reports investigate SA’s renewable-energy programmes

To bolster its argument that renewable energy is critical to combating climate change, the World Wide Fund for Nature-South Africa (WWF-SA) has commissioned a series of reports that investigates the state of renewable energy in the country, focusing on how it can be scaled up and financed beyond government’s current efforts.

This came on the back of previous research by the organisation which had shown that investing in renewable energy, together with energy efficiency in industry, would provide cheaper electricity by 2020 than further investment in coal or nuclear power.

The first in the series of these reports, ‘Enabling Renewable Energy in South Africa: Assessing the Renewable Energy Independent Power Producer Procurement Programme’, outlined government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) bidding process, which had mobilised over R100-billion in less than three years.

It discusses the key aspects of the REIPPPP bidding process from various stakeholders’ perspectives, highlighting and exploring the significant successes, challenges and developments that had emerged since the inception of the programme.

Key nonfinancial themes covered include the price discovery process, the impact of the ambitious pace of the programme, grid connection challenges and local content requirements. 

New light was shed on financial aspects of the REIPPPP, including the management of foreign exchange and interest rate risk, broad-based black economic-empowerment financing vehicles and ways in which funding sources could be diversified.

“The REIPPPP is a clear indication of government’s intention to address climate change mitigation in the energy sector. Critically analysing the programme so far will allow a better understanding of the practical implications of scaling renewable energy generation in the electricity sector to 100% by 2050, thereby allowing South Africa to contribute its fair share to climate change mitigation,” commented WWF-SA sustainable finance programme manager Malango Mughogho.

Another report in the series, titled ‘Renewable Energy Vision 2030 – South Africa’ was the first of a two-part report describing the current state of play in the renewable energy independent power producer (IPP) sector in South Africa.

It looked at the technology allocation of contracted projects, the current capital cost per kilowatt-hour of renewable energy supplied by different renewable-energy technologies, the high-level projected capital cost trajectory of these different technologies and the estimated capital cost of supplying South Africa’s 2030 renewable-energy ambitions.

“The Integrated Resource Plan needs to look at renewable energy more seriously if it intends to meet the immediate electricity requirement and improve electricity affordability. This should be accompanied by firmer policy positions on renewables, in particular, a longer-term renewable-energy procurement plan,” argued WWF-SA energy economist Manisha Gulati.

The ‘Corporate Renewable Energy Procurement in South Africa’ report, meanwhile, implemented a survey and case study approach to establish the quantity and type of renewable energy demand in South Africa by companies that were not IPPs, identifying the top five drivers for this demand.

The research detailed existing and planned voluntary renewable-energy purchases above 3 MW by companies across a range of industries, demonstrating that these companies considered renewable energy as a critical strategic and financial consideration that warrants investment.

Additional policy mechanisms that supported these drivers would allow South Africa to leverage the private sector to meet its climate change mitigation needs, the fund noted.

Edited by: Chanel de Bruyn
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New initiative boosts Renewable Energy Technology Transfer between China and Ghana and Zambia with UNDP and Danish Development Assistance as catalysts

A milestone partnership was forged today in Beijing between China, Denmark, Ghana, Zambia and UNDP with the signing of a project agreement for Renewable Energy Technology Transfer.

This project is one of the first examples of triangular South-South cooperation between China and Africa with support from a donor. Its objective is to ensure that Chinese renewable energy technologies are optimally responding to priorities and needs in Ghana and Zambia, and critical skills are also transferred and developed to make the technologies actually work on the ground. This approach will have a tremendous impact on increasing access to energy for the rural poor in the two countries, and for other developing countries interested in such cooperation with China in the future.

The project is part of the UNDP-China agreement for Strengthened Partnership signed in 2010 to promote South-South cooperation through innovative programmes. “UNDP is pleased to embark on this cooperation and is committed to making projects more impactful and more sustainable by providing ‘software’ support with the transfer of renewable energy technologies, rather than just relying on the traditional hardware of equipment or infrastructure,” said Xu Haoliang, UN Assistant Secretary-General, UNDP Director of the Regional Bureau of Asia and Pacific.

The Government of Denmark provided funding for the initial formulation of the project and a contribution of 29.25 million DKK, equivalent of US$ 5.4 million, to UNDP for its implementation in Ghana and Zambia. This implementation will be led by the Government of the two countries with the Ministry of Sciences and Technology as the Chinese counterpart institution, and support from the UNDP offices in Beijing, Accra and Lusaka.

 “It seems quite obvious for Denmark to enter in an innovative partnership like this. Denmark has a serious track record in setting high targets for use of renewable energy and meeting these goals by delivering commercially viable solutions to these challenges,” said Friis Arne Petersen, Ambassador of Denmark to China. “Together with Denmark’s involvement as a long term partner in development aid for Africa and Denmark’s increasing bilateral co-operation with China in a broad sense make it natural for us as a donor to engage in a project like this,” he added.

The project will help with achieving the objective of Sustainable Energy for All (SE4ALL) of the UN Secretary- General Ban Ki-Moon by increasing access to energy through off-grid and community-based electrification. Support will not be in the form of hardware transfer but instead will focus on creating conditions required to make adoption of renewable energy technologies more effective, removing barriers and strengthening local capacities to respond to national priorities and meet local needs.

The ceremony for the signing of the agreement held at the UN compound in Beijing was attended by Mr. Xu Haoliang, Director of UNDP Regional Bureau for Asia and the Pacific, Mr. Friis Arne Petersen, Ambassador of Denmark, Mr. Anani Demuyakor, Ambassador of Ghana, Ms. Getrude Kasuba Mwape, Ambassador of Zambia, Mr. Guo Risheng, Director-General of representative of China’s Ministry of Science and Technology (MOST), Mr. Alain Noudehou, UN Resident Coordinator and UNDP Resident Representative and Mr. Christophe Bahuet, Country Director of UNDP China.

UNDP partners with people at all levels of society to help build nations that can withstand crisis, and drive and sustain the kind of growth that improves the quality of life for everyone. On the ground in 177 countries and territories, we offer global perspective and local insight to help empower lives and build resilient nations. www.undp.org
– See more at: http://africanbrains.net/2014/08/20/new-initiative-boosts-renewable-energy-technology-transfer-china-ghana-zambia-undp-danish-development-assistance-catalysts/#sthash.67YQtBKP.dpuf

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Inspirational – SA is on the forefront of renewable energy internationally, the possibilities are endless

Click here to view this clip

South Africa is the place to be right now if you are in the renewable energy sector. Renewable energy, is one of the government projects that is being applauded universally. Wind Lab Africa’s, Peter Venn, and Kevin James, the Lead Strategist at GCX Africa joined Alec in CNBC Africa’s Cape Town studio, to discuss the groundbreaking advances in South Africa’s renewable energy space.

The price is right, the resources are plentiful, and Kevin James summed it up perfectly, ‘We’ve gone from zero to hero in terms of the top ten utility renewable energy suppliers in the world… Here’s a massive opportunity to create clean, free energy and create many, many jobs… Let’s look at this as an opportunity to increase GDP growth.’ If you’re looking for a good news story about South Africa that will inspire you – this is it. – LF

ALEC HOGG: Welcome back. Well, there’s no finer place than being in the Cape Town studio when you’re talking about something like renewable energy.  In the studio with us is Peter Venn, who’s with Wind Lab Africa as well as Kevin James, who’s the Lead Strategist at GCX Africa. Peter, just help me out here. Everyone I talk to, from the construction industry to people, who are watching government, say ‘if you want to find a government project that has worked, renewable energy is it’.

PETER VENN: That’s 100 percent correct. It’s been a massive success. I think we’ve seen over R100bn committed to the program over the last three years. The tender requirements from the government are extremely strict, but fair and these projects have been adjudicated appropriately. We’ve seen 64 projects get away to date, so you distributed that risk across private enterprise and as I say, R100bn with about half of it coming from foreign income.

ALEC HOGG: And your business…

PETER VENN: Our business: we’re focused on wind energy and we’ve been very successful with two projects. One of them will be delivering electricity to the grid this year, and one next year – so 230-odd megawatts.

ALEC HOGG: Are these the huge wind….

PETER VENN: Yes, 100-metre towers going ahead, but the price point of view…currently, wind is around the 70 to 80 cents per kwh point, where the estimates for Medupi and Kusile are somewhere around R1.00/R1.50, depending who you’re talking to and because of the delays and the debt requirements due to the delays. So, about half price.

ALEC HOGG: Kevin, as far as you’re concerned, your analysis…this is more of a consulting business.

KEVIN JAMES: A little bit of both. We’re involved with certain utility supplies, such as Wind Lab on the carbon trading side, which is becoming another big topic in South Africa. In addition, we assist large complex organisations with their own energy challenges, and that’s the other side of renewable energy that isn’t really as prominent as the utility side. That’s the distributor/generation side where there are rooftop solar panels on top of carports and decentralised wind turbines. That’s another topic entirely, and that’s being treated very differently from the utility side of things. On the utility side, I agree with Peter and yourself. It’s been a huge success. I think it could have been an even bigger success if they opened it up to more players, they did things slightly differently, and they pulled back a little bit on the fossil fuel coal-powered strategy.

On the distributor/generation, I do believe they could have greater incentives to companies to be able to generate their own electricity on site. I think they could also make those incentives, which do exist under the DTI; a little bit more…create a little more awareness around that.

ALEC HOGG: There’s always room for improvement. If you contrast it with some of the other projects that haven’t even gotten off the ground… We have an infrastructure project, generally, in the country that we’re hoping one day is going to kick into gear. It does appear as though things have gotten going here. There was a plan. It’s happened. There is going to be electricity coming into the grid. What’s different? What happened here that we could learn as a nation?

KEVIN JAMES: I think certainly, the fact that we’re dealing with independent power producers, and I think that really is the big outcome of this process – the efficiency and the ability to produce and implement successful projects at a very cost effective price. Eskom really needs to learn from that because the struggles and the challenges they’re having with Medupi, Kusile, and the proposed Coal 3 is certainly as a result of them not having the proper management skills potentially, or certain other factors coming into the procurement space that wouldn’t ordinarily creep into the independent power producer space. I think that’s definitely one aspect that is a major differentiator and part of the success of the renewable energy program.

ALEC HOGG: Peter, it also appears as though the local content side is working out pretty well.

PETER VENN: Absolutely. On the wind side, we have a threshold of 40 percent of your project and these projects are normally in the region of R2bn to R4bn. Forty percent threshold of local content and a target of 60 percent local content, and you have to meet the target to be part of the tender. You put up massive bid bonds. In our case, normally a bid bond is R14m.

ALEC HOGG: What is that?

PETER VENN: You put up R14m.

ALEC HOGG: Before you can bid.

PETER VENN: Before you can bid.

ALEC HOGG: So it’s only serious players.

PETER VENN: It’s only serious players, but that allows government to know that if you’re successful – and then your bid bond doubles to R28m – which means you’re actually going to get this project away. As I said, it’s a R2bn to R3bn project that one needs to get away at the end of the day. Government has done this appropriately. They used a reverse auction method where the cheapest price gets away and thus, price for wind has come down 42 percent over three years. In the first round to the third round, there was a reduction of 42 percent because of the reverse auction.

ALEC HOGG: What’s likely to happen in the future with prices on renewables?

PETER VENN: They’re going to come down I think, particularly on the solar PV side there’s going to be better and better technology, so we’ll see the prices coming down. In America now, we more or less have parity between wind and solar and we’re going to attract more and more foreign players into the market that will be on the construction/manufacturing side, as well as on the debt side. I think we’re in for another ten to 20 percent price reduction over the next two to three years.

ALEC HOGG: Public/private partnership.

KEVIN JAMES: Well, that certainly does make sense, but if you look at local government – and there are challenges around that –, I think one of the major factors affecting deals happening between the public and the private sector is the Municipal Finance Act. This is a massive issue in terms of being able to go into longer-term contracts. When I say longer, I mean longer than three, years, which is really the threshold under the MFC. We need a longer-term outlook and we need municipalities who require energy to make money, because they sell the energy on to their customers. We need to start engaging with local government and doing those kinds of deals. Actually, entering into public/private partnership.

ALEC HOGG:  It’s almost like we’ve taken the first steps well, but there are obstacles that need to be addressed.

KEVIN JAMES:  There definitely are, we spoke about local content, it is part of the criteria, part of the criteria for accessing funding which is available in the country. Local manufacturing is another thing. We don’t have critical mass in the local market which means prices are…

ALEC HOGG: You’re a gloomy guy, you’re kind of finding problems here and I get the feeling from Peter that he’s looking for the solution.

KEVIN JAMES: No, I think I’m realistic. I think there are a lot of players in the utility renewable energy space that haven’t been successful. They have tried numerous rounds with compliant bids, that’s a huge loss. I’ve certain players come in and be massively disappointed. So, you know Peter and his company Wind Lab have been tremendously successful, and kudos to them.

ALEC HOGG:  But why have they been successful? What have they done differently?

PETER VENN:  I think one thing is that we brought our global experience to the local market, we understand that and also understanding the wind better than anybody else. The normal story I say, is that government mustn’t tell us where the wind is. It’s like telling De Beers where the diamonds are. They must create a framework – a policy framework -, which I believe they’ve done through the RFP that allows us to find the best resources because it’s a combination of wind, finance, grid, and a number of other factors that allow you to create a great wind project and bring the lowest tariff to the company.

ALEC HOGG: Where is the best wind?

PETER VENN: There’s great wind all over the country and I really do mean that. South Africa has some of the best wind resources in the world.

ALEC HOGG: Where are we going to see these windmills come up?

PETER VENN: They’re northern, eastern, and western Cape…there are great projects throughout and the beauty of that is that’s not where our current coal base load is located. We’re distributor/generation far away from the base load, which is good for the electricity grid to give us security of supply.

ALEC HOGG: I would guess Kevin, that solar (we talk about sunny South Africa) would also be an opportunity.

KEVIN JAMES: When it comes to solar or wind, we have massive resources. Forgive me for sounding a little bit gloomy, but it’s just that the potential is so massive in South Africa…

ALEC HOGG: So it frustrates you that we can’t get there quicker.

KEVIN JAMES: Exactly. You see companies with far less resources in Europe for example, making massive gains with renewable energy because of political will and because of appropriate policies coming in. For me, renewable energy, despite its massive success in South Africa – and don’t get me wrong. It has been a massive success. We’ve gone from zero to hero in terms of the top ten utility renewable energy suppliers in the world, but the potential is so massive that to be dead frank, our coal-fired energy strategy, which is very entrenched, is going to take us to a situation where we’re even more carbon-intensive than we are. We’re in the top 15 carbon emitters in the world – probably the highest per unit of GDP in the world – and focus is on us to do something about it. Here’s a massive opportunity to do that.

Here’s a massive opportunity to create clean, free energy and create many, many jobs. Let’s take a look at that. This initial process is creating – in the build – about 20,000 or 35,000 jobs; twenty thousand where it’s actually ongoing jobs. When we talk about the green economy, rather than pay lip service, let’s look at this as an opportunity to turn this economy around. Let’s look at an opportunity to increase GDP growth, take a look at it, and look at it seriously rather than an offset and lip service to a strategy that is more entrenched, if you know what I’m saying.

ALEC HOGG: Very briefly: when is it going to make sense for me to put a solar-powered facility in my home?

PETER VENN: If we talk about distributor generation, which is what we’re referring to, when individuals can own they can put solar panels on their roofs like in Germany. We need a feeding tariff. At the moment, we see hints of something called nett metering. Nett metering is happening I think, in the Nelson Mandela Bay. It’s the first municipality there where companies, individuals, or farms who are producing more than they require in terms of energy can feed into the grid and they can use the grid as a storage capacity to access at times when there is no sunlight or there is no wind, for example. That’s a great first step and that is essential before companies start investing seriously. If we had a feeding tariff like in Germany and other parts – that’s when it makes huge financial sense. That’s actually when the private sector can become big participants in the actual provision of large-scale energy.

ALEC HOGG: We look forward to that. Kevin James and Peter Venn – our guests here in the Cape Town studio. It makes me feel a lot happier. Sometimes we get used to failing…to missteps, but this is one where the missteps have been few and the opportunities are enormous. We are very blessed in South Africa with our natural resources, and not just under the ground. That was Kevin James. He’s the Lead Strategist at GCX Africa and also in the studio was Peter Venn from Wind Lab Africa.

 

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