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UWC launches energy storage laboratory

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.

 

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Renewables tariffs dropped over 25% in round 4, but how low can they go?

Engineering News
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.

 

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Five Reasons Why the Wind Industry Will Make Your Day

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.

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Engineering News – 16 April 2015 Energy Minister announces

The Department of Energy (DoE) has announced the names of 13 projects that have been accepted in the fourth bidding window of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

The 13, which would make up 1 121 MW installed capacity on the national grid, were selected from a tightly competitive field of 77 proposals.

Energy Minister Tina Joemat-Pettersson told a media briefing in Cape Town that the successful round four bids, amounting to around R23-billion in value, were expected to create over 7 000 jobs during construction, with 1 000 permanent operational jobs. Over 27 000 jobs are expected to be created over a 20-year period.

The Minister expected financial close of these projects in the fourth quarter of this year, with commissioning of the projects expected from November 2016.

The largest slice of the bids was allocated to onshore wind energy, at 676 MW.

Solar photovoltaic (PV) energy made up 415 MW, with 25 MW being allocated to biomass and 4.7 MW to small hydro.

Six of the 49 solar PV proposals were successful, as were five out of 23 onshore wind projects. About 62% of the successful projects in the fourth round were situated in the Northern Cape, including all of the solar PV projects that were selected. The Northern Cape also scooped two out of the five wind projects.

The Eastern Cape took the largest slice of the onshore wind projects, amounting to around one-third of the successful projects overall.

The recommended preferred bidder for small hydro was in the Free State, and the biomass project in Mpumalanga.

Joemat-Pettersson said the number of proposals indicated the “substantial continuing investor interest” in the South African renewable-energy programme.

The average price of electricity supply had dropped substantially since the first round of bids. The average fully indexed price for the solar PV bidders is 76% lower than it was in the first round, with onshore wind prices falling by almost half.

The average, fully indexed price of onshore wind energy in April 2014 terms is R619/MWh, and R786/MWh for solar PV. Biomass was quoted at R1 450/MWh, with R1 117/MWh for small hydro. The supply prices to Eskom would be contracted for a period of 20 years.

The Minister said she wanted to see swift movement in the implementation of the fourth round and on into a fifth bid submission phase. 

“We don’t have the luxury of time or margins for errors. We will be putting the private sector under tremendous pressure. We will leave no stone unturned to speed up processes to assist in solutions we seek as a collective in this country.”

She said the DoE would need to put pressure on Eskom to sign the power purchase agreements. “The biggest challenge is to get Eskom to evacuate the energy,” she said.

Joemat-Pettersson told journalists that the focus would fall sharply on community participation in the areas in which the projects were based.

“Communities should not be passive recipients but active participants in their destinies.”

The 13 preferred bidders for Window 4 are as follows:

Biomass

Ngodwana Energy Project – 25 MW

On-shore wind

Roggeveld Wind Farm – 140 MW
Karusa Wind Farm – 140 MW
Nxuba Wind Farm – 139 MW
Golden Valley Wind – 117 MW
Oyster Bay Wind Farm – 140 MW

Solar PV

Sirius Solar PV Project One – 75 MW
Droogfontein 2 Solar – 75 MW
Dyason’s Klip 1 – 75 MW
Dyason’s Klip 2 – 75 MW
Konkoonsies II Solar Facility – 75 MW
Aggeneys Solar Project – 40MW

Hydro

Kruisvallei Hydro – 5 MW

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Engineering News – 16 April 2015 Accelerate and expand

Energy Minister Tina Joemat-Pettersson has announced plans to accelerate and expand the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), reporting that she will be seeking the concurrence of the National Energy Regulator of South Africa (Nersa) for an additional 6 300 MW of renewable energy. 

To date, South Africa has procured or is procuring, following four competitive bidding rounds, 5 243 MW from 79 mostly solar and wind projects, which represent a collective private investment into the country’s electricity sector of R168-billion. MORE INSIGHT More than 70 bids received for fourth renewables bid window Energy Minister to open African Energy Indaba These procurements have been pursued in line with the Integrated Resource Plan (IRP) and have been facilitated by Ministerial determinations for around 7 000 MW. Joemat-Pettersson indicated on Thursday that, owing to the competitive nature of the 77 bids received during the fourth REIPPPP bid window she would consider naming additional preferred bidders over and above the 13 selected on April 11. The 13 projects already identified were expected to reach financial close during the fourth quarter and should be operational by November 2016. The Minister had requested the IPP Office to deliver a “firm report” on an additional allocation of megawatts from round four by month end, so that an announcement could be made by the end of May 2015. In addition, a ‘Request for Further Proposals’ would be released by early June for a further 1 800 MW to be procured under an accelerated programme, with bidding open to unsuccessful bidders from all previous bid windows. However, the Department of Energy’s Ompi Aphane stresses that bidding will also be open to those that had not previously made a submission under the REIPPPP. Once those two mop-up processes were completed, the tender documentation would be redesigned ahead of a fifth bid submission phase, with the reworked request for proposals (RFP) documents expected to be ready for release in the second quarter of 2016. Key aspects of the RFP that will be redesigned included the definition of local community, the mechanisms to ensure early, efficient and equitable benefits to the communities and the local content or industrialisation regime. The new RFP would also take South Africa’s distribution and transmission system constraints into account – these constraints had been held up as being largely responsible for recent delays to the conclusion of bid windows three and four. In fact, Aphane confirmed that, had the process not been tightened in recent rounds, Eskom would have run a real risk of having to contract with plants whose power could not have been evacuated. He also revealed that there had been at least one case during the REIPPPP where this risk had actually become a reality. Joemat-Pettersson said the additional 6 300 MW determination was in line with the IRP 2010-2030 and that the allocation would “maintain the momentum of the programme, especially for future bid-submission phases”. The Minister also said that the ‘Small Projects Programme’, which would seek to procure 50 MW from facilities ranging between 1 MW and 5 MW in size, was also under way, with 29 bids having been received totalling 139 MW. The evaluation of bids would be finalised during April. FAR-REACHING DEVELOPMENT The South African Wind Energy Association (Sawea) described Joemat-Pettersson’s announcement as “far-reaching”, while the South African Photovoltaic Industry Association (Sapvia) said the announcement would “help regain the momentum” of the REIPPPP. Sawea CEO Johan van den Berg arguing that the new allocation could mean that an additional 2 500 to 3 000 MW of wind power would be procured over the coming four years. “This, once Gazetted, should give comfort to international investors to invest in local factories that can push the local content of wind farms to about 54%, with the upper 60’s in reach. Moreover, the money being put into local community development around wind farms will rise from the present R5-billion over the next 20 years, to at least R10-billion and perhaps much more.” Van den Berg also added that prices for wind power in round four were understood to have fallen to an average of 62c/kWh, which is a market improvement on the prices of over R1/MW achieved during the first bid window. “Renewable energy is coming just at the right time. There is a lot of it ready to be built immediately. Government is recognising this and has now communicated a vision that, given the volatility in our sector, is remarkable for its courage and perspicacity," Van den Berg concluded. Sapvia added that, the proven ability to deliver projects on time and on budget provided the basis for its belief that the solar photovoltaic (PV) sector, in conjunction with other renewables technology, stood ready to bring additional generation capacity as part of the government’s five-point plan to address the current electricity shortages. “Solar PV alone can provide additional capacity of at least 2 000 MW a year over the next five years,” the association said in a statement. It also welcomed the proposed Ministerial determination to raise the renewables allocation to 6 300 MW, as well as awarding at least 1 000 MW of additional capacity from bid-window four. Sapvia also backed the announcement that 1 800 MW would be allocated for the procurement of projects from various renewable-energy sources that participated in bid windows one to four.

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China and Africa harvest the wind for power

Emerging economies installed the most wind-generated power in 2014, giving them the lead in an area in which investment lagged in developed economies.

Developing nations contributed significantly to a record year for newly installed wind power and, of the 51 gigawatts (GW) installed in 2014, emerging markets accounted for 30GW, or 60%, according to the 10th annual Global Wind Report released by the Global Wind Energy Council in Istanbul on April 1.

The surge was largely bolstered by 23GW of new power installed in China, which in itself is a new record and more than what the runners-up, Europe and North America, together installed last year. Investments in the global wind sector rose 11% to $99.5-billion during the year, also a record. Only 35.6GW of wind energy was installed in 2013, a sharp downturn from an installed 45GW in 2012.

South Africa installed 560 megawatts (MW), the most in Africa and the Middle East, which the council described as “the big news story” for wind for 2014. The country had installed just 10MW by the end of 2013 and is now considered one of the leading wind power markets.

Helped by projects in South Africa, Morocco and Egypt, more than 934MW of new wind power was introduced to Africa this year.

“2014 was a milestone year for the African market, as almost a gigawatt of new capacity came online,” the report said. “Africa is likely to emerge as a new hot spot for wind energy development, with new projects in South Africa, Kenya, Tanzania, Morocco, Ethiopia and Mauritius coming on line.”

Global generation

Latin America and the Caribbean had a good year, too, with 3 749MW of new capacity. It was led by Brazil, which alone accounted for 2 437MW and is now ranked 10th in the world in terms of cumulative installed wind power.

Wind power also grew in Turkey, which installed 804MW last year, to reach a total of 3 762MW. India contributed 2 315MW to the global total.

But this is not the first year the developing world – led by Asia, the world’s largest regional wind energy market for the past seven years – has been the frontrunner in new wind power.

“In 2014, as in 2013, the majority of wind installations globally were outside the OECD [Organisation for Economic Co-operation and Development] once again. This was also the case in 2010 and 2011, and is likely to continue to be so for the foreseeable future,” the report noted.

More than 80 countries now generate wind energy, 24 of which have more than 1 000MW of capacity installed and 11 with more than 5 000MW, according to the report.

Uncertain market growth

However, “at the end of 2013, the expectations for wind power market growth were uncertain, as continued economic slowdown in Europe and political uncertainty in the US made it difficult to make projections for 2014, which we called at just over 47GW, not anticipating the dramatic growth in the Chinese market.”

Wind power generation accounted for 2.78% of China’s total electricity generation in 2014 and the nation aims to nearly double it to 200GW by the end of 2020.

But the ambitions of developed countries for wind energy are less clear.

Germany set a new record, installing nearly 5 300MW, which is the first time that any country other than China or the US has installed more than 5 000MW in a single year. This, and with the installation of more that 1 000MW in Britain, France and Sweden, helped to shore up the European figures, despite disappointing numbers from many other European countries.

Together these four countries account for more than three quarters of all installations, the report said.

EU consumption

Although by the end of 2014, grid-connected wind power was enough to cover 10.2% of the European Union’s electricity consumption, weakened legislative frameworks, economic crises and austerity measures are hitting the wind industry hard. “The year ahead will be tough, and the long-term prospects for the wind industry are closely linked to the outcome of the debate over the EU’s 2030 targets for climate and energy,” the report said.

“In early February this year, the European Commission’s Energy Union proposal was made to establish post-2020 legislation for renewables. The plan is to put forward a renewable energy package, possibly sometime next year.”

Meanwhile, after China, the US is the second largest market in terms of total installed capacity but remains the hardest market to call, the council said.

“2014 saw the US market rise with new installations of 4 854MW, bringing the total installed capacity to 65GW … Wind energy accounted for almost 31% of all new generating capacity installed over the last five years … (and) by the end of 2014, more than 12 700MW of wind capacity was under construction across 98 projects in 23 states,” according to the report.

However, the council said, uncertain federal policies in the US continued to inflict a “boom-bust” cycle on the country’s wind industry.

“With a strong pipeline of projects under construction under the existing incentive arrangements, 2015 and 2016 are likely to be good years. But what happens after that? 

“It remains the case that energy (and climate) are ideologically charged political issues in Washington, and it’s difficult to see how the current administration and Congress can work together to come up with much in the short term to fill the looming policy gap.”

Australian politics

In Australia, the report said, investments in large-scale wind, solar and other clean energy sources dropped 88% in 2014. This was a result of Australia’s new coalition government, led by Prime Minister Tony Abbott, which came into power in 2013 and does not support renewable energy. This has caused significant damage to the industry.

“But given the dramatic progress of both wind and solar in Australia, we expect that to be short-lived, although it will no doubt depress market figures for the next few years in the Pacific region,” the council said.

The two big issues as far as wind energy is concerned continue to be the drop in the price of oil – which halved last year and remains low – and growing concerns about climate change, leading up to the COP21 summit in Paris at the end of 2015.

“It’s often suggested that the lower oil prices will have an effect on the wind sector, but there’s no evidence of that yet.

“By and large, we don’t compete with oil, and the price of gas is no longer tied to the price of oil as closely as it once was,” the council said in its report.

“But price, speed of deployment and fighting local air pollution have been the main drivers in most of the major growth markets this year. As for 2015, we’re projecting another 50-plus GW year, and continued growth from there.”

Market dominance

For Africa, the council says it’s going to be a contest between Egypt and South Africa for dominance of the continent’s wind energy market. With contributions from other African nations, the council projects there will a total installation of slightly more than 13GW in the region through to 2019.

“South Africa’s emergence in 2014 is the ‘take-off’ after an extremely long countdown. Despite the political instability in the country, the electricity situation is dire, and they need the power,” the report said.

“The industry in South Africa is in a very rapid growth phase. The country’s chronic energy shortages mean that the renewable energy procurement programme is likely to be expanded …

“South Africa is evolving into the hub for manufacturing and development that the industry has been looking forward to for many years.”

The South African wind industry wants to develop about 5GW by 2019.

The cost of wind power has grown increasingly competitive with that generated by coal-fired power stations in South Africa, the report said. The average selling price of electricity is about 63c a kilowatt/hour, and wind power is being procured for about 65c/kWh.

New coal-based power is likely to cost R1.05/kWh, if it is not cross-subsidised from existing plants.

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Eskom gets R4bn loan from KfW to upgrade grid

PUBLISHED 08 APRIL 2015
BY: REUTERS

 

South African utility Eskom Holdings has received a R4-billion ($339-million) loan from KfW to help modernise its power grid, Germany's State-controlled development bank said on Wednesday.

The loan will be used to connect solar and wind power plants to Eskom's power network and help to secure supply in a country that has been beset with almost daily power outages, KfW said.

"The adjustment of the energy supply is a big step for South Africa away from dependency on coal towards a more sustainable electricity generation," Norbert Kloppenburg, a management board member at KfW, said in a statement.

Eskom has implemented rolling blackouts over the past year, disrupting business and annoying residents, as its grid struggles to meet growing demand.

Integrating more renewable sources of energy into the grid will also help reduce South Africa's CO2 emissions by up to 5.5-million tonnes a year, KfW said.

 

Duane Daws

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Rolling blackouts, renewable energy and lessons learned

http://finweek.com/2015/03/31/news-rolling-blackouts-renewable-energy-and-lessons-learned/
In early 2008 South African society was shocked into the reality of inadequate power reserve margins required by Eskom in order to consistently keep the lights on. Suddenly new terms such as “load shedding” and..

 

In early 2008 South African society was shocked into the reality of inadequate power reserve margins required by Eskom in order to consistently keep the lights on. Suddenly new terms such as “load shedding” and “rolling blackouts” were introduced to our daily language.

There was a rush to buy private power generators and increasingly there was chaos on the roads and early shop closures as power was unexpectedly switched off around the country. Productivity losses cost the fiscus billions of rands of lost revenue and the mining industry in particular was hit hard hit by power cuts.

However the crisis has been in the making for the past 30 to 40 years since the early 1970s when the government of the day commenced the roll out of a massive power investment programme within Eskom. Demand growth was overestimated and the construction of new coal fired stations resulted in an over capacity of power generation over the following 20 years.

As the cost of this investment was paid off, it culminated in South Africa enjoying the cheapest electricity prices in the world. However with virtually no new investment in new and replacement power generation over the next 20 years, the country was lulled into a false sense of security and a complacency around pursuing further investment. In 2004 the power reserve margins dropped sharply as economic growth accelerated and in 2008 the country suddenly realised that cheap and reliable electricity was a luxury of the past.

Post 1994, the Department of Energy (DOE) was mandated to take over Eskom’s exclusive role to produce and manage a power plan for the country. In 2010 the DOE promulgated an integrated resource plan (IRP) which envisaged the doubling of power generation in South Africa by 2030 and significantly this included a 42% allocation of the new build to renewable power (18000 MW), the rest comprising coal, nuclear, gas and diesel fired power generation. This was followed by the launch of the Renewable Energy Independent Power Producer Procurement (REIPPP) programme in 2011, the biggest single public private partnership (PPP) initiative in South Africa to date.

The DOE sought the assistance of National Treasury’s PPP Unit to set up a small and dedicated technical team, most of whom had vast PPP experience, to manage the roll out of the REIPPP programme. From the outset this was a successful arrangement for a number of reasons:

  • The team operated outside the formal departmental structure of national government and thus was not hamstrung by onerous policies and procedures.
  • There was significant project development experience in the team including individuals who had drafted the rigorous PPP appraisal framework whilst working in National Treasury.
  • An open door policy with the private sector was vital to facilitate dialogue with the professionals behind the projects and ensured there was clarity around key design and implementation issues.
  • The renewable energy team ensured the maintenance of high standards throughout the process, particularly in respect of meeting deadlines and clarifying expectations by both the government and the private sector.

This enhanced the credibility of the programme in the market’s eyes and was a departure from the distrust of government by the market that was evident in previous private public partnerships in infrastructure during the past. The REIPPP program is now widely recognised to be in the top ten infrastructure investment programmes in the world over the past three years.

There are a number of lessons learned in the REIPPP programme that can be transferred to other private public partnership investment initiatives by government in future as follows:

  • Maintain a business-friendly approach to the investment industry in order to build confidence in the sustainability of the programme through dialogue and a high level of trust by the investors.
  • Take advantage of available private sector funding and use it to gear up donor and development finance investment money
  • Make a case for renewable energy (or the relevant infrastructure investment thesis) and keep making it. Constant lobbying of government by the renewable energy team has ensured ongoing government support for the programme.
  • Find a programme champion within the team with good experience and credibility in the eyes of both the private sector and government to ensure that there is sustained momentum behind the programme and that it remains goal directed and productive

This will attract investment into the country by the international community and should be high on the agenda of government. It should ensure a win win scenario in respect of the massive need for infrastructure investment and the no less amount of international investment money that is seeking deployment into emerging market economies such as ours.

– Paul Semple: Portfolio Manager

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The role of renewable energy in South Africa’s energy mix

Power utility Eskom has implemented regular power cuts this year to prevent the national grid being overwhelmed, as South Africa faces its worst energy crisis in decades, Public Enterprise MinisterLynne Brown said earlier this week, adding that power outages cost the country between $1.7-billion and $6.8-billion a month.

Lynne Brown
Photo: Duane Daws

Lynne Brown

 
 

The solution to the energy crisis might be at home, as the country’s Renewable Energy IndependentPower Producer Procurement Programme was considered successful and combined the benefits of an auction-style programme with sufficient criteria to provide assurance that the projects were viable.

 

The combination of an excellent wind and solar resource, vast land availability, the country’s strong manufacturing capacity and an increasing commitment to renewable deployment from the government and financing institutions, made for an encouraging picture in the country. Concentrated solar power (CSP), in particular, stood out.

 

South Africa’s daily electricity demand has two peaks, one in the morning and another, more pronounced one, during the evening. This characteristic made CSP with storage the most suitable alternative among all renewable-energy sources for generating electricity to supply the evening peak demand.

 

Factors, such as the increasing energy demand, high electricity prices and limited proven oil reserves should hasten the implementation of CSP at a wider scale.

 

Despite the delays in the Department of Energy’s announcement schedule and other challenges, the South African market continued to generate great interest among international developers and financing institutions, which would meet at the CSP Today South Africa conference, in Cape Town, on April 15.

 

For more information, visit http://goo.gl/kyqnuU

Edited by: Chanel de Bruyn

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