To make wind energy truly viable in South Africa, the industry requires a feed-in tariff - in essence, a subsidy - of around 90c to a rand per kilowatt hour, says Siemens Power Generation Wind Power technical head of European sales, Tom Krøjgaard Pedersen.

The feed-in tariff currently proposed by the National Energy Regulator of South Africa (Nersa) for wind energy is 66 c/kWh, decreasing to 58 c/kWh in 2014.
These tariffs are currently the subject of public hearings.

The feed-in tariff refers to the price Eskom or government will pay when buying electricity generated from wind farms, as well as other forms of renewable energy.

This tariff is higher than the current tariff government and large industry pay for coal-generated electricity, at roughly 15 c/kWh to 25 c/kWh.

Power from renewable energy sources is more expensive than electricity produced from coal, says Minister of Minerals and Energy Buyelwa Sonjica, explaining that the cost deficit then "has to be subsidised by government through what is called a feed-in tariff".

The feed-in tariff would not lower the cost of electricity for the customer, but would subsidise renewable energy generators, enabling a renewable energy sector to gain traction in South Africa.

Government has a target of producing 10 000 GWh from renewable sources by 2013.

Pressure is mounting on governments everywhere to lower their carbon footprint as global warming gains increasing prominence on the global political agenda.

Electricity from coal is regarded as dirty energy.

The global wind industry is watching South Africa closely to see if the country could possibly represent a viable business opportunity.

"We have the responsibility to embark on a programme in this regard," says Sonjica.

She says South Africa has traditionally picked coal over other forms of energy as it is cheap and abundant, thereby offering a comparative advantage.

"It helped us to use cheap electricity as an incentive to lure investors to South Africa.
"We're a late entrant in the renewable energy race," explains Sonjica.

South Africa's Darling Wind Power CEO Hermann Oelsner says he believes a viable wind power sector requires a feed-in tariff of closer to R1,50/kWh, but notes that "things are not as simple as it seems".

The cost of wind farms and generating energy at these farms vary along with the size of the farm, the type of technology used, and the distance from farm to grid.

A further distance-to-grid will increase the bill of feeding the electricity generated into the national grid.

"These will all influence costs - each case will be unique," says Oelsner.

Vestas Wind Systems group government relations director Michael Zarin says "feed-in tariffs must be sufficient to level the competitive playing field between established, and sometimes subsidised power plants, and to attract new investments.

"Feed-in tariffs have been part of the success story in Germany and Denmark, and other countries."

Zarin says Vestas is "keenly following" the South African process to establish feed-in tariff levels.

"Long-term regulatory and policy stability, which includes fair pricing, enables more accurate predictions of return on investment, which, in turn, reduces risk and thereby cost. Investor confidence in this context is extremely important."

Danish company Vestas - the world's largest wind turbine producer - does not want to be drawn on what feed-in tariff it believes would kickstart a wind-energy sector in South Africa.

"The right level must still be established by regulators, and I'm confident they'll get it right," says Vestas Pacific MD Jørn Hammer.

The chief sales officer of another Danish wind energy specialist, Suzlon Wind Energy, Claus Andersen argues that no form of energy has ever been developed without economic support, and that fossil fuel and nuclear energy plants have all received large subsidies in the past.

Around 20% of Denmark's electricity demand is generated by wind, and the country is eager to expand its already burgeoning wind energy export sector to Africa.

In South Africa the 5,2 MW Darling wind farm is the country's national demonstration project in this field, with the potential to be expanded to 13 MW.

Sonjica says there is "huge potential for wind energy [in South Africa], estimated to be in the region of 64 000 GWh".

South Africa's renewable feed-in tariffs are expected to be approved in March.