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Oct 22, 2012

Financial closure on renewable projects needed to maintain investor confidence – SAWEA

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Cape Town|Energy|PROJECT|Projects|Renewable Energy|Renewable-Energy|Electricity Generation Capacity|Energy|Prospective Independent Power Producers|Wind Energy|Wind Energy Sector|Jasandra Nyker|Johan Van Den Berg|Power
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The second Windaba conference, organised jointly by the South African Wind Energy Association (SAWEA) and the Global Wind Energy Council, was being held in Cape Town this week at a time when many prospective independent power producers were awaiting news of the impending financial closure for round one of the Renewable Energy Independent Power Producer Programme (REIPPP). 

“The programme is nothing short of impressive. But to really show that this programme works and to maintain investor confidence, financial close needs to occur to acquire confirmation that we indeed have a wind industry,” SAWEA chairperson Jasandra Nyker said during the opening session of the conference.

Reflecting on the past year in the South African wind energy sector, Nyker was positive about the progress the industry had made with eight wind projects having been selected out of the total of 28 projects under round one of the REIPPP, totalling 634 MW, and another seven wind projects being successful in round two, accounting for 563 MW. “For any first-time industry that is an impressive accomplishment and we should not blindly cast that achievement aside,” she said.

However, as with any new programme there was always room for improvement, said Nyker, adding that government had to engage further with industry to ensure that the “very expensive learnings of round one” were taken into consideration as the REIPPP moved into future rounds. “Ask any round-one developer, the process to financial close has to be done in a more cost-effective manner going forward,” she asserted.

Nyker added that the wind industry welcomed the government’s announcement that there would be further allocation of future electricity generation capacity for renewable energy. “The 1 470 MW allocated to wind energy ensures that wind will become the dominant player in the renewable-energy mix in the years to come.”

The theme of the localisation requirements for the REIPPP would also be highlighted at the 2012 Windaba conference and Nyker warned that the government needed to give the long-term implications of the policy serious thought. “The [capital expenditure] associated with constructing local manufacturing plants is significant and it is going to require a much longer-term view and a further megawatt commitment to wind to ensure that these manufacturing plants will be stable. Given the current global and local economic environment we cannot afford to invest in manufacturing facilities that will end up underutilised or loss making in the future,” she said.

“In this modern-day world of tighter operating margins and a theme of downsizing globally, the ‘just do it’ approach needs to be given much further thought and evaluation. Like many of us sitting here in this hall today, we want to build a localised industry that can stand on its own and indeed create that manufacturing gateway to the rest of the SADC [Southern African Development Community] region,” said Nyker.

The first REIPPP round required 25% local content for wind projects, which, according to SAWEA CEO Johan van den Berg was not overly onerous as it could be covered in the ‘balance of plant’ portion of the project costs. Even with the third round requiring 40% local content, Van den Berg said he thought this was still possible, though it would require South African blade and turbine contributions. “As we go further up it becomes a little bit more challenging but it’s not that it can’t be done, it’s the question of whether it can be done,” he said.

Edited by: Creamer Media Reporter
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