Wind-energy developments could supply up to 300 MW into South Africa’s electricity grid over the next three years, a new research study shows. However, the country’s energy-supply industry would continue to lag far behind that of countries in North Africa, which have far more ambitious targets and where there is already significant deployment experience.

Further, there are additional concerns, not raised in the study, that the roll-out of wind and other renewable technologies could be constrained by a desire among the South African authorities to limit tariff increases, which are already set to rise aggressively.

Frost & Sullivan energy research analyst Sipha Ndawonde argues that the lower upfront capital costs, as well as shorter lead times, will allow wind power projects to add additional capacity to the national grid far quicker than new coal or nuclear energy facilities.

However, the contribution of such projects will depend materially on issues such as grid capacity, private sector investment, environmental application processes and the regulatory environment.

The study suggests that, prior to 2006, there was a lack off urgency in South Africa to reduce electricity consumption and introduce energy efficiency measures, which also dulled the pressure on Eskom and private suppliers to explore alternative forms of generation.

But given the power disruptions of 2007 and 2008, and a new renewable energy feed-in-tariff (Refit) structure that “surpassed” the expectations of stakeholders, Frost & Sullivan anticipates that wind energy projects could begin to play a larger role.

That said, the study argues that South Africa should draw lessons from North Africa, which is home to over 97% of the total installed wind power on the continent, most of which is installed in Egypt, which already has an installed base of 365 MW, Tunisia and Morocco.

These three countries also installed 99% of the 104 MW of new wind power added across the continent in 2008.

Frost & Sullivan argues that the progress made in the territory was based on the identification, with experts, of the real potential for wind energy, and the involvement of development finance institutions in assisting to fund projects on favourable terms.

“Without accurate data on the wind speed and wind variability at a specific site, equipment manufacturers, project developers and investors will not be interested in investing time and resources into a project,” Ndawonde asserts.

He adds that South Africa may never catch up with its Northern counterparts, but that it has all the resources necessary to develop a significant wind energy industry.

“The wind potential is abundant, regulatory incentives are favourable and project developers, equipment suppliers and financiers have already expressed intent to get involved in the sector.

“What is required now is more dialogue between the regulators of the renewable energy industry on issues such as grid stability, grid connection costs and the timeframe in which these issues will be resolved,” he concludes.

OTHER CONCERNS

Not included in the report, but an issue that appears to be emerging as a potential constraint, is a view that the authorities will seek to contain the price increases associated with renewable-energy projects, which would have the effect of limiting the number of projects sanction and introduced.

There are hints that the regulator, government and Eskom could seek to restrict the renewable- and independent power producer (IPP)-related price increase in the overall electricity tariff to 10% over the next three years.

The regulator has insisted that, although the Refit tariffs were significantly higher than the current Eskom tariff of about 22c/kWh, they would add only between 6% and 10% to the average tariff once the full 1 100 MW of capacity, which was being targeted for 2013, was installed and operational.

But should the authorities insist on a limit of 10%, Hatch principal consultant Dieter Metzner warns that new renewable and conventional IPP capacity could well be limited to a paltry 1 500 MW over the period, against a potential wind-energy pipeline alone of around 3 000 MW and a larger cross-technology pipeline of more than 5 000 MW.

There is also growing concern about the competitive tender processes that Eskom, as the designated ‘single buyer’, plans to implement.

Ian de Jager, an engineer working on various renewable projects, tells Engineering News Online that such a process appears to be out of step with the Refit, which suggests a “first come first serve” approach to licence applications and subsequent power purchase agreements (PPAs) with the single buyer office, or renewable energy purchasing authority (Repa).

Consequently, de Jager argues, the Refit may be run as a commercial programme, where bids won’t be evaluated against the prices as published by the regulator in the Refit, but on other criteria that remains somewhat opaque.

Under the Refit a wind tariff of R1,25/kWh was sanctioned, while small-scale hydro would receive 94c/kWh, landfill gas 90c/kWh and concentrated solar, with a storage capacity of more than six hours, would receive R2,10/kWh. Other renewable technologies, such as biomass and photovoltaic, could be added in the coming months.

But should a competitive process be pursued, only successful bidders would then be invited to enter into a PPA with the Repa rather than those that were first through the licencing door.

Matzner says there is also significant confusion among potential developers about how precisely a PPA will be procured.

Further, there was uncertainty about whether the rules provided sufficient protection in what would come down to robust commercial discussions with a powerful single buyer office, or Repa, which is housed within the incumbent utility.