Most of Africa’s installed electrical capacity is in South Africa, which is heavily reliant on coal for its electricity generation needs, says South Africa-based law firm Cliffe Dekker Hofmeyr, noting that there has been little incentive for South Africa to invest in renewable energy in the past.
“The journey to renewable energy had a slow start with the publication of the White Paper on Renewable Energy in 2003, under which government committed to a specific target for the role that renewable energy will play in the country’s energy mix.
“The uptake of renewable energy until 2011 was very slow and seemed to be marred by politics. It could be that the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) was eventually launched, in 2011, to coincide with South Africa’s hosting of the seventeenth Conference of the Parties to the United Nations Framework Convention on Climate Change, more popularly known as COP17. Since its roll-out, however, the programme has been extremely successful,” says Cliffe Dekker Hofmeyr projects and infrastructure practice director Zahra Omar.
She notes that just under 7 000 MW of renewable-energy power is set to be produced under the REIPPPP, and close to 4 000 MW has already been allocated in the first three bid rounds.
“In terms of the onshore wind projects, 3 320 MW is currently reserved for onshore wind projects, of which 1 984 MW has already been allocated under the first three rounds. The Department of Energy (DoE), in making its announcement of preferred bidders under round three of the programme, has reserved the right to allocate even more megawatts and was expected to make an announcement before November 20, under which it would decide whether additional megawatts would in fact be allocated and, if so, what portion of that woukd be reserved for onshore wind projects,” she explains.
“Despite the criticism associated with the resource-intensive process to submit a compliant bid under the REIPPPP, there is still a lot of international interest. Countries such as Spain and Italy are showing interest in investing in the projects, as are nontraditional investors, such as search engine giant Google, which recently took a stake in a solar photovoltaic plant.”
Omar explains that the Eastern Cape and the Western Cape provinces are the most suitable locations for wind farms in South Africa, with greater interest in Eastern Cape locations, possibly owing to the proximity of State-owned power utility Eskom’s Poseidon substation.
“Wind energy projects are capital intensive for developers, especially at start-up, but compared to coal-fired power stations, the costs over a lifetime of a wind farm compare very favourably with coal-fired power station costs. The drawcard in terms of the REIPPPP for investors is that there is a guaranteed offtake. The programme offers developers a 20-year power purchase agreement, with Eskom as the offtaker of all power generated from the plant on a take-and-pay basis. If the plant is generating power, Eskom is obliged to buy it at the tariff submitted by the developer,” she says.
Omar notes that the REIPPPP addresses socioeconomic and environmental issues, as the uptake of renewable energy is sustainable and its development must go hand in hand with the country’s other priorities, such as social development.
Omar notes that a typical wind turbine is essentially the height of a 20-storey building with what resembles a commercial airplane propeller on the top of the structure. Each turbine has the potential to generate around 2 MW of electrical energy.
“Wind turbines affect birds and bats in several ways, such as colliding with the towers and the changing habitat owing to the construction of wind towers. As such, every bid submission must contain an environmental-impact assessment, which must show that the impact on these two animal populations will be limited by way of assessments from an avifaunal expert,” she says.
“Environmental authorisations are required as a part of the bid submission under the REIPPPP and if an appeal to any environmental authorisation is lodged and the bid is submitted without proof that the bidders are addressing the appeal, it will negatively affect the evaluation of that bid,” Omar says.
Another important aspect of the bidding process that she highlights is the need for skills transfer and localisation. “Where possible, components for wind turbines must be sourced locally and local communities must be empowered with the skills needed in the renewable-energy industry. Compliance with the economic development obligations of the programme, such as job creation, is a gatekeeper criterion and failure to address this component will result in a bid being noncompliant,” she notes.
Omar says the current status of onshore wind projects in South Africa provides encouraging signs of a promising sector. “Wind developers who achieved successful financial close under round one of the programme have already commenced construction of their facilities, which are expected to be commissioned before the middle of next year. Those who achieved successful financial close under round two are expected to have their wind farms connected to the national grid before the end of 2016.
“Currently, the programme requires that round three preferred bidders be on the grid by 2017. However, in light of the DoE’s anticipated increase of megawatt allocation under round three, and the fact that such allocation may be announced as late as a month after the timeline for the announcement of preferred bidders under round three, it is unclear how the timelines under round three, including timelines for commissioning, will be affected and whether they will be revised,” she explains.
Omar adds that, under South Africa’s current 20-year Integrated Resource Plan, it is expected that 42% of all new capacity will be generated from renewable-energy sources by 2030. This will comprise 9% of the total energy mix for the country by 2030 or an equivalent of 17 800 MW, which is taken up primarily by onshore wind at 52%.