Wind energy construction activity in South Africa will peak at more than 1 GW of capacity in 2020/21 as developers race to operationalise projects that were awarded during the fourth bid window of the Renewable Energy Independent Power Producers Procurement Programme, says Wood Mackenzie (WoodMac) Power & Renewables.
Its ‘Africa wind power market outlook 2019’ report states that, in the longer term, the country's Integrated Resource Plan is expected to target more than 10 GW of additional wind power capacity through 2030.
Further, President Cyril Ramaphosa’s proposed reforms for the power sector is expected to create a more favourable environment for renewable energy deployment.
“South Africa boasts Africa’s largest wind power market with 2.1 GW of operational capacity as of the first quarter of 2019. Issues with governance that took place in 2016 and 2017 were bad news for the local wind market, as no new additions were recorded in 2018, says WoodMac senior analyst Sohaib Malik.
“However, installations are expected to restart in 2019 with 130 MW of new capacity additions, though potential project delays jeopardise that capacity and limit any upside potential for additional capacity.
“Growth prospects improve thereafter, with more than 1 GW of capacity expected in 2020 and 2021 combined. This outlook is supported by ongoing construction activity, peaking in 2020 as IPPs race to achieve commercial operations.”
Meanwhile, cumulative wind power capacity in Africa stood at 5.5 GW by the end of 2018. Africa’s wind project pipeline stands at 18 GW as of the first quarter of this year 2019, says Malik.
“The project realisation rate, however, remains low in the region owing to a host of challenges faced by developers. As some governments took measures to address these issues, the regional market is expected to recover and grow exponentially between 2019 and 2021.
“This growth is underpinned by a five-fold increase year-on-year in turbine order intake in 2018 and 6.5 GW of wind capacity in advanced stages of development. The scale of the development pipeline underlines the ability of the continent’s largest wind markets to grow in a sustained manner, providing a blueprint for emerging markets to tap their wind potential and fuel economic growth,” he added.
Inconsistent policy measures have historically plagued wind market growth in Africa but that is beginning to change.
WoodMac has observed growing momentum in the development of long-term incentive mechanisms to support the regional wind market.
“Competitive procurement has proven to be the favoured tool of policy support, with South Africa and Morocco having introduced auction programmes in 2011 and 2015, respectively. Tunisia solicited bids for wind independent power producers (IPPs) in 2017, while Kenya and Ethiopia are contemplating the launch of auctions for future installations.
“These developments mirror global trends where competitive procurement regimes have resulted in lower tariffs in many countries. Notably, this trend may be less impactful in emerging markets, which are expected to grow by less than 800 MW of capacity through 2028, as auction volumes may not be sufficient to draw the attention of global wind industry leaders," states Malik.
The National Renewable Energy Authority (NREA) maintained market leadership in Egypt in 2018. This is expected to change with the commissioning of the 262 MW Gulf of Suez project by an Engie-led consortium this year.
Several international developers are executing projects with anticipated commissioning in the near future. Consequently, a wind IPP market will be established in Egypt with 1.3 GW of capacity, he says.
“Similarly, the commissioning of 1 GW of wind capacity in Morocco, awarded between 2012 and 2016, will enhance [the role of] IPPs in this market. It is necessary for Egypt and Morocco to take measures to consolidate their success.
“For example, Morocco needs to introduce new rounds of auctions no later than the early 2020s and the Egyptian government should implement a more rigorous policy framework for the long-term development of its wind power market,” Malik advises.
As more governments introduce long-term plans to support wind power and heed investors’ concerns, private sector confidence in emerging market will continue growing, he points out.
“For example, IPPs in Tunisia were lukewarm to proposals owing to concerns regarding the power purchase agreement terms, which were deemed unbankable by financiers and developers. The government addressed these concerns by revising the contentious terms.
“On the back of making these amendments, the government received substantial interest for the 620 MW of capacity it will award before 2020. Similar favourable developments in countries including Ethiopia, Tunisia, Kenya, Algeria and Ghana offer a combined 6.2 GW wind market opportunity for developers and original-equipment manufacturers through 2028,” adds Malik.