To achieve a successful localisation programme with incremental local content thresholds as part of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), a consistent procurement pipeline needs be established, says industry association South Africa Wind Energy Association (SAWEA) CEO Ntombifuthi Ntuli.
The stop-start nature of procurement, and latent bid windows, severely damaged the meaningful momentum, pre-2015, which established new manufacturing capacity within the wind and solar value chains in South Africa.
Significant manufacturing capacity was lost in the delay between Bid Windows (BWs) 4 and 5, with many companies forced to shut down as a result of the delays, unable to carry the cost of overheads indefinitely.
The Department of Mineral Resources and Energy (DMRE) this year finally launched BW 5 and assured that at least three more BWs will be held over the next two years.
“Consecutive bidding rounds will enable local manufacturing facilities to be re-established and the potential expansion of already operating manufacturers, which is crucial in creating long-term sustainable jobs,” says Ntuli.
A consistent procurement pipeline would be a positive development, as it facilitates augmented job creation and skills development as the economy recovers from the Covid-19 pandemic and accelerates economic growth, she adds.
“While we celebrate the new impetus, one must be mindful that regaining the investor confidence will not be an overnight process. To enable the required quantity and, importantly, quality of components will require at least two to three years of investment and development.
“It is, therefore, crucial that further interruptions or delays are not encountered. A controlled rollout of procurement will allow all aspects of the value chain, and not only the manufacturing sector, to expand,” she says.
The BW 5 local content threshold has been retained at 40%, in line with previous bidding rounds, with the difference that there is no local content target, only the threshold is prescribed.
Further, for the first time, the REIPPPP introduced designated local content, which, over and above the threshold, requires bidders to procure certain specified components locally. Should these components be unavailable, bidders can apply for exemption, which needs to be lodged with the Department of Trade, Industry and Competition (DTIC).
SAWEA confirms that the industry remains confident in its ability to meet local content requirements and reiterates that it has no reservations or concerns that the sector will respond positively. The association has facilitated conversations between the DMRE, the DTIC and other key sector stakeholders to align strategically and map the way forward to deliver on increased local content requirements.
“The wind industry has further submitted its vision to practically increase local content in the next few years and remains fully supportive of growing the local manufacturing sector,” explains Ntuli.
Meanwhile, SAWEA is heartened by the development of the South African Renewable Energy Masterplan (SAREM), which aims to contribute to fast-tracking the establishment of local manufacturing capacity. It is intended that this framework will provide a blueprint from which government departments such as the DTIC and the DMRE can provide incentives for investment into local manufacturing.
“This is important for future BWs and the renewable energy sector’s ability to deliver jobs and investment, in the post-Covid-19 recovery period,” she says.
“SAREM represents an opportunity to identify jobs and investment in our sector linked to the country’s resource plan, as well as to clearly outline how job creation and investment might be enhanced if impediments are removed and replaced with supportive policy.”