Energy trader reports strong market demand for green electricity from 210 MW Hendrina Wind Farm

20th May 2024 By: Terence Creamer - Creamer Media Editor

Energy trader reports strong market demand for green electricity from 210 MW Hendrina Wind Farm

Apollo Africa MD Jenna Harris

Newly formed electricity trader Apollo Africa reports that it is experiencing strong demand from potential customers for the renewable electricity that will be produced from the grid-ready 210 MW Hendrina Wind Farm, being developed by Enertrag in the Mpumalanga province.

Apollo Africa, which is majority-owned by JSE-listed Reunert and is in the final stages of securing a trading licence from the National Energy Regulator of South Africa, has entered into an exclusive agreement with Enertrag for the electricity that will be produced at the facility.

It is currently overseeing a process through which it will enter into power purchase agreements (PPAs), ranging in duration from three to 20 years, with multiple buyers of the wheeled electricity, with contracts ranging in size between 0.5 MW and 50 MW.

MD Jenna Harris tells Engineering News that Apollo initiated the sales process on May 1 and has since received offtake interest well above 50% of the wind farm’s anticipated yearly electricity production of more than 688 GWh; this being the minimum contractual threshold required to advance the project to bankability.

The sales window is scheduled to close in August, with the aim of progressing the project to financial close before December 1, the date on which construction of the wind farm is scheduled to begin, with the goal of producing first power in May 2026 before ramping up to full production in November of that same year.

Located about 20 km from Eskom’s existing Hendrina coal power station, the wind project is in the final stages of securing a crucial grid-connection budget quote from Eskom, making it one of the few private wind projects to have achieved that milestone to date.

The project’s relative maturity, with Eskom grid capacity already allocated, is a material advantage, as it can take up to five years to advance a wind project to bankability. In this case, it is linked to Enertrag’s decision in 2017 to begin assessing the wind potential of Mpumalanga in light of indications of emerging grid limitations in the Eastern, Northern and Western Cape provinces that have hitherto attracted the lion’s share of wind developer interest, owing to their perceived resource advantages.

Enertrag’s Dustin Rebello tells Engineering News that, having collected 36 months of wind data across the farms on which the project will be located and in other parts of the province, it has found the Mpumalanga wind resource to be comparable to the energy resources of projects it has in other provinces.

“Linked to this we have found our Mpumalanga projects to have particularly favourable generation profiles, with a lot of night-time generation, winter generation, and peak time generation,” Rebello explains.

In addition, there is the added benefit that the project – which is in the Middleburg area, and which will connect at the Hendrina substation – is in close proximity to many potential consumers, for which decarbonisation is a business imperative. Over the first 20 years of operation, the Hendrina project is expected to save an estimated 8.7-million tons of CO2.

The wind farm will also co-exist with prevailing commercial farming under way on the nine farms.

“The strategic advantages of wind energy are massive in today’s evolving energy landscape,” Harris adds. “With 24/7 green energy production, it fills in the gaps around the decreasing coal-fired generation and the expanding deployment of embedded solar, offering synergistic opportunities for blending solar and wind power.”

Apollo is also targeting to close a market gap that has emerged between those energy-intensive companies that are able to enter into bulk long-term PPAs with independent power producers (IPPs) with utility-scale projects and those companies that also have decarbonisation ambitions but lack the scale or the operational certainty to sign such contracts.

“Traders with large backing balance sheets such as ourselves are able to step in as the single offtaker to the IPP and offer exceptionally large guarantees to make these projects commercially bankable. In our case, this has only been made possible because we have Reunert standing behind us as guarantor on our supply,” Harris explains, stressing that if a project is not bankable, it will not secure the financing needed for construction.

Apollo has structured the PPA contracts to be as flexible as possible with regards duration and size, with pricing that is both below Eskom’s Wholesale Electricity Pricing System tariff and certain for the contract period.

Apollo uses digital smart meters to measure both wind-farm production and the customer’s grid consumption and allocates supply to customers with consideration to meeting their contracted supply commitments and providing a “top up” if the customer   has consumed excess grid electricity during the period.

The electricity is paid for by means of a credit-flow mechanism, whereby Eskom passes a credit on the customer’s bill, reflecting the nominated supply from Hendrina, for which Apollo receives payment.

Harris says the Hendrina project represents Apollo’s entry into the trading market, but that the company is pursuing a 4.5-GW pipeline of other supply and demand aggregation opportunities nationally that it will implement in future.

She reports that, while it was initially a challenge to attract IPPs, there has been a significant shift in recent months, with an increasing number of IPPs now approaching Apollo with potential supply.

For its part, Enertrag expects the role of aggregator-retailer companies to become increasingly important in facilitating private market sales, as the electricity supply industry continues to liberalise.

While Apollo continues to sign up customers, Enertrag’s immediate focus is to continue to progress the project towards construction, during which about 200 people will be employed on site, so as to achieve financial close in the fourth quarter of 2024 and full production before the end of 2026.

Key milestones will be the securing of a grid budget quote, which is expected to be issued in June, and for Apollo to secure its trading licence, which Harris says is well advanced with the regulator expected to host public hearings in the coming month.

“We’re also obviously very excited to be playing an important part in the changing marketplace right now.

“A lot of IPPs have been selling entire 100MW-plus projects to the large energy-intensive users, but the number of big buyers in this space has diminished and traders are being seen as increasingly pivotal for commercialising utility-scale assets,” she concludes.