HomeIndustry SectorsBusiness and marketsLocalisation means the entire renewable energy value chain could 'win'

Localisation means the entire renewable energy value chain could ‘win’

South African Wind Energy Association (SAWEA) and the South African Photovoltaic Industry Association (SAPVIA) recently hosted a webinar where industry experts shared their insights on the opportunities renewable energy presents not only for the possible bidders but also the entire renewable energy value chain.

Ntombifuthi Ntuli, CEO of South African Wind Energy Association (SAWEA): “The presentations highlighted different components, both solar PV and wind, that have local manufacturing potential and exposed participants to valuable knowledge about how to engage with Original Equipment Manufacturers (OEMs) with the purpose of participating in the value chain. Participants also learned different strategies that local businesses can use to enter the renewable energy manufacturing value chain, such as being a local subsidiary of a foreign company, manufacturer under OEM IP local assembler of components, in addition to other valuable insights that will help our sector draw greater economic value to our shores.”

Have you read?
More localisation of Nigeria’s oil industry on the cards

Over the next ten years, the wind power industry is expected to drive an estimated $2.7 billion of investment, each year, with a fairly large portion of this coming from economic benefits of stimulating the local value chain. Hence, assuming that smooth procurement of new wind energy production continues, in line with the Integrated Resource Plan (IRP2019), this sector is an excellent vehicle for direct infrastructure investment and a positive multiplier of economic effects, including specialised components manufacturing such as wind turbine towers and steel mounting structures for solar PV; component transportation; construction industry; engineering and logistics.

The economics of renewable energy in local manufacturing in South Africa

“While exact quanta from assumptions may vary, the opportunity as a starting point is worth pursuing,” explained Francis Jackson, special advisor at GreenCape, who addressed attendees on the economics of renewable energy in local manufacturing. 

Jackson’s presentation unpacked opportunities and barriers, such as:

  • Uncertainty on market consistency: Technical and systems readiness
  • Availability of climate finance
  • Price competitiveness of local supply
  • Investment attractiveness in Energy Transition hotspots
  • Match of skills demand and availability, amongst others.

Addressing low hanging fruit that can drive economic stimulation by the sector he identified wind tower and blade manufacturing; nacelle assembly; wind tower internals; solar PV module assembly; and a number of options, should the solar sector move into vertical integration in the module value chain, such as glass.

Have you watched?
Let’s get more renewables on the electricity network

Considering what it will take for South Africa to achieve economies of scale to enable locally manufactured components to be competitive at a global scale, Jackson said: “It is to be confirmed whether we are well positioned be competitive at a global scale in all components.  The first step is to ensure we make the most of our local opportunity and establish building blocks for opportunities to participate in export.  Global value chain players would be well placed to make the business case as they build capacity to service the local market. There will be certain parts of the supply chain that may emerge to be more strategically placed to cultivate capacity in South Africa than others in order to be able to compete internationally.”

He added it will take a suite of systemic interventions by stakeholders from industry through government and labour: “Notable amongst these is rebuilding market certainty on the back of sufficient scale. Contributing factors may include increasing off-taker diversity; growth in demand through sector coupling, such as green hydrogen for export; consistent review and implementation of policy; refinement to bid window timing; and working in ways with which to allocate risk around procurement consistency and timing.”

As previously unpacked by SAWEA, the Bid Window 5(BW5) local content threshold has been retained at 40%, in line with previous rounds, which the Association believes the industry will respond to positively.

SAWEA has facilitated conversations between the Department of Mineral Resources and Energy (DMRE), Department of Trade, Industry and Competition (DTIC) and the other key sector stakeholders, to align strategically and map the way forward to deliver on increased local content requirements.

Have you read?
REIPPPP lessons: To build localisation, embrace importation benefits

It is noted that for the first time the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has introduced designated local content, which, over and above the threshold, requires bidders to procure specific components locally. Should these components be unavailable, bidders can apply for an exemption, which needs to be lodged with the DTIC.

SAWEA cautioned that the stop-start nature of procurement, and the 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 BW4 and BW5, with many companies being forced to shut down as a result of the delays, unable to carry the cost of overheads indefinitely.                                                       

Nomvuyo Tena
Nomvuyo Tena is a Content Producer at Clarion Events Africa and is as passionate about the energy transition in Africa as she is about music and Beyonce.