26 February 2013 – Following the announcement of the successful bidding companies for the last round of South Africa’s Renewable Energy Independent Power Producers (IPP) programme, the country is looking forward to a future powered by renewable energy. The Integrated Resource Plan 2010, published first in 2010 and updated in 2011, anticipated the introduction of renewables into the South African electrical power mix in excess of 10,000 MW over the next 20 years. The current IPP seeks to procure 3,725 MW of renewable power capacity by 2016.
“The severe electricity supply constraints experienced in South Africa recently resulted from the lack of infrastructure investment and maintenance. This programme balances constraints affecting the supply of electricity, reduces carbon emissions and water usage, emphasises localisation and job creation and regulates technology uncertainties and likely developments,” explains Trevor de Vries, MD of 3W Power/AEG Power Solutions. “The IPP programme focuses on allowing as much as possible of the investment value to reside within South Africa and provides a developmental impetus in respect of training, job creation and support for local enterprises. The procurement programme had accordingly been designed to provide value for money, but specifically to stimulate economic development.”
Current policy envisages 30% of generation capacity to come from IPPs, and Eskom’s constraints make it likely that at least this will be attained, if not more. Emphasis on localisation will result in the substantial development of skills and capacities so that local enterprises will be able to carry out manufacturing, supply, maintenance and operation of components, plants and facilities.
“As renewable technology costs decrease, the utilisation of renewable projects will continue, and the government’s support of the sector is essential to the long-term success of these investments. Its commitment to renew the IPP programme, and the announcement of the provision of an additional 1.0 GW of solar and 1.0 GW of wind power in the future, shows that government is prepared to partner with the renewable sector to ensure that the goals of the IRP are met,” de Vries says.
He adds that the IPP programme, and government’s commitment to it, mirrors the subsidies that made renewable energy viable in Europe. “Without the subsidies provided by the governments of European countries, the renewable market would not have developed as far as it has. This will prove equally true in South Africa. Solar, in particular, will flourish locally, because even the areas in South Africa with the least sun have double the amount of solar irradiation that Germany, the solar capital of Europe, has. In addition, solar power is fast achieving price parity with traditional power, and when the European tariffs fall away in 2015, it will be cost-efficient to buy solar on its own merit, and the renewables IPP programme will have the same result in South Africa.”
De Vries says that now that the IPP bidders have been announced, there is visible excitement around the entire renewable market. Government’s R13 billion investment in the sector offers tangible proof of its commitment and provides confidence for all involved in the sustainability of renewable energy sources in South Africa.
However, South Africa’s capacity to deliver on the envisaged renewable energy projects is lacking – particularly in light of the IPP’s local requirements. “The scale of the IPP projects is enormous, and there are extremely high expectations. Many international companies do not have the infrastructure in place to deliver on this scale locally,” de Vries says. “And, once the installations are complete, the requirements for customising, servicing and maintaining them mean that having local people on the ground will be even more important.”
Despite these challenges, de Vries feels that as the renewable IPP programme reaches maturity, the South African renewable sector will grow from strength to strength. “The only way to overcome the logistical issues will be through the use of local suppliers and service providers, and this will grow the entire market in South Africa. I believe that we will learn from the mistakes in the first round of the IPP bidding, making rounds two and three quicker and more effective, and I believe local companies will be the foundation of the success of the IPP programme.”