Insight into South Africa's wind power development

South Africa’s wind energy projects include Eskom’s 100 MW Sere wind farm, eight projects that got their go-ahead in the first round of South Africa’s renewable energy independent power producer programme (REIPPP) and are currently under construction; and the seven round two projects that achieved financial closure in May 2013. This is a notable achievement, considering that only three years ago South Africa’s wind sector could lay claim only to the 5.2 MW Darling wind farm in the Western Cape and Eskom’s pilot 3.2 MW Klipheuwel project, neither particularly representative of what the modern wind power sector is capable of.

South Africa’s wind power sector has seen a national commitment to 8,400 MW of installed wind capacity through the country’s integrated resource plan (IRP 2010) that covers the next 20 years. This will equate to approximately 3,000 wind turbines. While the IRP will be amended and updated according to changes in technology and other factors, the South African government has thus far remained steadfastly committed to the renewables component of the plan.

South African Wind Energy Association (Sawea) chairman, Johan van den Berg, says that the organisation is now focused on issues pertaining to the construction of the over 1.0 GW of wind projects. “We are in execution mode and working to ensure that as an industry we deliver smoothly and on time. As an example, the majority of the projects are being undertaken on a turnkey engineering procurement construction (EPC) basis and will have their own project planning. However, from a wind sector perspective we are working to avoid or mitigate as much as possible potential logistical hurdles that could arise with numerous projects all looking at procuring access to certain construction and transport resources.” The topics Sawea has thus added to its previous focus on the regulatory environment and ensuring that government achieves its socioeconomic goals with the REIPPP include practical matters such as confirming when traffic rules allow for heavy haul vehicles to travel to sites, and similar issues.

Van den Berg says that the window one REIPPP wind projects that achieved financial closure in November 2012 were typically those developed by early pioneers that were ready at the time and which had worked on their permitting over the previous years. While they would have been chosen for their favourable wind regimes and other factors positive to their viability, they may not necessarily represent the very best wind energy possibilities in South Africa.

These projects are: the 26.19 MW Dassiesklip project in the Western Cape being undertaken by BioTherm Energy with Sinovel as the OEM supplier; the 26.19 MW Van Stadens project in the Eastern Cape being undertaken by Metrowind with Sinovel as OEM; the 65.4 MW Hopefield Umoya project in the Western Cape with Vestas as OEM; the 72.75 MW Noblesfontein Gestamp project in the Northern Cape with Vestas as OEM; Red Cap’s 77.6 MW Kouga project in the Eastern Cape with Nordex as the OEM; the 97 MW Dorper Rainmaker/Sumitomo project in the Eastern Cape with Nordex as OEM; the 133.86 MW Jeffreys Bay project being done by Mainstream with Siemens as OEM; and the 135 MW Cookhouse ACED project with Suzlon as OEM.

As of June 2013 all the window one projects were in the construction phase, with some such as the Cookhouse project having seen the arrival of turbines. The smaller projects are expected to start coming on-stream in March 2014, with the last of this crop of projects expected to do so in about September 2014.

“The window two projects were different, as the bidding was much more competitive, which is indicated by the drop in the average bid price from 114c/kWh to 89.7c/kWh,” Van den Berg says. As with the window one projects, a key factor in their selection would have been grid availability, but increasingly this crop of projects as a whole is reflective of the emergence of a different kind of investor: for example, large utilities that can afford to invest at lower returns. All the second round projects are reflective of good wind regimes as well.

The window two projects are: the 90.8 MW West Coast 1 GDF project in the Western Cape with Vestas as OEM; Cennergi’s 137.9 MW Amakhala Emoyeni project in the Eastern Cape with Nordex as OEM; Cennergi’s 94.8 MW Tsitsikamma project in the Eastern Cape with Vestas as OEM; EdF’s 23.4 MW Grahamstown project in the Eastern Cape with Vestas as OEM; EdF’s 59.8 MW Grassridge project in the Eastern Cape with Vestas as OEM; EdF’s 20.6 MW Chaba project in the Eastern Cape with Vestas as OEM; and the 135.2 MW Gouda project by Aveng/Acciona in the Western Cape with Acciona as the OEM.

Industry insiders suggest that all these round two projects have a P50 (i.e. the 50% probability that the capacity factor will not be less than a certain level) of above 35%. The P90 (where the probability that the capacity factor will be above a certain level is 90%) would be about 4-6% lower than the P50 for these projects. Thus the parts of South Africa where wind projects are being developed exceed by a wide margin the average global capacity factor of 25% for onshore wind projects and as a result South Africa is getting wind power at a very competitive price.

Ten of the fifteen REIPPP projects awarded to date have been in the Eastern Cape, with most of the rest in the Western Cape. However, this is probably more reflective of the availability of grid capacity to accommodate the power, in particular the Poseidon substation in the Eastern Cape, than a reflection of the overall wind regime distribution across the country. “In addition, the environmental impact assessment (EIA) process may have taken longer in the Western Cape and this may in part be a reflection of that,” Van den Berg says.

He estimates that in addition to the existing projects there is probably about another 2,000 MW of grid connected wind capacity that could be added in South Africa at this point should it get the go-ahead. “This estimate takes into account that at this stage only projects that require shallow grid strengthening are being looked at. In addition, it takes into account that a number of projects are competing for the same resources, so are mutually destructive in that if one goes ahead it will be at the expense of another.” It is predicted that the third round of the REIPPP, scheduled for August 2013, could see as many as 200 renewable energy projects in total submit bids, of which a large percentage will be wind projects.

He hopes that as the renewables sector matures in South Africa long term transmission grid planning will dovetail with the best wind resources the country has to offer. As Eskom notes, the lead times for new transmission corridors are very long due to land rights negotiations for servitudes. Thus long term planning is needed for wind resources that require deep grid connection to be realised.

The wind sector, in particular in South Africa, in recent times has received some bad press. Antagonists have pointed out its intermittent nature which entails running parallel base load plant and is thus not cost effective, the low power density of this technology, the large non-aesthetic footprint, environmental impacts on birdlife, etc. Van den Berg is used to dealing with these accusations.

He points out that wind is the cheapest form of new generation bulk energy available in South Africa today, based on the cost of new plants being built (89c/kWh versus 97c/kWh for new coal plant). In fact, an estimate by Standard Bank is that Kusile will cost R1.38/kWh in 2019, when it is commissioned.

In addition, of Eskom’s multi-year price determination (MYPD3) submission for its 16% requested increase (in the end a much lower increase was granted), 3% was allocated for independent power producers. This 3% was misinterpreted by many as that required for renewables only and led to some of the contention that these projects will add significantly to the cost of the country’s electricity base. “In fact the majority of that, approximately 2.7% of the 3% increase, was associated with peaking power gas fired IPPs,” Van den Berg says. “It is the age of power that costs a little extra, not the colour (greenness). All new power is costlier than old power, like new cars are costlier than old ones.”

It should be noted that the intermittency and output variability can make simple economic and financial comparisons between wind projects versus non-renewable energy projects difficult.

In terms of intermittency, wind power is fairly predictable. The studies done on the sites of the wind projects over sufficient time to ensure bankability do provide a measure of predictability of the various wind regimes, and the dispersion of the wind projects across South Africa with their different wind patterns provide levels of counterbalance. The proof on the merits or otherwise of the individual wind projects in South Africa will come once the plants are up and operational. However, apart from Sere, the projects come from the private sector and risks on capacity factors and ability to supply power reliably are borne by the private sector, though of course the 20-year power purchase agreements (PPAs) signed by the project companies and Eskom do require the grid to uptake the power when provided and are underwritten by Treasury.

Van den Berg notes that based on experience in countries such as Germany the intermittency factor only becomes an issue once renewables contribute over 20% of a country’s delivered energy. South Africa will not reach that level with the projects currently underway nor for many years. In addition, in the current context of the country’s electricity demand and supply situation, the wind projects would be able to displace the use of very expensive peaking diesel generators, and could prove to be a highly cost beneficial addition to the grid. Thus, taking into account the delays in commissioning of Medupi, the sooner the wind projects are up and running the better for the country.

While it is clear that wind, like any other power generation technology, has its strengths and weaknesses, global installed wind power capacity had grown to 282 GW by the end of 2012. Africa’s contribution to wind’s global installed capacity, however, has been minimal, standing at just over 1.0 GW by the end of 2012. Up until the end of 2012 existing grid connected wind energy output in Africa was dominated by north African countries, with south and east Africa poised to gain ground, taking into account projects underway or planned in these regions. Apart from South and southern Africa, the east African wind corridor has been recognised for its potential. Wind energy’s prospects in west Africa remain limited. This is one of the conclusions of a comprehensive study on the development of wind energy in Africa, by among others Dr Emelly Mutambatsere, principal regional economist, at the African Development Bank (AfDB).

By the end of 2011 the developed wind potential on the continent saw a strong concentration of wind energy capacity in three north African countries, Egypt, Morocco and Tunisia. “Egypt held half of the continent’s total installed capacity, followed by Morocco with 40% and Tunisia with 5%. Outside of north Africa, there is commercial capacity in Cape Verde, and limited capacity in South Africa, Kenya, Mauritius, Eritrea and Mozambique.” Mutambatsere says.

She continues, “The wind energy market’s outlook in Africa is also noteworthy. Our survey produced a comprehensive sample of about 60 on-going and planned wind energy projects on the continent.” South Africa alone is expected to contribute a third of the wind energy capacity currently under development or planned in Africa, while east African countries such as Kenya are making strides towards developing wind projects. “This trend is attributed to an increased strategic focus on wind in these regions, whilst in the north market development has been stalled by socio-economic instability.”

According to Mutambatsere, Africa’s wind energy market has developed at a pace similar to that observed in leading markets at the early stages of their wind sector development. In southern Africa, apart from South Africa, Mozambique has a small scale wind farm under construction (Ponta de Ouro wind farm, 10 MW), and several projects are planned in other countries in the region. Similarly, east African projects include two on-going commercial scale projects in Ethiopia and Tanzania (Ashegoba and Njiapanda wind farms, respectively); and some planned projects in Kenya, Djibouti and Ethiopia. The latter include the Lake Turkana wind farm in Kenya, which is among the largest wind energy projects planned in sub-Saharan Africa. No on-going or planned projects were recorded for Central Africa. Concentration of reported on-going and planned projects in Africa sees three countries – Egypt, Morocco and South Africa – collectively contributing about 75% of the total number. Van den Berg says Sawea estimates that getting to 5.0 GW installed wind capacity on the continent by 2020 is very achievable.

Though wind power is a well-established industry globally, many emerging market countries have localisation ambitions in the sector. South Africa is no exception. Van den Berg believes that in terms of localisation goals for the technology in South Africa, the tower structures will be built locally as will turbine blades, not to mention the obvious balance of plant work. Beyond that it becomes harder, and he suggests that the model used by the motor vehicle industry in South Africa be studied, as it has seen international manufacturers building a particular model of car in South Africa. “Perhaps something similar could be done, taking into account that wind turbine manufacturers produce different types of turbines, and such a company could be convinced to build a certain line in South Africa for its global market and see this offset as meeting its localisation requirements.”

There is also another wind market South Africa could conceivably tap into – the off grid market. South African companies already produce small wind turbines ranging from 5.0 kW up to 300 kW. Van den Berg notes that there are some 690 million people across the continent without access to electricity. The Alliance for Rural Electrification says that wind could play a role in distributed grids, which are seen as the solution to improving access to electricity in Africa.

“Rural electrification requires simple, easy to implement and service technology, and for wind to maximise its potential it requires good hub heights – a rooftop wind height loses a great deal of the effectiveness,” Van den Berg says. It is a reason that rural electrification has been more associated with photovoltaic systems combined with diesel generators. However, he believes adequate pole structures can be manufactured in rural environments to enable small wind turbines to be part of distributed generation in Africa. “This is the sweet spot where South Africa can really build a large local industry,” he adds. The Alliance for Rural Electrification predicted that the global market for small wind technologies will more than double between 2010 and 2015, reaching a value of US$634 million. A significant part of this growth will take place in developing and emerging markets.

Small wind turbines are easy to integrate in already existing mini-grids, mostly run by diesel. Such hybrid systems offer a more sustainable, higher quality and lower cost solution than diesel-only systems. The price of small wind lies between US$0.15 and US$0.35 per kWh over the lifetime of the system, making it under favourable conditions cheaper than small PV, small hydro and other renewable solutions.