The state of SA’s renewables industry

By admin On September 15, 2011 · Leave a Comment

A great degree of previous uncertainty over South Africa’s renewable energy procurement programme has made many international players shaky about investing in the sector. However, this situation was resolved recently when the South African National Energy Regulator (NERSA) concurred with the Department of Energy’s (DoE’s) proposal to abandon the renewable energy feed-in tariff (REFIT).

Our renewables sector is large and diversified and it has attracted many international players despite the now-defunct REFIT. Many international companies have been represented in this country for a good number of years. In the wind, CSP and PV generation spaces alone these companies have invested an approximate R1,3-billion just on initial steps such as compiling maps, conducting EIAs, setting up offices and possibly land acquisition.

International interest in the local solar market and green economic opportunities seems to be intensifying among both small and large-scale installers. A German photovoltaic tracking systems producer recently announced its intention to enter the local market. The local uptake of their product will in all probability be good, but that leaves the challenge of localisation. Besides the tracking device included in the product, the installations consist of many components which the company does not manufacture. To be competitive in South Africa, it should consider a local production plant and contribute to upskilling our local labour force and creating new green collar jobs. We must base our renewables industry on a model which is reasonably localised, but which also incorporates the best of international practice.

REBID is designed to keep within our borders capital flows generated by renewable projects and create localised green collar jobs, develop local skills and expand our local manufacturing value chain, a requirement the DoE has always viewed as non-negotiable.

The ultimate advantage to the local renewable sector is that, regardless of REFIT, REBID, tenders or green certificates, we have by far the best solar radiation in the world. It is a boundless national resource which makes this country more attractive to solar companies in terms of investment per output than some our northern counter-parts like Austria, Germany, Italy or Spain.

I am very optimistic about the future of the green sector, and I foresee a period of relative strategising and excitement among developers as they gear up to face a very competitive season. A bidding conference is scheduled for mid-September and investors would have most certainly have gone back to the banks and financial development institutions to renegotiate and recalibrate terms of finance in a post REFIT environment. We must, however, guard against tenderers bidding too low to maintain the sustainability of their projects; with the REFIT process, IPPs were guaranteed a fixed amount per kW/h.

Concerns have been raised over possible effects of the economic downturn on US and EU markets on the industry’s ability to raise capital. Financial development institutions such as the IDC, however, view the renewables industry as of the “new economy” in which they have invested many resources while setting aside billions towards its development.

Regarding the new green economy, utility giants like Eskom are creating fertile ground to usher in our low carbon society; it currently has a 100 MW CSP farm in the vicinity of the 5 GW Upington PV installation.

Old economy industries such as mining and metalworking provide many jobs and support many people. When we build a wind or solar farm, it generates many indirect and direct green collar jobs. Having said this, we cannot expect to stop coal generation summarily, but we can explore ways for the old economy to stimulate and complement the new.

On the solar water heating front, Eskom’s rebate programme, which is now entering its second phase, has been allocated a certain amount per month until March 2012. Eskom was granted R1,15-billion by the National Energy Regulator of SA (NERSA) through the multi-year price determination (MYPD2) process to install 259 000 systems. To date, 144 141 systems have been installed at a cost of over R750-million.

The utility has indicated its willingness to create a “super group”, a type of “SWH Inc.” in conjunction with SESSA and other interested parties to accelerate the programmes. This body will facilitate engagement with all the stake holders like SESSA members, potential funders and industry players at large. The programme has resulted in an exponential uptake of SWH systems, with 144 141 systems having been installed at a cost of over R750-million.

Eskom realises that the SWH programme is a national asset and is geared towards co-operating with the industry to ensure that we make the most of it. However, we need to ensure that the quality of installations are audited regularly to ensure success.

With a positive policy environment and the ushering in of green building codes, the SWH stands on the precipice of greater uptake.

In terms of quality control, we are expecting a move within the industry towards self regulation. SESSA has indicated to Eskom its willingness to perform that function on its behalf, but the society relies on membership funding and resources are limited in this respect.

We have entered “Phase 2” of the SWH rebate programme and we will incorporate into it the lessons learnt in the past. SESSA and its membership base are key drivers towards realising governments vision to create 300 000 “green collar” jobs in the next ten years. The future of the SWH programme must be supported by local manufacturing and by a maintenance and service drive. We must grow our green sector with a view to export our skills and patented low-carbon technologies.

Source: Irvan Damon, SESSA Ambassador, of ee Publishers