WIND POWER: SOUTH AFRICA S EXPERIENCE AS AN AFRICAN CASE STUDY

Transcription

1 + WIND POWER: SOUTH AFRICA S EXPERIENCE AS AN AFRICAN CASE STUDY Presentation to the AEEP Energy Business Dialogue Djibouti May Johan van den Berg (CEO) and Nicolas Rolland South African Wind Energy Association

2 INTRODUCTION TO SAWEA The Industry Association for wind energy in South Africa Fifteen years old but only two years as an organisation with a permanent office and people (2 permanent staff) Heavy reliance on about 60 volunteers divided into 9 working groups (Policy/legislation, land use, environmental, skills development, technical, transport/logistics, markets/procurement, public relations, events) Working Groups work semi-autonomously in collaboration with CEO and Board and they post reports, findings and discussions on SAWEA website. SAWEA funding about 50% membership fees and 50% events ( Windaba annual conference 500 delegates, about 70 exhibitors). SAWEA has excellent relationship with Government Minister of Energy is patron to Windaba SAWEA aims to facilitate the roll-out of wind power in SA to at least the IRP 2010 target of 9,000 MW installed by see

3 RENEWABLE ENERGY SA THE LONG AND WINDING ROAD Date Event Significance South Africa builds a fleet of large, coal fired (fossil fuel These are now all amortised (paid) and only maintenance needs to be based) electricity generation plants. paid, making electricity cheap. They are however highly polluting and nearing end oflife 1988 Concern about climate change gets momentum Fossil fuels are recognised to endanger human well-being in the long run 1990 IPCC brings out a sobering scientific report Negotiations start towards an international convention on Climate Change 1992 UNFCCC signed South Africa is a signatory and acquires international obligations including the limitation of fossil fuel use and promotion on renewable energy 1995 It becomes clear that new generation capacity is needed The pattern of electricity shortfalls is set to keep track with SA s increased energy demand response was slow 1995 IPCC s second report indicates the climate news is worse General recognition that a binding international convention (the KP) than expected needed to follow UNFCCC 1997 KP signed (enters force in 2003) International community undertakes to take real steps towards addressing climate change Eskom makes good profits and Government as its The pattern of Eskom s increasingly burdened balance sheet is set shareholder pays it out in dividends without keeping a reserve for the new build programme 1998 Darling National Demonstration Wind Farm starts First tentative steps towards IPP wind energy however no system in development and by 2001 gets demonstration support place to make it competitive with fossil fuel energy which in Eskom s case from the erstwhile Minister of Energy is much cheaper Dec 1998 White Paper on Energy launched A break from the Eskom monopoly is envisioned with a mixed basket of energy sources and a mixed basket of energy suppliers (including Independent Power Producers)

4 RE SOME PROGRESS 2003 South Africa hosts the World Wind Energy Conference and the White Paper on Renewable Energy is launched Virtually no progress is made with the RE target as per the RE White Paper Various competitive bid processes launched to procure electricity from private sector fail totally or partially the PNCP, MTPPP, the Peaker programme and the base load IPP programme Principles in Energy White Paper affirmed and target of 10,000 GWh s of RE production by 2013 is set (this will now be very difficult to achieve) RE stalls in the county The energy investment community becomes very sceptical about South Africa NERSA consultants publish inception report for a REFIT scheme Potential REFIT raises hope in the RE sector 2008 Darling National Demonstration Wind Farm is commissioned after 11 years of battling against the odds and two High Court approaches but fails to remove the barriers to RE energy 2009 NERSA approves REFIT for certain RE technologies including Solar PV, Solar Thermal and Wind. Investment starts flowing very quickly, international companies invest in SA and employ local people. EIA s start. Wikipedia mentions the SA REFIT as attractive The message is sent that doing business in the sector in SA is very difficult The RE Industry spends ZAR 500 million + in the belief that the country will have a REFIT scheme Feb 2010 NERSA approves the budget ( MYPD2 ) that includes renewable energy Developers get comfort that REFIT procurement is imminent

5 RENEWABLE ENERGY TO THE PRESENT April 2010 NERSA publishes the draft selection criteria scorecard for REFIT and holds public hearings to discuss same Not all projects commissioned will get the REFIT. There will be tender process and only some will succeed. Developers gear their projects to fit with the draft selection criteria May 2011 IRP 2010 is approved as SA s energy master plan that will include a vast contribution from renewables costing ZAR 350 billion plus wind about 9,000 MW The large RE component (9,000 MW wind) implies ensuring very large private sector investment and very rapid skills development August 2011 REFIT is replaced by REBID A different procurement method than anticipated but with a much larger ambition Nov 2011 First bid round closes over ZAR 100 million is posted in bid bonds. About 52 applications Dec 2012 preferred bidders announced about 30 successful projects. In wind, 634 MW s provisionally accepted and 630 MW of solar PV May 2013 Second bid window closes Another 500 MW + under construction. The wind sector is firmly established in South Africa

6 THE IRP 2010 Integrated Resource Plan 2010 ( It is the 20 year blueprint/master plan for energy in the country Extensively work-shopped and modelled Adjusted from lowest cost model for various factors including policy Readjusted every 2 years due to changed circumstances

7 THE IRP 2010 cont

8 RE LIFT-OFF In ten years SA stumbled from 0 10 MW of wind power installed If all goes well, in 36 months we might have 2,000 MW s of wind (also 1,000 MW of solar PV installed) This would move SA into a significant position in the global order and RE would then be a significant new sector in the SA economy

9 WHAT HAPPENED? WHAT CHANGED? Government decided to address climate change, joblessness, skills development as well as the need for local manufacturing and industrialisation through a single measure: the Green Economy. Government, private sector and labour signed the Green Economy Accord One champion in government (treasury) drove integration and alignment between different permitting bodies inside government. Private sector was willing, ready and skilled The policy framework finally became friendly to Renewable Energy The Procurement Rules were written by leading international lawyers and consultants There is on-going consultation between role players and government about the rules and whether they need to be adapted. SAWEA plays a key role The industry associations for RE won Government s trust

10 WHAT DID IT COST? WHAT ARE THE BENEFITS? The wind power is procured over 20 years and government (via utility Eskom) only pays for electricity. All capital expense and development risk borne by private sector (70% debt, 30% equity in project finance structures) Round 1 cost about USD 0,16/kWh (levelised cost) Round 2 cost about USD 0.13/kWh (levelised cost) Even excluding the thermal (coal) pollution cost of minimum USD 0.13/kWh, wind is now cheaper than new coal power (see ENTIFIC%20PAPER%20139%20pages.pdf) Wind can come online within 18 months after contract signature Fuel is free forever commodity price increases cannot affect existing wind plants like it can affect thermal plants Can create jobs and community benefits

11 COST OF RENEWABLES VS EXTERNALITIES OF COAL POWER USE HOW MUCH CAN IT BE PER KWH FOR KUSILE? (UNIVERSITY PRETORIA)

12 ON-GRID WIND POWER IN EAST AFRICA/DJIBOUTI Significant wind potential in the East African Wind Corridor - constitutes Global Wind Energy Council s ( GWEC ) s number 1 international priority Greater generation potential than grid/s can presently integrate IRENA working to improve inter-connective with SA Power Pool to evacuate wind power from East Africa to Southern Africa Ethiopian hydro capacity will largely remove the intermittency challenges of wind power. Existing thermal plants in Djibouti will function well as peaker plants that can work well with renewable energy and also off-set intermittency challenges Every kwh generated by wind that prevents thermal generation in Djibouti will save money due to lower generation cost Desalination through wind largely removes intermittency problems

13 CREATING THE RIGHT POLICY FRAMEWORK FOR PRIVATE SECTOR For on-grid, the choice is between a REFIT (Renewable Energy Feed in Tariff Scheme) and a (more complex) competitive procurement system Remember: Banks do not take risk! All contracts must be bankable in terms of international project finance practice REFIT is simpler with lower transaction costs. Given Djibouti s high energy costs, even a REFIT will yield a lower cost than at present Suggested REFIT about USD /kWh (industry will not be very large investors cannot cross-subsidise or take a future view. Other markets compete for investors attention). The Power Purchase Agreement will need Sovereign/similar support as the utility s balance sheet may not be enough for investors/banks Policy framework must be integrated (get top international lawyers to assist) All required permits/approvals must be listed upfront All issuing government departments must talk to each other

14 OFF-GRID WIND POWER IN EAST AFRICA/DJIBOUTI Grid extensions to rural areas are very expensive and time consuming If the saved costs are taken into account, mini-grids and hybrid systems (including solar PV and diesel) can often be the most cost effective solution Much work has been done by the Alliance for Rural Electrification ( ARE ) AEEP supported a 2012 conference in Ghana on off-grid electrification great potential and interest shown

15 COMMUNITY BENEFITS The SA procurement system has extensive rules on local content, socioeconomic development, job creation, skills development etc. The aim is to create jobs and socio-economic development within 50 kilometers of the project site. Contributions to schools, medical clinics etc from turn-over Minority shareholding by community trusts - yielding large sums once the project reaches maturity. These benefits are recovered from the tariff but do not raise costs by that much. Community benefits and extra buy in may be very significant Recommended that Djibouti considers similar structures

16 THE ROLE OF INDUSTRY ASSOCIATIONS A mediator between private sector, financial institutions, investors and government is essential SAWEA has been playing this role in South Africa We have managed to place the collective interest of building an industry above the distinct interest of individual developers. We have avoided rival associations within the same technology and have strong collaboration between RE technologies Mature markets in especially the EU show a strong correlation between industry association strength and industry growth Suggested Djibouti encourages building such an association The AEEP is an umbrella for intra-continental collaboration Suggest also look into joining the African Renewable Energy Alliance ( AREA )

17 THANK YOU Johan van den Berg (CEO SAWEA) (27) (0) WITH Nicolas Rolland (SAWEA)