South Africa has the capacity to draw 20% of its energy requirements from renewable sources such as wind and the sun, substantially alleviating the current pressure on the national grid and bringing electricity to a wider audience.
In a nutshell, the renewable energy sector couples with mining as the most vital industries for bringing economic development, financial reward and job creation to rural South Africa.
Windlab MD Peter Venn says that in a little over a year, the wind energy sector in South Africa has attracted R47 billion in infrastructural investment and created more than 1000 white-collar positions without the industry yet showing revenues, let alone returns on investment. ‘This shows the unparalleled commitment the government has to support alternative energy generation,’ he says.
Recently the Department of Energy, national electricity supplier Eskom and various private renewable power producers signed final agreements on procedures and timelines for independent producers to generate electricity. The agreement includes developing wind farms that will provide into the Eskom grid 1415MW of installed renewable capacity.
Venn says South Africa has substantial capacity for wind farms given the windy climate and the vast expanse of rural land. Currently wind power costs half that of solar power per MW, meaning in the next decade, it should ‘receive the lion’s share’ of the renewable energy market.
However, shifting to renewable energy will not come without issues. Venn indicated the grid will be challenged in shifting from one large electricity source to a distribution model. The vigorous tender process had also made the costs in bidding exponentially higher than global comparatives, necessitating large financial backing just to participate.
Building a 140MW capacity wind farm requires a capital investment of R2 to 3 billion with the first revenues only collected five years into the project. However, the maintenance costs were minimal since the raw material was free.
Venn also noted the tender documents demanded a 40% local participation, but that given the country had limited expertise in wind energy, bidders had maximised on the 60% allowable international inclusion. As the process has become better understood, local pension funds were dipping into investment opportunities.
He says when the Medupi power station comes online in 2014, power generation would be 97c/kW hour (kWh) against wind at 89c/kWh. The government requirements state 45% local content, 40% local ownership and 2.1% of income for local economic development.
The farmers on whose land the turbines are sited also receive a royalty that would act as another income stream during more difficult agricultural times. Venn: ‘Wind is the cheapest form of renewable energy and the cost of building wind farms is covered by investors not taxpayers. This is a massive private investment that will benefit the engineering, construction and transport sections and lead to developing wind farms in other southern African countries.’
Trade and Industry Minister Rob Davies has stated that the green economy should be used as a tool to create opportunities and drive job creation. Addressing a Pretoria-based manufacturing conference, he said South Africa needed to be part of the green economic revolution.