Wind industry awaits governement's announcement on possible Round 3 extension

Experts in the wind industry are awaiting an anticipated Round 3 extension from government

In October, wind energy projects totalling 787MW were announced by the Department of Energy (DoE) as preferred bidders in the third bidding window. This will take the number of wind turbines under construction in the country to about 800 and continue South Africa’s rapid, global rise as a powerhouse in wind energy.

But more may be coming: At the announcement of the preferred bidders, the Minister of Energy, Ben Martins, said that the DoE had received a large number of very competitive bids and that the department is considering the appointment of additional preferred bidders. The announcement regarding the appointment of additional renewable energy projects that had been scheduled for November 20 2013 has now been postponed to 31 December.

With Eskom having recently declared an emergency around energy supply, the country is in dire need of more power sources, like wind energy, that can reach commercial operation within a short period of time.

“The additional allocation that is being considered is a tremendous endorsement of the success of the renewable energy procurement programme and the quality of the projects that are being submitted in the programme,” says Johan van den Berg, CEO of the South African Wind Energy Association (SAWEA).“The existing Round 3 allocation, when compared with the equivalent price of Medupi power, will save the country more than R15 billion over the next 20 years,” he explains. “Should additional contracts be awarded, the saving would increase further.”

He further stresses that since the advent of the Renewable Energy Independent Power Producers Procurement Programme (REIPPP), the wind energy industry has seen impressive growth. “Coupled with the competitive pricing that wind energy is able to offer, the industry is eager to see the outcome of the next bid window and an increase in the contract allocation, as we are confident that this will have a significant impact on South Africa’s ability to meet its energy requirements in the future.”

SAWEA has recently published findings showing that the average price of wind energy in Round 3 (74 cents per kilowatt hour) is now as much as 30% below the cost of new coal power, even if the very significant pollution costs of coal power are ignored. If additional contracts are awarded these too are expected to be significantly cheaper than new coal.   

The REIPPPP has encouraged substantial direct foreign investment into the country’s nascent renewable energy industry.

“Most of the investment so far has been in solar energy and wind-powered projects, with a few investors taking up opportunities in biomass, biogas and landfill gas projects,” says van den Berg.

Furthermore, he points out that private power producers’ investment in the renewables industry in South Africa has grown steeply from less than US$30 million (approximately R300 million) in 2011 to US$5,5 billion (R550 billion) in 2012 according to the Pew Institute – making it the fastest growing clean-energy market in the G20.”

"Up to this point[the third round of procurement], South African producers have been doing well but in Round 3, the big winners have tended to be from abroad. A further allocation of contracts is likely to benefit local players while saving the country more money. For these reasons we have every confidence that more contracts for wind power will be forthcoming soon”, he concludes.

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