LOCAL content: LESSONS LEARNED

There has been much debate around the removal of the local-content requirement on aluminium frames for photovoltaic panels by the Department of Trade, Industry and Competition (dtic). The decision has caused questions to be asked of dtic but should also motivate the industry and government to reflect on what local content really means.

By Niveshen Govender, COO, SA Photovoltaic Industry Association

Looking back at the progress we have made since the 2011 launch of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), I can see so many positives.

Recognising that our own local industry was not able to fully realise the ambitious programme targets, government took an innovative stance that was designed to leverage foreign expertise but also provide South Africa with the opportunity to become a major manufacturer of componentry of renewable energy projects.

The local content requirements of the initial Bid Windows of the REIPPPP stipulated a certain percentage of local content and have resulted in several technology and component manufacturers establishing local manufacturing facilities.

According to the IPPO quarterly report, Black South Africans now hold 33% of the shares across the complete supply chain and local communities hold 9% equity in the Independent Power Producers (IPPs) of Bid Window 1 to Bid Window 4.

To date, the R58.5-billion local content spend reported by active IPPs is already 89% of the R66-billion local content expected. This is with 20 projects still in construction, and 71 of the 91 active projects having reached Commercial Operation Date (COD).

All this is to be lauded. However, as I reflect on progress, I must ask, what exactly is local when it comes to local content requirements?

As with everything in life, there is often a happy medium between opposing viewpoints. And this might be an appropriate time to reassess what it is we want from local content requirements as we embark on another decade of renewable energy procurement.

Our definition of local should of course be aligned with government objectives to increase domestic employment through increased industrialisation. But local content should also lead to an enhanced skills base that leads us to leverage foreign expertise to improve the knowledge of our local workers and enable them to add value across the solar PV value chain, not just through manufacturing and construction and in the process, hopefully develop globally competitive products.

Renewable energy provides us with an opportunity for industrialisation. SAPVIA is fully supportive of localisation that builds industry in South Africa in line with the national policy. The framework must support fair and transparent opportunities to both local manufacturers and foreign investors.

There are several solar PV system components that could be locally manufactured if the right conditions are put in place. Add the untapped potential across the African continent which we could look to manufacture for the region and not just South Africa.

All of this must be done responsibly and sustainably, with an eye on balancing the immediate needs of the sector while encouraging investors and incentivising viable local businesses and industry.

A refocus on what local content requirements can only be done through open consultation both nationally and internationally, working with private industry and government to ensure that we have empirical, data-based research as the cornerstone of any plan.

Local content calibrations should begin with an assessment of existing local capabilities and the market potential, while keeping an eye on the planned roll out of capacity – mainly, the IRP 2019.

Going forward, we are keen to continue working with the dtic and other organisations representing the renewables and manufacturing sectors to fully understand the local market potential, currently, and what it can grow into. Only through research and consultation will we be able to chart a forward trajectory that supports increased investment in industrialisation and fosters healthy local competition.

SAPVIA is working hard to create an enabling environment that supports manufacturers. We have reconstituted a Manufacturing Working Group, for both members and non-members, which has representation from various solar PV component manufacturers, suppliers and distributors, both local and international.

This Manufacturing Working Group, under the leadership of its own Chairperson, Patrick Govender and Vice Chairperson, Conrad Harmse, will focus on specific issues that relate to the development of local PV supply-chains, supporting the South African Renewable Energy Masterplan’s focus of identifying and maximising industrialisation and employment opportunities from the implementation of IRP 2019, under the leadership of the Department of Mineral Resources and Energy (DMRE) and dtic.

With the aim to contribute to a meaningful definition and position of local content as it relates to government-led procurement programmes, this Working Group elected officials (Frans-Willem Vermaak and Lourens Vermaak) to represent their collective interests at the South African Renewable Energy Master Plan (SAREM) level.

I would actively encourage as many players as possible from across the industry to come together through this Working Group to allow us to formulate an industry position that will help us tackle the challenges facing our industry.

Together we will map out the component manufacturing, supply, and distribution landscape in South Africa. Through a thorough review of policy, technical and lender requirements for local manufacturing, we will be better able to align with industry capability. We will further engage key policy makers to ensure an enabling environment for local manufacturers and support further investment into industrialisation.

A key ambition for any local content requirements must be to increase skills transfer and development and we will engage with the relevant SETAs to include and encourage youth participation and employment within the industry.

By interacting with other industry groups, our hope is to create a more collaborative sector that will lead to the increased rollout of solar PV in South Africa.

There is always a balance to be struck and compromises that sometimes must be made. However, by working together, we can make sure that future local content requirements really address the needs of the market and support long term policy objectives of both government and industry in the short, medium, and long-term.

  • Govender is the COO of the solar PV industry representative body, SAPVIA.
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Wind power producers may provide immediate surplus power

The South African Wind Energy Association has engaged with its members to ascertain if the sector is able to provide additional power, in line with the recent call for additional energy from existing Independent Power Producers by the Department of Mineral Resources and Energy (DMRE).

The Department of Mineral Resources and Energy (DMRE)’s proposed ‘Additional Megawatt Programme’ will see the Department entering into agreements with existing renewables Independent Power Producers (IPPs) to procure additional energy that wind and solar farms could supply, over and above, what is currently allowed under their existing Power Purchase Agreements.

“We welcome this call from government and can confirm that several of our IPP members have indicated that they will be responding. They are of the view that it is possible to run their wind turbine generators (WTG) at higher power output or include a power boost to increase generation output of already installed wind turbines,” explained Ntombifuthi Ntuli, CEO of SAWEA.

She added that the industry will be seeking clarification on practical details of the ‘Additional Megawatt Programme’, but that the response has been positive overall. When the country reached unprecedented Stage 6 load-shedding in 2019, SAWEA called for the immediate release of available additional capacity from operational wind farms into the national grid, by lifting the Maximum Export Capacity (MEC) on all operating wind farms.

“Earlier this month, the IPP Office issued a call to all operational IPPs with projects in Bid Window 1 to 4, to make available additional capacity from their operational plants, in order to contribute towards closing the power supply capacity gap. It is encouraging to see that industry proposals are being taken seriously by government and are now being implemented,” said Ntuli.

Due to demand exceeding available supply capacity, South Africa has been plagued with power shortages for a long time. This is despite government’s efforts to implement a number of programmes to close the capacity gap, which include the announcement of preferred bidders for the RMIPPPP and issuing of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Round 5 Request for Proposals (RFP) as well as announcing future procurement plans.

“Eskom’s Electricity Availability Factor has been below recommended levels for a very long time, as demonstrated by the protracted load-shedding that our country has been experiencing for well over a decade now. This indicates an urgent need to procure new generation capacity, both in the long-term and short-term, to bring the available capacity to healthy levels again,” added Ntuli.

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Wind energy industry celebrates new bid window for renewable procurement

The South African Wind Energy Association (SAWEA), together with the broader renewable power sector, are celebrating the Department of Mineral Resources and Energy’s (DMRE) announcement to open a new procurement round.

DMRE Minister, Gwede Mantashe, announced the opening of Bid Window 5 of the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP), which will procure a further 2 600MW of renewable energy from Independent Power Producers (IPPs).

“The announcement by the Minister to open Bid Window 5, calling for proposals from IPPs, marks the rebirth of the wind energy industry, as the last bidding round took place almost seven years ago, in 2014.”

Ntombifuthi Ntuli, CEO of SAWEA

The Energy Minister has set a firm closing date for the Bid Submission as August 4, 2021.

Addressing energy stakeholders in Johannesburg earlier this month, Minister Mantashe said the auction, which aims to procure 1.6GW of wind energy, is in line with the gazetted IRP2019. 

The wind energy industry is dependent on policy tones set by government.  The Association has noted and is grateful to the various government departments, for implementing policies over the last two years.  The wind sector sees these changes, which are closing policy gaps, as a clear direction in terms of plans to procure new generation capacity on an ongoing basis, in line with the energy roadmap, which sees 14.4GW of new wind power over the next decade.

This procurement window, will add vitally needed power capacity to the country, which continues to struggle with strangled energy supply, an ongoing crisis that is economically crippling and has seen South Africa buckling under the strain of load shedding for the last few years.

“With supporting policy and smooth procurement rounds, expected to include the announcement of Bid Window 6 during the course of 2021 as reiterated by the Minister today, the renewable power sector certainly has a key role to play in re-building the country as a significant catalyst of economic growth, and investors have a big role to play in making that a reality,” adds Ntuli.

Minister Mantashe simultaneously announced the preferred bidders for the procurement of the 2000 MW Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), which SAWEA recognises as a significant move, as wind and solar will now be able to play a role in dispatchable power.

Two of the eight preferred bidders in RMIPPPP include wind power IPP’s in the form of hybrid projects.  These projects incorporate wind, solar and storage technology on a utility scale, which is a first for South Africa.

SAWEA has noted that this is a massive advantage for the country, as hybrid projects enhance the reliability and stabilisation of the power generation system. Plus, they do not always require grid expansion, as hybrid grids produce power at different intervals and during complementary seasons.

The advantage of hybrid systems, when incorporated with storage, is that the power is ‘dispatchable’.  So, when the wind or solar systems are not generating power, hybrid systems provide power through batteries. Whilst the battery capacity needs to be large enough to supply electricity during non-charging hours, when they run low, the generating plant can provide power to recharge the batteries.

“An advantage of renewable energy hybrid systems lies in their ability to combine two of the fastest growing renewable energy technologies. Hybrid systems can also take advantage of the complementary nature of solar PV, which produces power during the day, and wind, which produces most of its power at night,” concluded Ntuli.

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Municipal Energy Resilience Project launched for a more energy secure future

24 November 2020

We are pleased to announce the official launch of the three-year Municipal Energy Resilience (MER) Project to assist municipalities to take advantage of the new energy regulations, which may include purchasing of energy directly from Independent Power Producers (IPPs), so that we can create a more energy secure future in the Western Cape.  

The MER Project will help municipalities across the Western Cape to understand the requirements of the new national energy regulations, and mitigate related risks as well as provide for network and operational capacity requirements for energy project development and procurement in municipalities. 

The MER Project is spearheaded by our Green Economy unit at the Department of Economic Development and Tourism, who are working in collaboration with the Department of Local Government and Provincial Treasury to enable the development of energy projects and engage with municipalities on multiple fronts.

The procurement of energy at utility and municipal distribution scale, such as bulk energy purchases from IPPs, under conditions of developing and evolving policies and regulations is a complex and challenging task. Municipalities may not have the policies, plans, resources, funding, or procurement expertise to procure wholesale electricity from sources other than Eskom, specifically IPPs. Neither have all municipalities’ electricity distribution systems been technically evaluated to clarify their readiness to support new electricity generation and energy trading.  

And so, the MER Project is structured in the following three phases: 

  • Phase 1 involves the identification of potential candidate municipalities and pioneering projects and the development of a roadmap for rolling these out. The work will explore multiple pioneering renewable energy technologies and scales, cost options, scale of investment required, location issues, risks, municipal readiness needs, infrastructure needs, timelines to get capacity onto the grid, transaction and procurement mechanisms and regulatory issues.   
  • Phase 2 will focus on starting the implementation of the pioneering energy projects in the identified candidate municipalities along with working with municipalities to help fill gaps to enable future energy project implementation.  
  • Phase 3 will see the development of a master plan for energy projects to be rolled out in municipalities along with the commencement of energy projects in further municipalities as budget allows.

While we recognise that only a few municipalities are likely to be able to procure utility scale energy from IPPs in the near term, there are other energy generation and storage opportunities that may serve to improve municipal energy resilience and future economic growth in the Western Cape.   

To support the MER Project, two bids have been advertised in the Government Tender Bulletin on 20 November 2020 and all applicable parties are invited to apply:

Energy resilience-related work that is already being undertaken by our Green Economy unit and that will continue, includes support to municipalities to develop and revise SSEG feed-in tariff frameworks and feed-in tariffs, engagement with businesses to drive take-up of rooftop solar PV, support to municipalities to enable wheeling on their grid, support to energy sector businesses and the provision of energy technology and cost options to businesses and municipalities, and support to green economy investors in the Western Cape.  

Cumulative load shedding in 2020 was 23% worse than in 2019 despite a 9% decrease in real GDP. This is estimated to have cost the country’s economy R500 million per stage per day and the Western Cape’s economy R75 million per stage per day. Recent regulatory changes in the energy sector which we called for, have started to open the door for new renewable energy generation which will allow for an increasingly decentralised system of energy generation and distribution to mitigate the risk of load shedding in South Africa. 

And so, we will continue to do everything we can to support municipalities and businesses to participate in the growing green energy sector and to become more energy resilient so that together we can create a more energy resilient future in the Western Cape.  

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REDZ role in South Africa’s Just Energy Transition

Renewable Energy Development Zones (REDZ) have a key role to play in South Africa’s Just Energy Transition, creating priority areas for investment in the electricity grid and increasing South Africa’s green energy map, by enabling higher levels of renewable power penetration.

In particular, wind developers are investigating the potential for development in the eMalahleni REDZ, despite Mpumalanga not being known for high levels of wind, a challenge that can certainly be overcome with increased turbine hub height. 

As the wind industry embarks on a journey of localisation and local economic development, industry players believe that the region can be positioned as a component manufacturing hub, which will further entrench the positive impact on job creation by the wind industry. It is recognised that engagement with the relevant government stakeholders is critical.

“The new eMalahleni REDZ is a huge step toward accelerated economic development in Mpumalanga. As we move to implement the requirements of the Integrated Resource Plan (IRP) 2019, it would appear natural that a portion of the 1600MW per annum should be allocated to the northern region of the country and research has dispelled the myth that wind is not an economically viable option in this region,” said Mercia Grimbeek, Head of Project Development for Enertrag, in South Africa and Chair of the South African Wind Energy Association.

“Through the implementation of national and even regional auctions the area could receive the economic stimulus that it needs and reduce the almost complete reliance on mining generated income to drive and support the economy. Renewable energy such as wind power plants is deployed fairly quickly when compared to other large infrastructure projects. This allows for the economic benefits to flow through to communities in a relatively short period of time not only directly through job creation but also indirectly through manufacturing and supply chain management,” added Grimbeek.

Due to the large number of energy-intensive users, in and around eMalahleni, it is seen as an ideal location to promote private off-taker agreements for the purchase of energy from Independent Power Producers (IPPs).

The deployment of wind energy, backed by a regulatory regime that supports private Power Purchase Agreements, has the ability to provide economic stimulus within a short timeframe.

Hence, the development of the eMalahleni REDZ could be viewed as a perfect partnership between Government and IPPs, further enabling a Just Energy Transition for the benefit of the communities of Mpumalanga.                                                                                         

Wind energy production is an excellent vehicle for direct infrastructure investment and a positive multiplier of economic effects on industries such as construction, procurement, engineering, and logistics.

It is believed that with the provision of a consistent regulatory framework that supports a focused project delivery pipeline, the renewable energy industry would have the opportunity to expand the manufacturing value chain in this REDZ.

“A stable and consistent project pipeline will support manufacturing of components locally, with the added benefit of skills development and training for the local communities.  One cannot ignore that the introduction of renewable energy would require a significant amount of skills transfer and human capital investment, so we believe that by expanding into eMalahleni, local communities will be empowered and less reliant on a single industry to provide economic certainty,” concluded Grimbeek.

REDZ are geographical areas where wind and solar PV development can occur in concentrated zones, creating priority areas for investment in the electricity grid and thereby increasing South Africa’s green energy map by enabling higher levels of renewable power penetration.

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IPPs to power a new wave of economic opportunity

By Dylan Baxter

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We’re going Virtual!

After much consideration and in the interest of your safety, we are excited to announce that Power & Electricity World Africa and The Solar Show Africa 2020 going virtual.

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