Deadline looms for renewable sector bid submissions

South Africa’s renewable energy sector is preparing submissions for the fifth bid window (BW5), with a looming 4 August deadline.

However, it is not only the bidders that are abuzz but also the local manufacturing, transportation and other industries that make up the local value chain of the industry.

Energy minister Gwede Mantashe in March finally announced the much-awaited opening of BW5 of the Renewable Energy Independent Power Producers Procurement Programme, which will procure a further 2 600MW of renewable energy from independent power producers.

This came as a relief to the country, which has endured bouts of load-shedding, as power utility Eskom battles to keep the lights on.

With Eskom’s woes persisting, SA is also making bold moves in driving renewable energy generation, as most of the country’s coal plants are reaching their end of life.

In June, president Cyril Ramaphosa said SA is amending Schedule 2 of the Electricity Regulation Act to increase the National Energy Regulator of South Africa licensing threshold for embedded generation projects from 1MW to 100MW.

Ramaphosa said amending the regulation reflects government’s determination to take the necessary action to achieve energy security and reduce the impact of load-shedding on businesses and households across the country.

In preparation for the opening of BW5, a broad segment of industry players convened online to get insights from sector heads and thought leaders, in a capacity-building webinar organised by the South African Wind Energy Association (SAWEA) and the South African Photovoltaic Industry Association (SAPVIA).

“The presentations highlighted different components, both solar PV and wind, that have local manufacturing potential, and exposed participants to valuable knowledge about how to engage with original equipment manufacturers (OEMs) with the purpose of participating in the value chain,” says Ntombifuthi Ntuli, CEO of SAWEA.

“Participants also learned different strategies that local businesses can use to enter the renewable energy manufacturing value chain, such as being a local subsidiary of a foreign company, manufacturer under OEM IP [intellectual property] local assembler of components, in addition to other valuable insights that will help our sector draw greater economic value to our shores.”

According to Ntuli, over the next 10 years, the wind power industry is expected to drive an estimated R40 billion of investment, each year, with a fairly large portion of this coming from economic benefits of stimulating the local value chain.

“Hence, assuming that smooth procurement of new wind energy production continues, in line with the Integrated Resource Plan (IRP), this sector is an excellent vehicle for direct infrastructure investment and a positive multiplier of economic effects, including specialised components manufacturing such as wind turbine towers and steel mounting structures for solar PV; component transportation, construction industry, as well as engineering and logistics.”

“While exact quanta from assumptions may vary, the opportunity as a starting point is worth pursuing,” explains Francis Jackson, special advisor at GreenCape, who addressed attendees on the economics of renewable energy in local manufacturing.

Addressing low-hanging fruit that can drive economic stimulation by the sector, Jackson identified wind tower and blade manufacturing, nacelle assembly, wind tower internals, solar PV module assembly, and a number of options should the solar sector move into vertical integration in the module value chain, such as glass.

Considering what it will take for SA to achieve economies of scale to enable locally manufactured components to be competitive at a global scale, Jackson said: “It is to be confirmed whether we are well-positioned to be competitive at a global scale in all components.

“The first step is to ensure we make the most of our local opportunity and establish building blocks for opportunities to participate in export. Global value chain players would be well-placed to make the business case as they build capacity to service the local market. There will be certain parts of the supply chain that may emerge to be more strategically placed to cultivate capacity in South Africa than others in order to be able to compete internationally.”

Meanwhile, SAPVIA says the solar PV market continues to grow rapidly, with positive market indicators coming out of various national government policy objectives.

It notes that annually installed PV capacity in 2020 totalled 1 313MW, broken down into 813MW of utility-scale systems and 500MW of distributed generation.

Cumulative capacity reached 4 172MW, of which 2 372MW is provided by utility-scale solar, says the organisation.

“It is estimated that 20% of this distributed generation capacity consists of residential systems, with the commercial and industrial segment contributing the largest bulk of rooftop capacity,” says Maloba Tshehla, SAPVIA spokesperson.

He points out that the IRP outlined new additional capacity of 6GW utility-scale solar PV and 6GW distributed generation, the majority of which is expected to come from solar, to be installed by 2030.

“The IRP electricity infrastructure development plan is based on least-cost electricity supply and demand balance, considering security of supply and the environment, and will result in a 400%+ increase of solar PV by 2030. This will increase the PV installed capacity from 3% of the current total electricity supply to 11% by 2030.”

According to Tshehla, the policy landscape continues to change as government and industry work to meet the increasing energy needs of the country, while also striving to drive a post-COVID economic recovery.

“The commitment of president Cyril Ramaphosa to amend Schedule 2 of the Electricity Regulation Act and to raise the licensing exemption threshold for distributed generation facilities from 1MW to 100MW, should cause a rapid increase in the development of larger-scale distributed generation projects.

“This work on updating the regulations that will allow municipalities to develop and procure their own power generation projects shows government is working hard to create the right policy environment to let the industry fully realise the IRP 2019 targets.”