Monday, March 23, 2009

South African Wind farms want higher feed-in tariffs

Business Day - 23/03/2009

MAINSTREAM Renewable Power, an Irish renewable energy company, and local wind farm developer Genesis Eco-Energy plan to build wind farms in SA at a cost of R11bn that will generate more than 500MW by 2014, the companies said yesterday.

According to representatives of the companies, the wind farms, to be in the Eastern Cape, Northern Cape and Western Cape, could stimulate local manufacturing of plant components in SA. Notwithstanding the government’s target of a 10000GWh renewable energy contribution to total energy consumption by 2013, SA is yet to see major investments in renewable energy. Darling, in the Western Cape, has the only commercial wind farm in SA.

The National Energy Regulator of SA (Nersa) is set to announce the long-awaited renewable energy feed-in tariffs at the end of the month. The tariffs will signal the attractiveness of an investment in renewable energy, an industry with high capital expenditure costs.

Mainstream chief development officer Torben Andersen said that, assuming “appropriate” renewable energy feed-in tariffs and a regulatory framework, more than half the components for the plants could be made locally. “Local turbine manufacturing typically results in three jobs a megawatt.”

He said construction of the first of these projects — a 30MW wind farm in Jeffreys Bay — would commence next year and would be fully operational early in 2011. The project would comprise 15 wind turbines, each generating at least 2MW, the companies said.

Andersen said for SA to encourage investment in wind energy, feed-in tariffs would have to be higher than the tariffs Nersa proposed in its draft consultation paper in December. The regulator said feed-in tariffs for wind energy in the period between last year and 2013 would range between 65c/KWh and 75c/KWh. A feed-in tariff of about R1/KWh would stimulate investment, he said.

The Nersa figures were based on old data, Andersen said. He said the company had since informed Nersa — during the recent public participation process on the tariffs — of its concerns about the proposed tariffs.

Genesis director of operations Davin Chown said a feed-in tariff of less than R1 could lead to “slight hiccups” in the planned projects. But he said the companies would work through those hiccups.

Andersen said turbines for the plants would be sourced from major manufacturers.

Mainstrean and Genesis would have to conclude a power purchase agreement with Eskom for the transmission of the power from the plants. Eskom is the only buyer of electricity produced by independent power producers.

Andersen said the companies would wait for Nersa’s announcement. The companies have said that access to Eskom’s grid and the ability to sell power to the grid “without obstruction” are challenges facing the project.