6 minute read
ENERGY
LOCALISATION:
A KEY ECONOMIC DRIVER FOR THE WIND INDUSTRY
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With the announcement of Bid Window Five under the REIPPPP, which includes 1 600MW from onshore wind energy and Bid Window Six expected to be announced Q1 2022, the wind power sector is gearing up to deliver adequate energy to the country and help shift the economy onto a positive trajectory.
BY NORDEX ENERGY SOUTH AFRICA
Original equipment manufacturers (OEMs), such as Nordex Energy South Africa, will play a key role in stimulating local jobs and skills. The company sees the latest Bid Window (BW5), as an important link in driving the local value chain, which will directly stimulate the domestic job market.
“The wind power industry is expected to drive an estimated R40-billion of investment each year over the next decade, with a fairly large percentage coming from the economic benefits of stimulating the local value chain. This includes local manufacturing, transportation and other related industries,” explains Compton Saunders, Managing Director of Nordex Energy South Africa.
He attests that the option of concrete constructed wind turbine towers has the added advantage of boasting close to 100% local content, including raw material such as concrete and rebar steel, aggregates and labour, in addition to offering the option of manufacturing at site. “Currently Nordex is the only supplier of local concrete towers, which are manufactured by the local industry. We create local jobs and skills directly at site, as the manufacturing facilities can be set up close to the project facility
Wind tower manufacturing facility in Prieska, Northern Cape, that manufactures concrete wind towers for the Garob Wind Farm and Copperton Wind Farm.
SAWEA
Garob Wind Farm in the Northern Cape.
during construction. This stimulates and drives local employment in rural areas. Our industrial strategy is aligned with the Just Energy Transition Policy and one of many primary benefits of the South African government’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).”
If 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, construction industry, engineering and logistics.
Sector experts point out that although it is still to be confirmed whether the country is well-positioned to be competitive at a global scale in all components, the first step is to ensure industry makes the most of local opportunity and builds capacity to supply the local market. Furthermore, it has been noted that certain parts of the supply chain may emerge to be more strategically placed to cultivate capacity in South Africa than others to be able to be competitive.
The BW5 local content threshold has been retained at 40%, in line with previous rounds, however the scoring mechanism incentivising further commitments above 40% has been removed from the request for proposal regulation. For the first time, the REIPPPP has introduced the concept of designated local content, which requires developers to procure specific components locally such as steel. Should these components be unavailable, bidders can apply for an exemption that needs to be lodged with the Department of Trade, Industry and Competition.
However, Nordex believes that this should not be applied to tower production, as both local and international companies have already invested in local manufacturing facilities that successfully produced these components for the previous REIPPPP rounds. These OEMs have confirmed capacity to fully deliver the required towers for BW5, as well as future bid windows.
“Job creation and skills development will be a direct result of these consecutive bidding rounds, as they enable local manufacturing to be re-established or continue in the case of our concrete towers,” adds Saunders.
The most recent REIPPPP project to come on line, Garob Wind Farm, incorporates 46 wind turbine generators with AW125-3150 technology, as well as concrete towers, and is able to generate 573GWh each year, during its 20 years of operations. The 145MW Garob Wind Farm achieved commercial operation in December 2021 and is located in the Northern Cape, close to Copperton, in the Siyathemba Local Municipality.
Assembling a wind turbine. Technician in position to guide the rotor into position on the nacelle.
The construction of Garob Wind Farm, which commenced in April 2019, installed concrete towers fully produced in the manufacturing facility set up in Prieska, a mere 40km from site. The work was completed by local contractors, providing employment for over 500 people from the local community at the peak of the construction phase of the project.
READ REPORT
THOUGHT [ECO]NOMY
GREEN ECONOMY POLICY REVIEW OF SOUTH AFRICA’S INDUSTRIAL
POLICY FRAMEWORK | United Nations Environment Programme | Lead authors:
Gaylor Montmasson-Clair and Gillian Chigumira from TIPS [2020]
Local content requirements are an industrial policy tool used to spur demand for locally manufactured goods and develop the manufacturing capability in the country. They encompass tools or instruments, such as manufacturing enhancement programmes, supplier/enterprise development initiatives, competitive supplier development programmes, local content targets and designations. Green procurement has yet to be rolled out in the country. South Africa’s REIPPPP has so far been the main avenue used to localise green goods in the country. The programme’s objective is to spur industrial development through increasing local content requirements. Minimum local content requirements, as set by the dti, increased from 35% (for solar PV and CSP) and 25% (for all other technologies) of project value in the first procurement rounds to 50% in the latest rounds. The design and governance of the programme attracted numerous manufacturers in the country. Companies, such as Gestamp Renewable Industries (turbines), DCD Group (turbines), SMA (inverters), Jinko Solar (solar panels), SolaireDirect (solar panels) and ARTsolar (solar panels) opened plants in South Africa to meet the growing demand for locally produced inputs. As of December 2018, a total of R45.3-billion had been spent in local content by project developers, achieving 51% local content for the programme (DoE, NT, and DBSA, 2019). However, protracted delays in finalising procurement rounds since 2015 (ie beyond BW3 of the REIPPPP) and the lack of long-term certainty about the future of the programme has forced most facilities established at the onset of the REIPPPP to already close down. The industrialisation envisioned as part of the programme has remained constrained owing to the limited generation capacity allocated per technology (to create sufficient aggregate demand for international companies to set up manufacturing sites in the country) and the small existing manufacturing base.
While the initial allocations represented a substantial volume, the overall capacity spreads across several technologies as well as numerous competing developers and suppliers, thus failing to create enough aggregate demand to encourage large investments in local manufacturing.
All raw (unprocessed) steel and aluminium, regardless of origin, is deemed 100% local in the programme, pushing local content statistics without benefiting local industries. In South Africa, over and beyond local content requirements, products can be “designated” (in South African terms) by the dti for local procurement by public entities. At a generous estimate, designations applied to less than 20% of procurement by general government, and to 6% of total sales of intermediate products. The share for state-owned enterprises is likely larger. While the impact of local procurement can take time to materialise, notably for new and nascent industries, it is an effective avenue to promote local green industrial development in the long run.
greeneconomy/report recycle
Industrial Skills finance development
Localisation requirements29 35 44 50 Capacity building 54 Transition planning
