South Africa Wind Energy Programme

SOUTHSOUTH AFRICA AFRICA WIND WIND ENERGY ENERGY PROGRAMMEPROGRAMME (SAWEP) (SAWEP) FULLFULL SIZE SIZE PROJECT PROJECT

RENEWABLERENEWABLE ENERGY ENERGY CITY CITY SUMMIT SUMMIT SPIERSPIER 1313--1414 MAY MAY 2008 2008

Andre Otto (Programme Manager)

1 ContentsContents

•• Policies,Policies, Strategies,Strategies, Acts,Acts, Plans,Plans, TaskTask TeamsTeams •• ConclusionsConclusions •• WindWind energyenergy statusstatus •• SummarySummary •• SAWEPSAWEP •• SAWEPSAWEP ImplementationImplementation planplan •• OffOff GridGrid windwind •• WindWind measurementmeasurement andand analysisanalysis

2 Policies,Policies, Strategies, Strategies, Acts, Acts, Plans, Plans, TaskTask Teams Teams

• White Paper on Energy Policy (1998) “The entry of multiple players into the generation market will be encouraged” (NERSA to set tariffs, basis full avoided cost)

• White Paper on Renewable Energy Policy (2003) Renewable Energy target: 10 000 GWh (0.8 Mtoe) renewable energy contribution to final energy consumption by 2013, to be produced mainly from biomass, wind, solar & small-scale hydro. The renewable energy is to be utilised for power generation and non-electric technologies such as solar water heating and bio-fuels.

This is equivalent to replacing two (2x 660 MW) units of Eskom’s combined coal fired power stations. Or.

1100 million litres of diesel (14% of one year) replaced with biodiesel.

TO BE REVIEWED MID TERM (2008)

3 ElectricityElectricity Regulation Regulation Act Act Electricity Regulation Act (No. 4 of 2006, became operational 1 August 2006) Multimarket model excluded Objects of the Act: (d) facilitate universal access to electricity; (e) promote the use of diverse energy sources and energy efficiency; (f) promote competitiveness and customer and end user choice; Regulator regulates prices and tariffs The Regulator may make any licence subject to: conditions relating to the setting and approval of prices, charges, rates and tariffs charged by licensees; compliance with energy efficiency standards and requirements, including demand- side management A transmission or distribution licensee must, to the extent provided for in the licence, provide non-discriminatory access to the transmission and distribution power systems to third parties. The Minister may, by notice in the Gazette, make regulations regarding (section 46 New Generation Capacity): (m) new generation capacity; (n) the types of energy sources from which electricity must be generated; (0) the percentages of electricity that must be generated from different energy sources; (p) the participation of the private sector in new generation activities

4 NationalNational Electricity Electricity Plan Plan • Generation contribution: 30% IPPs, 70% Eskom • Eskom Sole Buyer • DME to provide strategies that inform the country plan. Strategies include: – Nuclear strategy – Renewables strategy – Imports strategy – Climate change strategy – Percentage of investment by IPPs and Eskom • A critical component of the country plan is setting the assumptions. The assumptions include: – Plant availability – Load forecast – Choice of reserve margin – Criteria for deciding on projects such on least cost basis – Outlook on independent power producers • The process of arriving at assumptions must be transparent

5 ConclusionsConclusions…… • It is evident that the IPPs are needed in the South African power generation sector to augment Eskom’s capacity in meeting the growing energy demand. Eskom is currently embarking on a R150 billion infrastructure roll-out programme.

• With the participation of IPPs in the power generation sector, Eskom will have an opportunity to pass some of its risks to the private sector (IPPs).

• The IPPs are the only vehicles at the disposal Government to ensure meaningful BEE participation with regard to equity ownership in the power generation sector.

• Experience has shown that there is sufficient market appetite for private sector participation in the power generation sector.

6 ElectricityElectricity Generation Generation Capacity Capacity

55 60 65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50 55 60 40,000

MAJUBA 35,000 PALM IET

KEND AL 30,000

M ATIM B A d e

l 25,000 l LETHAB O a t s n

I TUTU KA

t 20,000 t

a KOEB ER G w DRAKENSBERG a

g 15,000 C AHOR A B AS SA e

M DUHVA

10,000 M ATLA B R AKP AN R O SHER VILLE VAN DER KLOOF GR OOTVLEI A C AC IA P OR T R EX INGAGANE W ILGE GEORGE KR IEL VEREENINGING W ITB ANK VAAL 5,000 KOM ATI GAR IEP UMGENI C OLENSO CAMDEN KLIP SO UTH C OAS T C ON GELLO TA AIB OS ARNOT CENTRAL W EST B ANK HIGHVELD VIERFONTEIN SALT R IVER HEX R IVER HEN DR INA 0 55 60 65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40 45 50 55 60 Year

If government is to meet its 6% per annum growth target, Eskom will need to augment existing national capacity by 2 000 MW per annum over the next 20 years (currently 43 GW, 217000GWh)

7 MacroMacro--economiceconomic Analysis Analysis Macro-economic Analysis: 10 000 GWh least cost renewable energy contribution (excl biofuels, solar thermal power generation and wave)

Solar Water Heating: Re side ntial Biomass Pulp & Pape r 9% W ind 1% 1% Solar Water Heating: C om me rcial 14%

Sugar Bagasse Hydro 59% 10%

Landfill Gas 6%

8 MacroMacro--economiceconomic Analysis Analysis cont cont Macro-economic Analysis: Technical feasible renewable energy contribution (excl biofuels, solar thermal power generation and wave energy) RE Technology Potential GWh Contribution Percentage

Biomass pulp and paper 110 0.1%

Sugar bagasse 5,848 6.9

Landfill Gas 598 0.7%

Hydro 9, 245 10.3%

Solar Water Heating: commercial 2,026 2.0%

Solar water heating: residential 4,914 6%

Wind 64,102 74%

TOTAL 86,843 100% About 40 % of 2006 electricity consumption

9 WindWind Energy: Energy: Status Status

Wind is the world’s fastest-growing energy source with an average annual growth rate 29% over the last ten years and the wind industry provides more jobs per capita than conventional power generation.

Darling National Wind Farm Demonstration Project (5.2MW):  The Minister of Minerals and Energy on June 2000 supported the declaration of the Darling Wind Farm as a National Demonstration Project:  Knowledge, experience and lessons learned through “learn by doing” implementation of the Darling Wind farm will contribute to test and or inform decisions around replicable new and or novel approaches to recognise energy and environmental problems and will act as a platform for replication by the public; and  Requested assistance from GEF and Danced (Danida)  Investors: CEF, Darlipp, DBSA, Danida  PPA City of Cape Town, PWA Eskom,

Eskom:  Eskom Wind Test Site: Klipheuwel (3 units, total 3.2 MW)  Planning 100 MW on the West Coast, Lutzville

Private Developers: Genesis, Darlipp etc Municipalities: Nelson Mandela etc

Off-grid

10 SummarySummary

 Policies (White Paper on Energy Policy, Renewable Energy Policy)  Renewable Energy Strategy  Electricity Regulation Act  Electricity Regulation Act Regulations  National Electrification Plan  Long term sustainable financing mechanism(s)  Verifiable, EIA friendly, exploitable wind resource map, capacity credit, grid integration)  Demonstration ? Buyers (Eskom) ? Customers (Eskom: all, other: non-captive) ? Procurement (services, supplies) ? MFMA etc

11 SouthSouth Africa Africa Wind Wind Energy Energy Programme Programme (SAWEP)(SAWEP)‏‏ South African Wind Energy Programme (SAWEP)‏ PDF B (March 2003 – June 2004)‏ • The following activities have been undertaken: • Financial Engineering – Sub-contracts: » Financing of Wind Farms in South Africa: Financial and Policy instruments (Report: Financing of wind farms in South Africa January 2005) » Barriers to wind development identified and described. Assess and quick scan of 4 current wind farm developments (Report: Practical barrier assessment and removal 2004) » Assessment of the barriers to the Availability and Accessibility of Investment Capital for wind power development, and potential activities for their removal (Report: Assessment of Financing barriers April 2004) » Financial Model workshopped and updated with key stakeholders (e.g. DBSA, CEF, developers) (Report: Financial Model for Wind farms May 2004) • GEF Technical Specialist and Green Funding Sources and Mechanisms – Sub-contracts: – Green Power Market Survey » City of Johannesburg: industry and commerce (Report: Green Power Survey City Power January 2004) » Research and describe issues related to the certification and trade of “green” power certificates and design a mechanism to implement the process of certification and trade (Report: Green funding Sources and Mechanisms September 2004) » “Green” Power Guarantee Scheme for City of Cape Town (SAWEP FSP, Annex 3) • Commercial Requirements Power Sales – Sub contracts: » Power Purchase Agreement (generic) (Report: Generic PPA 2004) » Power Wheeling Agreement (generic) (Report: Generic PWA 2004) The GEF in May 2007 approved SAWEP Full Size project ($2 million, 2 years) with the Darling Wind farm investment ($7 million) which was accepted as South Africa’s co-funding (commissioning of Darling Wind farm was a prerequisite for GEF SAWEP Full Size project grant).

12 SAWEPSAWEP FSP FSP Goal  To reduce GHG emissions generated by thermal power in the national inter-connected system.

Objective  To install and operate up to 5.2 MW Darling wind farm and prepare the development of 45 MW combined wind farms (by the private sector)

Expected outcomes, Inception Workshop held on 12 March 2008  Increased public sector incremental cost funding, by assisting the Government of South Africa with detailing the most appropriate financial instruments that should be made available to stimulate commercial wind energy developments; (NERSA feed-in study, DME TRECs, “green” premium, Treasury 2c/kWh, CDM)  Green power funding initialised, by assisting initiatives geared towards green power marketing and setting up and implementing Tradable Renewable Energy Certificates (TRECs) as well as implementing a green power guarantee scheme developed under the PDF B;  Long-term policy and implementation framework for wind energy developed, by assisting the Government of South Africa; (Renewable Energy Strategy, Electricity Regulation Act, National Electrification Plan, EIA)  Wind resource assessment, by assisting interested public and private sectors entities with the generation of reliable wind energy data and other necessary information for wind energy development; (verifiable, practical, EIA friendly, wind resource)  Commercial wind energy development promoted, by assisting private sector developers with the (pre-) feasibility of a number of wind farms up to 45 MW installed capacity; (EIA, “hot spots”)  Built capacity building and strengthened institutions, such as key government departments (e.g. national and provincial environmental departments), public agencies (e.g. financing), wind farm national and provincial environmental departments), public agencies (e.g. financing), wind farm 13 industry (e.g. South African Wind Energy Association) and independent private firms involved in wind energy development. SAWEPSAWEP ImplementationImplementation Plan: Plan: medium medium to to longlong term term Input: Renewable Energy Strategy (beyond 2013), Electricity Regulation Act Regulations, National Electrification Plan, long term sustainable financing mechanism(s) (CDM baseline, TRECs, production subsidy etc), wind (load) forecasting Support: Capacity Building SAWEA, education and training, developers, industry

14 SAWEPSAWEP ImplementationImplementation Plan: Plan: Immediate Immediate Develop and implement “innovative” public funding and implementation model(s) (PPP, BOTT etc), addressing:  Sustainable financing mechanism(s) & models  Verifiable, EIA friendly, exploitable wind resource map, capacity credit, grid integration  Buyers (local government, etc)  Customers (all)  Procurement (services and supplies)  MFMA

15 SAWEPSAWEP WindWind AssessmentAssessment andand MonitoringMonitoring

Estimate potential ranges from 3 GW to 33 GW

Tripod Review of Wind Energy Resources in South Africa concluded:  these studies are inconclusive and under estimate the true wind energy potential as weather measurement stations at 10 m were used and in may cases these stations are shaded by buildings etc from measuring the true wind potential; and  recommended that a dedicated wind energy measurement programme needs to be undertaken to confirm the true wind energy potential in SA

CaBEERE Wind Monitoring study

16 WindWind Maps: Maps: DME DME

17 WindWind Maps: Maps: DME, DME, Eskom, Eskom, CSIR CSIR

18 WindWind Maps Maps (meso,(meso, micro micro scale scale modeling) modeling) South Africa (Helimax) Cape Point (Windlab)

19 OffOff grid grid wind wind for for rural rural economic economic development development HlulekaHluleka hybrid hybrid mini mini--gridgrid 11kW 11kW

20 LucingweniLucingweni hybrid hybrid mini mini--gridgrid 86kW 86kW

21 List of documents used and where to get them

White Paper on Energy Policy: http://www.dme.gov.za/energy/planning.stm

White Paper on Renewable Energy Policy: http://www.dme.gov.za/energy/renewable.stm

Electricity Regulation Act: http://www.info.gov.za/gazette/acts/2006/a4-06.pdf

SAWEP documents: http://www.dme.gov.za/energy/renew_wind.stm

Economic and Financial Calculations and Modeling for the Renewable Energy Strategy Formulation (DME, CaBEERE 2004), Tripod Review of Wind Energy Resources in South Africa & CaBEERE Wind Monitoring study: http://www.dme.gov.za/energy/efficiency_projects.stm

22 ThankThank you you

André Otto Project Manager: South Africa Wind Energy Programme (SAWEP) Dept Minerals and Energy P/Bag x59 Mineralia Centre 234 Visagie Street Room F508 Pretoria South Africa tel: +27 (0)12 3178428 cell: +27 (0)82 877 0128 email: [email protected]