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End to Eskom ‘stalemate’ will unleash wind market in 2017 – GWEC

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End to Eskom ‘stalemate’ will unleash wind market in 2017 – GWEC

25th April 2017

By: Terence Creamer
Creamer Media Editor


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The Global Wind Energy Council (GWEC) expects a recovery in the deployment of wind projects in South Africa, following a hiatus in 2016 brought about by Eskom’s refusal to enter into power purchase agreements (PPAs) for renewable-energy projects procured in 2015.

In its ‘Global Wind Report: Annual Market Update 2016’, which was released in India on Tuesday, GWEC forecasts that South Africa, Kenya and Morocco will also lead a recovery in the African market, after a “relatively quiet 2016” across the continent.


The report shows that 54 GW of new wind capacity were added in 2016 – a performance that was below expectation, owing to a slowdown in deployments in China to 23 GW and smaller than expected markets in Brazil, Mexico, Canada and Africa, notably South Africa.

South Africa added only 418 MW of wind capacity in 2016, raising its overall installed base to 1 471 MW. Nevertheless, South Africa remained the only country in Africa, and among a group of only 29 countries globally, to have a wind installed base of more than 1 000 MW.


Secretary-general Steve Sawyer and chairperson Morten Dyrholm wrote that they anticipated “solid prospects” for wind in 2017, following slumps in key emerging markets in 2016 and despite some uncertainty in the market due to the US election results in November. Cumulative wind capacity grew by 12.6% to 486.8 GW in 2016 and GWEC still expects the installed base to expand to 800 GW by 2021.

“In South Africa, it seems that the stalemate is about to break with Eskom over the PPAs the State-owned utility has refused to sign despite the government-run tender results and instructions to do so. If it does, this will unleash an enormous backlog of projects, with more to come in the next bidding rounds. South Africa’s new Integrated Resource Plan (IRP), if it becomes policy, will facilitate this key African market’s living up to its potential,” the report states.

In February, President Jacob Zuma confirmed in his State of the Nation Address that all outstanding PPAs would be signed and, following the announcement, former Energy Minister Tina Joemat-Pettersson set April 11 as the deadline for the signing of the contracts.

However, following the March 31 Cabinet reshuffle, which saw Joemat-Pettersson replaced by Mmamoloko Kubayi, the new Minister requested a postponement to enable her to consult with stakeholders, including Public Enterprises Minister Lynne Brown and new Finance Minister Malusi Gigaba.

In a recent briefing, Gigaba reiterated that the policy of integrating independent power producers into the country’s electricity network remained “unchanged” and said there should be no “uncertainty as to our commitment to the energy mix and the renewable-energy programme”.

Twelve of the 37 outstanding projects procured under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) are wind projects, while the draft IRP Base Case published last year calls for the addition of more than 37 000 MW of wind capacity by 2050. The IRP is still in the process of being updated and the final version is not anticipated until the second half of 2017.

Despite the “unfortunate” impasse in 2016, GWEC says South Africa’s wind industry, under a government designed competitive bidding programme, has taken place within a relatively short period of about five years, placing South Africa among the leading new wind markets globally. There are currently 20 wind farms fully operational and more than 3 365 MW under different stages of development.

“With bidding for the first four rounds of South Africa’s REIPPPP completed, and after three rounds of preferred bidders have reached financial close, by 2015 the wind industry has established itself as a major new infrastructure sector and is now worth about R75-billion,” the report states.

It also notes that the REIPPPP has facilitated both the rapid introduction of wind energy and a steep decline in prices. “Construction times for projects average less than two years and the electricity price paid to projects has declined 68% within three years. The price of wind energy in the last ‘Round 4-expedited’ was 0.62c/kWh, more than 40% less than forecast prices for Eskom’s new-build coal plants Kusile and Medupi.”

However, besides the Eskom impasse, GWEC also highlights weak growth, currency volatility, tendering costs and grid integration costs as constraints to wind projects. “Additionally, extended transmission and distribution works are needed, and the cost recovery rules for this are not yet transparent or consistent.”

GWEC believes the wind industry in South Africa “can pick up its very rapid growth phase from where it stalled” if the current impasse can be overcome, which it describes as a “likely” scenario. The council is, therefore, expecting a “big year” in 2017 for Africa led by Kenya, South Africa and Morocco.

Sawyer also notes that wind power is successfully competing with heavily subsidised incumbents across the globe and that wind penetration levels continue to increase, led by Denmark, which is approaching 40%.

GWEC's rolling five year forecast sees almost 60 GW of new wind installations in 2017, rising to a yearly market of about 75 GW by 2021.

Growth will be underpinned by Asia, with China continuing to lead all markets. But India, which set a new installation record in 2016, also has ambitious targets.

Market fundamentals are also seen as “strong” in North America, and “steady” for Europe, which will continue to lead the offshore market.  "Offshore wind has had a major price breakthrough in the past year, and looks set to live up to the enormous potential that many have believed in for years. We see the technology continuing to improve and spread beyond its home base in Europe in the next five to ten years,” Sawyer says.


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