The new renewable energy feed-in tariffs (Refit) rates proposed in a consultation paper issued by the energy regulator this week were more in line with those on offer in “mature” markets, but failed to take account of the risks confronting developers in newer markets, such as South Africa, the head of an international renewable energy development company argues.

The National Energy Regulator of South Africa (Nersa) paper proposes a material decrease of between 7% and 42% to the Refit tariffs promulgated in 2009 for technologies ranging from wind and various solar solutions, through to landfill gas and mini hydro plants. It will host public hearings on the proposition on May 5 and will seek to promulgate a new set of tariffs by May 26.

Mainstream Renewable Power Onshore CEO Torben Andersen, who has participated in wind projects in Europe, North America and South America over the past ten years, tells Engineering News Online that the development has caused some “uncertainty” for the company, as well as other developers.

The company has some 3 000 MW of wind and solar prospects at various stages of development in South Africa and plans to submit both wind and solar projects, with a combined nameplate capacity of 400 MW, once the first Refit procurement round opens. Hitherto, it had been anticipated that the 2009 rates would be applied to the first procurement round so as to stimulate investor interest.

But Nersa’s paper has been published ahead of the start of the formal procurement process, which was initially expected to begin in late March or early April with the issuance, by the Department of Energy and the National Treasury, of a request for proposals, accompanied by a standardised power purchase agreement (PPA). It is now uncertain whether that release will be delayed to allow for Nersa’s public participation process to be completed.

Speaking on the sidelines of a function hosted to unveil a Mainstream-led bidding consortium for South Africa’s future Refit programmes, Andersen argued that the 2009 tariffs were appropriate for an industry still getting started. It could take a while, he said, for the local industry to reach maturity levels similar to that of Ireland or a Denmark, where economies of scale and a diversity of participants had helped moderate prices.

He notes that the 2009 Refit rates are more or less on a par with the C$135/MWh tariffs on offer in Ontario, Canada, which has been successful in attracting developers, as well as renewable energy supplier industries.

SA STILL ATTRACTIVE

Nevertheless, the scale of the opportunity in South Africa is likely to continue to hold investor interest, including that of the Mainstream Renewable Power Consortium, which now comprises the Thebe Investment Corporation, AsgiSA-EC, Enzani Technologies and Usizo Engineering.

The consortium is supported by Siemens Energy Africa, which will provide technology solutions, and Absa Capital, which will be the exclusive financial adviser and debt arranger for the consortium.

Mainstream Renewable Power South Africa director Davin Chown says Cabinet’s endorsement of an Integrated Resource Plan, which calls for the addition of some 17 000 MW of renewable capacity by 2030, also signals a new era for the energy sector in South Africa.

He adds that, despite current frustration caused by the Nersa paper, South Africa’s hosting the 17th Conference of the Parties of the United Nations Framework Convention on Climate Change talks in Durban from November 28 to December 9 should provide further impetus to moves to secure the first renewable projects before year-end.

The company estimates South Africa’s wind potential alone at 50 GW, but the consortium is also pursuing concentrated solar power and photovoltaic prospects.

Its most advanced project is a proposed 125 MW wind farm for Jefferies Bay, in the Eastern Cape, where key project approvals have already been secured. This project, together with additional wind and solar projects, will form part of the consortium’s first-round Refit bid.

“Millions of rand” has already been sunk into the Jefferies Bay initiative and should it receive a PPA, construction could involve an investment of more than R1-billion.

Turbines with capacities of between 2 MW and 3 MW are being assessed for the development and the Siemens’ head of energy for South Africa Ute Menikheim revealed that the group had recently decided to make South Africa its wind-power hub for Africa and the Middle East.

She tells Engineering News Online that domestic capacity is currently being built to support project developers, including the Mainstream consortium, with various local manufacturing options under consideration.

Siemens announced last year that it would invest €200-million in Africa by 2012, about €100-million of which would be directed to South Africa, including investments into creating renewable-energy capacity.

Using the renewable energy experience of Germany as a proxy, Menikheim estimates South Africa could created 300 000 new jobs in the sector over the coming years.