Solar and Wind Sector Development StrategySolar and Wind Sector Development StrategySolar Energy Technology Roadmap 18 June 2012Solar Energy Technology Roadmap 18 June 2012

Green Industries, Department of Trade and Industry

Content

• Challenges

• Solar and wind strategy

• Local Content Requirements

• Window 2 Bid Summary• Window 2 Bid Summary

• Way forward

South Africa is in a difficult position

Electricity demand may reach 78 000 MW with economic growth

86% of power generation capacity from coal87% of primary energy supply from fossil fuels

2006 data, Source: DoE 2011 data, Source: Eskom

95% of crude oil requirement is imported

Source: Eskom

Demand @ 4% if GDP @ 6%

Demand @ 2.3 % if GDP @ 4%

Manufacturing employment and manufacturing share of GDP

1,100,000

1,150,000

1,200,000

1,250,000

1,300,000

1,350,000

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

44

1,050,000

Sour

13.5

So

urc

e

A large renewable energy programme can put electricity on the

grid, support industrialisation and jobs and address South Africa’s climate

commitments

Motivating Factors

• Addressing the country’s energy needs.

• Meeting GHG emission reduction commitments (climate

change).

• Very good solar and wind resources.

• Existing industrial capabilities in a range of relevant areas, e.g.

engineering, metal fabrication, composites, etc.engineering, metal fabrication, composites, etc.

• Growing number of component suppliers into renewable

energy value chains.

• Job creation.

2011 Renewable Energy Year

• Early balanced scenario had no solar commitment.

• Revised balanced scenario had 400 MW solar commitment - 11,4 GW renewables.

• Policy adjusted Integrated Resource Plan (IRP) 8 400 MW solar PV and 1 000 MW CSP and 8 400 MW wind.

• December 2011 announcement of 1st 28 projects• December 2011 announcement of 1st 28 projects

(1 415 MW).

• May 2012 – another 19 projects (1 044 MW).

• August 2012 – round 3.

KEY ACTION PROGRAMMES

• Market creation and Independent Power Producer (IPP) facilitation – ensures investor certainty. • IRP and Renewable Energy Independent Power Producer Procurement

Programme (REIPPP).

• Local manufacturing and industry upgrading incentives: Secure economic opportunities across value chains and develop and maintain local skills.• Manufacturing Incentives – Manufacturing Competiveness • Manufacturing Incentives – Manufacturing Competiveness

Enhancement Program (MCEP), etc.

• http://www.thedti.gov.za/financial_assistance/financial_assistance.jsp

• Renewable energy finance.• IDC, SARi and NT.

KEY ACTION PROGRAMMES

• Development and upgrading of technical and physical infrastructure: • Standards for wind turbines developed.

• Testing facilities investigation.

• Possible standards for solar to be investigated.

• Trade and investment support and facilitation:• ITAC tariff reviews. • ITAC tariff reviews.

• TISA investment facilitation and export promotion.

• Research, demonstration and skills development: Support focused and coherent approach to Research and Development and skills development.• Support DST and DHE initiatives.

KEY ACTION PROGRAMMES

• Minimum levels and targets for local content

required to participate in the REIPPP.

• Review annually and increase targets to optimum

levels.

Local Content RequirementsLocal Content

Technology First Bid

Submission Date

Second Bid

Submission Date

Third Bid

Submission Date

Current

Threshold

Current Target

Threshold

Target Threshold Target

Onshore Wind

25% 45% 25% 60% 40% 65%

Solar Photovoltaic

35% 50% 35% 60% 45% 65%

Solar CSP Without Storage

35% 50% 35% 60% 45% 65%

Storage

CSP with

storage

25% 45% 25% 60% 40% 65%

Biomass 25% 45% 25% 60% 40% 65%

Biogas 25% 45% 25% 60% 40% 65%

Landfill gas 25% 45% 25% 60% 40% 65%

Small scale

hydro

25% 45% 25% 60% 40% 65%

25% 45% 25% 60% 40% 65%

Emerging issues

• Request for Proposals (RFP) for round 3 will be amended to incorporate briefing notes, etc.

• Other issues:

• Clarification of local content issues (definition and its application).• SABS standard – SATS 1286:2011.

• Investigate “deeming” of certain components.

• Split between natural localisation and new industries – equipment.

Local content measurement and verification.Local content measurement and verification.

– Clear commitment required for long term plan; will DoE stick to IRP? Pace of roll out?

– Determine optimum level of local content: • Wind Industry Roadmap.

• Economic impact of localisation.

• Capacity and competitiveness of local suppliers.

Technology: Onshore Wind

Component Project

Component

Cost

Percentage of

total project

cost

Local Content Committed

Equipment Balance of Plant

Wind turbine blades R15 000,00 15% 5%

Nacelle R30 000,00 30% 0%

Towers R10 000,00 10% 5%

Transport R8 000,00 8% 5%

Civil works R12 000,00 12% 5%

Electrical R6 000,00 6% 6%

Erection costs R5 000,00 5% 5%

Spares and tools R2 000,00 2% 2%

Total EPC Costs R88 000,00 88% 10% 23%

Project development:

Consultants

R3 000,00 3% 3%

Project development:

Operating assets

R2 000,00 2% 2%

Project development:

Administration

R1 000,00 1% 1%

Other costs: Contingencies R3 000,00 3% 3%

Other costs: Initial working

capital

R3 000,00 3% 3%

Total Non-EPC Costs R12 000,00 12% 12%

R100 000,00 100% 10% 35%

REIPPP Window 2 Bid Summary

Bids received Approved

bids

Value of

approved

projects

Value of

local;

content

committed

MW

Approv-

ed

Job creation

potential

79 (3 200

MW)

19

(due to

R28,1bn R11,8bn 1 044 7 059

construction

Only 51 met

the

requirements

capacity

limitation)

jobs and 328

operation jobs

Zooming in on solar photovoltaics(PV)

• 1450 MW total allocation for Solar photovoltaics (PV).

• 631,53 MW awarded in window 1.

• 818,.47 remained to be allocated in subsequent windows.

• 450 MW was allocated for window 2.

• 417,10MW was awarded in window 2 (9 projects).• 417,10MW was awarded in window 2 (9 projects).

• Total remaining allocation 401,37 MW for subsequent

windows.

• Average price in Window 1 – 275 c/KWh.

• Average price in Window 2 – 165c/KWh.

Zooming in on concentrated solar power (CSP)

• 200 MW total allocation for Solar PV.

• 150 MW awarded in window 1.

• 50 MW remained to be allocated in subsequent windows.

• 50 MW was allocated for window 2.

• 50 MW was awarded in window 2 (1 project).• 50 MW was awarded in window 2 (1 project).

• Total remaining allocation 0 MW, for subsequent windows.

• Average price in Window 1 – 268 c/KWh.

• Average price in Window 2 – 251 c/KWh.

Zooming in on the Wind Sector

• 1 850 MW total allocation for wind.

• 633,99 MW awarded in window 1.

• 1216.01 remained to be allocated in subsequent windows

• 650 MW was allocated for window 2.

• 562,60MW was awarded in window 2 (7 projects).• 562,60MW was awarded in window 2 (7 projects).

1. Total remaining allocation 653,41 MW for subsequent windows.

• Average price in Window 1 – 114 c/KWh.

• Average price in Window 2 – 89c/KWh.

Summary of MW allocation within the REIPPP

Technology MW

allocation

per

determin-

ation

MW

allocated in

the 1st bid

submission

round

MW

allocated in

the 2nd bid

submission

round

MW

awarded in

2nd

submission

round

Remaining

MW to be

allocated in

the next

rounds

Onshore

wind

1 850 633,99 650 562,60 653,41

Solar PV 1 450 631,53 450 417,10 401,37Solar PV 1 450 631,53 450 417,10 401,37

CSP 200 150 50 50 0

Biomass 12,5 0 12,5 0 12,5

Biogas 12,5 0 12,5 0 12,5

Landfill gas 25 0 25 0 25

Small hydro 75 0 75 14,3 607

Totals 3 625 1 415,52 1 275 1 044 1 165,48

Way Forward

• Incorporation of the SABS standard (SATS

1286:2011) in the revised RFP.

• Finalising the decisions on the deemed levels

of local content.

• Communication of the ‘clarified local content • Communication of the ‘clarified local content

rules’.

Thank you

Ntombifuthi Ntuli

Director: Renewable Energy

Department of Trade and IndustryDepartment of Trade and Industry

PNNtuli@thedti.gov.za

(012) 394 5699