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Projects and Energy Weekly Snippets

17 April 2015

The role of renewable energy in South Africa’s energy mix

Eskom has implemented regular power cuts this year to prevent the national grid being overwhelmed as South Africa faces its worst energy crisis in decades. Power outages are costing the country between $1.7 billion and $6.8 billion a month, according to Minister of Public Enterprises, Lynne Brown.

The solution to the energy crisis might be at home as the country’s renewable energy independent power producer procurement programme, is considered hugely successful for renewables. The combination of excellent wind and solar resources, vast land availability, a strong domestic manufacturing capacity and increasing commitment to renewable deployment from the government and financing institutions, create an encouraging picture for South Africa. Concentrated Solar Power (CSP) in particular, stands out.

South Africa’s daily electricity demand has two peaks, one in the morning and one in the evening. This characteristic makes CSP with storage the most suitable alternative among all renewable energy sources for generating electricity to supply the evening peak demand. Factors such as the increasing energy demand, increasing electricity tariffs, and limited proven reserves of oil should hasten the implementation of CSP at a wider scale.

Despite the delays in the DoE’s announcement schedule and other challenges, the South African market continues to generate great interest among international developers and financing institutions, who will be meeting at the CSP Today South Africa Conference & Exhibition on 14-15 April 2015 in Cape Town.

ESI Africa, 10 April 2015

Sappi selected as preferred bidder of Ngodwana biomass project

Sappi has been selected as preferred bidder of the Ngodwana energy biomass project in the fourth window of the South African government’s renewable energy independent power producer programme. The forestry, paper and chemical cellulose maker’s 25 MW biomass project will be built at the group’s Ngodwana mill in Mpumalanga, using biomass supplied from local plantations. It will feed electricity into the national grid near Mbombela.

Project partners are Sappi Southern Africa, KC Africa and Fusion Energy. There will be broad-based empowerment participation through the Ngodwana Energy Employees Trust and the Ngodwana Energy Community Trust. ELB Engineering Services has been appointed as the engineering, procurement and construction contractor.

The group has long been diversifying out of globally declining fine coated paper markets as a result of internet publishing. Globally, Sappi had already developed and constructed five hydro, two gas and 31 steam turbines, which generated about 800 MW of renewable power on 14 sites in seven countries.

KC Africa president Ki Kyeong Kim said on Tuesday that the winning bid for the Ngodwana energy biomass project was a "giant step for KC Africa and for our parent company, KC Green Holdings in South Korea". "It is a mark of our belief and confidence in the project, in all the parties involved and especially in the country and government," he said.

Business Day, 14 April 2015

Enel Green Power confirms three SA wind projects as Round 4 bids are selected

Italy’s Enel Green Power (EGP) has confirmed that three of its wind-energy projects, collectively valued at €500-million, were selected as preferred bids following the much delayed fourth bid window under South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). The company said in a statement that the projects had a collective nameplate capacity of 425 MW and marked an important step in consolidating EGP’s presence in Africa.

Engineering News Online understands that the South African government sent letters to the fourth-round preferred bidders over the weekend and that around 13 projects were selected, with a collective nameplate capacity of over 1 000 MW. The fourth bidding round closed on 18 August, but the announcement of preferred bidders has been delayed for several months, partly owing to a delay in the selection of preferred bidders during round three.

EGP’s wind projects were additional to the 523 MW in solar PV projects being developed by the group in South Africa, with a 10 MW plant in Upington already operating and with a further 513 MW under development following EGP’s success during the third REIPPPP bidding round.

The three wind projects are the 142 MW Oyster Bay and 141 MW Nxuba developments in the Eastern Cape, as well as the 142 MW Karusa project, which will be built in the Northern Cape. EGP said that once fully operational, the three projects will be able to generate around 1 560 GWh a year.
Earlier this year, EGP country manager for South Africa Lamberto Dai Pra described the REIPPPP as a case study for the global industry and said that the company remained keen on pursuing additional projects under the programme.

Engineering News, 14 April 2015

CSP industry hots up

With one major concentrated solar power (CSP) plant up and running near Upington, in the Northern Cape, and another two in development, players in the CSP market see much opportunity for the industry. But they have called for greater certainty from government on its Integrated Resource Plan (IRP) update, which advocated for an increase in the current CSP allocation from the current 1200 MW to 3300 MW by 2030 and 8100 MW by 2050.

Southern Africa Solar Thermal and Electricity Association (Sastela) chairperson Louis van Heerden told delegates at the CSP Today South Africa 2015 conference in Cape Town on 14 April that “CSP has the potential for large-scale manufacturing, industrialisation and localisation”. He said CSP had become increasingly cost-effective compared with conventional energy.

Sastela believed CSP was the only renewable-energy technology capable of delivering electricity consistently during peak times when it was needed most, as it can be produced not only during the day, but also stored and supplied to the national grid at peak times. “CSP plants are modular and can be constructed within a period of 24 to 36 months. This will allow South Africa to introduce much-needed baseload and peak power into the grid within a short space of time."

The 100 MW KaXu Solar One project in the sun-drenched Northern Cape was connected to the grid on 2 March. KaXu Solar One GM Julián Lopez Garrido said the plant had outperformed its targets so far. He was also pleased that the company had achieved over and above the local procurement targets, while he expected many small businesses would be established in the area. However, Lopez called for a compromise from the government to help the solar CSP industry develop local skills.

Engineering News, 14 April 2015

Three BioTherm Energy projects selected during SA’s fourth renewables round

South African independent power producer BioTherm Energy has confirmed that three of its renewable-energy projects, with a combined capacity of 251 MW, were named as preferred bids during the fourth bid window under South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). The projects are the 120 MW Golden Valley wind farm, the 45 MW Aggeneys solar photovoltaic (PV) project and the 86 MW Konkoonsies II solar PV facility.

In total, 13 projects were selected as preferred bids during the Department of Energy’s (DoE) fourth competitive tender, including five wind projects, six solar PV plants, a biomass development and a mini-hydro project.

BioTherm Energy has already constructed, and is operating, 49 MW of wind and solar projects secured during the first REIPPPP bid window. In addition, it owns and operates a 4.2 MW waste-gas project at the PetroSA gas-to-liquids refinery in Mossel Bay.

“This 251 MW allocation by the DoE reflects our ability to compete directly with leading international players who have come to dominate the South African landscape,” BioTherm Energy CEO Jasandra Nyker said in a statement. She added that the allocation cemented its position as a leading Africa-based renewable-energy developer, having recently also been named as a preferred bidder on four solar projects in Zambia and two solar projects in Burkina Faso.

Engineering News, 15 April 2015

Goldman Sachs bullish on South Africa as favourable investment destination

Goldman Sachs International MD Colin Coleman told the Frontier Forum at the Industrial Development Corporation on Wednesday that notwithstanding the local problems – which he described as self-inflicted – South Africa had the deepest capital market in the region and one of the deepest capital markets measured as market capitalisation of the Johannesburg Stock Exchange (JSE) divided by gross domestic product (GDP). “South Africa has two times market cap to GDP, which reflects the liquidity and sophistication of the JSE, which is a very favourable destination to fund managers,” Coleman said during the presentation.

But factors positioning South Africa “fantastically” in the current world of investment funds were the local conditions in other emerging markets. Local conditions in Brazil, Latin America, Turkey, the Middle East and Russia were rendering them unattractive destinations for institutions in the short term. In contrast, South Africa offered liquid stocks that were well managed and well governed.

“So, self-inflicted wounds aside, [South Africa] is a world where we have sub-Saharan Africa at our backs, emerging market scarcity pointing to South Africa and the JSE, and very well run and governed companies being the platform for playing that growth,” said Coleman.

While the South African Treasury had put a 2% number on economic growth expectations for South Africa this year, Goldman Sachs, in triangulating for emerging markets and the economic pushes and pulls, were more bullish about South Africa at 2.3%. “The fact is South Africa should be a 3.5% growth rate because that is the country’s real base capacity,” he added. If South Africa just did the basics right, it would grow at 5%, and if it really excelled and produced a perfect performance, it would be at 7%. Growing at 2.3% and 2.4%, as Goldman Sachs forecast for 2015 and 2016, was effectively the country shooting itself in the foot.

Engineering News, 15 April 2015

The above reflects a summary of certain news articles published during the preceding week. It is not an expression of opinion in respect of each matter, nor may it be considered as a disclosure of advice by any employee of Hogan Lovells.

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