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RENEWABLE ENERGY MANUFACTURING PLANTS URGE GOVERNMENT TO CLOSE REIPPPP ROUND 3

RENEWABLE ENERGY MANUFACTURING PLANTS URGE GOVERNMENT TO CLOSE REIPPPP ROUND 3

Manufacturing companies serving the ZAR 120 billion South African renewable energy industry today called on Government to urgently finalise the financial close of the third round of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Financial close has been delayed and fears are arising escalating that the viability of manufacturing facilities and the accompanying jobs and companies may be threatened if finality does not come before year end. Uncertainty about the timing of announcing the preferred bidders for Round 3.5 (for concentrated solar power only) and Round 4 has also added to discomfort.

Henk Schoeman, Business Manager of DCD explains that his company invested R300m to set up a tower manufacturing plant in Coega to ensure that towers for wind turbines are manufactured locally and local content of wind farms is raised. The plant now employs 100 people. “The stellar success of the programme and rapid growth in the industry has meant that we are under pressure to manage our production with extreme care to ensure we deliver to all our clients on the contractual dates, given our present capacity. If anything the order book suggests plant expansion, but the present delays have extremely adverse consequences as we now have to wait with production until financial close occurs. Moreover, our future is dependent on the comfort of our clients that the programme is proceeding.”

ArcelorMittal has recently adapted the lay-out and technology at their Vanderbijlpark plant in order to ensure that steel plates of the correct width to serve the wind industry tower manufacture could be made. This capital outlay likewise assumes stability and predictability in the wind sector, both factors heavily dependent on investor sentiment and potentially impacted by the present delays.

In the solar photovoltaic (PV) industry, a similar distress is building. PV module manufacturing companies based in Cape Town and Durban, namely Jinko Solar, SolaireDirect and ARTsolar have jointly invested R245m in their facilities over the past 4 years and created 510 local jobs, which are expected to increase to 600 by April 2015.

However, these companies have less than 2% of their production capacity taken up by local orders, and have as a result been forced to seek foreign markets in the short term. South African PV manufacturers are competitive in supplying foreign markets and require at least predictability in the implementation of the REIPPPP to sustain the nascent local manufacturing industry. The same applies to Sun Power, which has recently announced the re-opening of a PV module factory in South Africa.

Should the dynamics in foreign markets change before the REIPPPP has had time to influence the development of local manufacturing value-chains in a substantial manner, these companies and the jobs they create may cease to exist. Furthermore, as South African content is not mandatory for exported modules, the local sub-supply chain for glass, aluminium and other products is also at risk without the REIPPPP.

International observers and stakeholders are equally concerned. “Today South Africa is one of the most promising new wind markets globally, along with Mexico and Brazil. The first stage of the REIPPPP programme has proven its success and starting to win trust among international investors. With the International Renewable Energy Conference (IREC) bringing some 180 sovereign states to South Africa in October 2015, it’s an ideal time now to build on the momentum –  round 3 closure is the first step forward”, said Steve Sawyer, Secretary General of the Global Wind Energy Council who was in South Africa last week.

Dr. Guenter Schneider from Enolcon GmbH that co-authored the 2030 Concentrated Solar Thermal Electricity Strategy for South Africa, points out that bidders who submitted bids in March this year  for  the distinct “Round 3.5” of REIPPPP meant for concentrated solar thermal electricity  are still waiting for the announcement  of the preferred bidders. “Investors in concentrated solar thermal electricity are watching what happens to Round 3 and 3.5 and will form their perceptions on the future of the industry based on what happens there”, he points out. “Round 3.5 preferred bidder announcement is five months late, and with the recent black-outs and the Eskom credit downgrade one would think that it would be prudent to safeguard the wellbeing of the REIPPPP programme, given that renewable energy is one of the sources of electricity that can help alleviate the power crisis that South Africa is facing until at least 2020. Moreover, South African companies who are part of the consortiums in Round 3.5 are burning cash while delays continue, and in some cases the BEE entities and Community Trusts may have to dilute their shareholding as a result of the delays.”

Industry experts maintain that Round 3 closure represents a ZAR 10 billion boost to the local supply and manufacturing industry.

Dr Luis Crespo, President of the Spanish concentrated solar thermal electricity speaking recently at the CSP Leadership Dialogue in Johannesburg said: “The key to industrialisation, localisation, job creation, broad based transformation and fulfilling the objectives of both the Green Economy Accord and the National Development Plan requires market “certainty” for all stakeholders to play an essential role in the implementation of key policies and that includes the private sector. South African manufacturers need certainty to be in a position to re-tool their manufacturing lines to locally manufacture up to 60% of some of the key CSP components for both the local and international markets in which South Africa has every chance to become the world leader.”

The broader renewable energy sector are also watching developments to gauge Government’s on-going commitment to the green economy.  In the low pressure solar water heating manufacturing industry, some 10 different local SABS Mark companies have collectively invested about ZAR200 million and are idling as they wait for policy developments, while some 30,000 Low Pressure SWH units are sitting in stock.

At present the renewable energy industry remains hopeful that Government is still committed to resolving the blockages and has reiterated its willingness to assist where possible.

 

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Notes to editors:

  1. Issued by the South African Renewable Energy Council, details available at www.sarec.org.

 

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