The South African Wind Energy Association (SAWEA) expects bilateral power purchase agreements (PPAs) with corporates and municipalities to add further impetus to domestic demand for wind energy and a shift to such deals to likely gain momentum once Eskom’s transmission and system operator functions are unbundled from the utility.

SAWEA chairperson Mercia Grimbeek stresses, however, that the South African wind market will continue to be driven in the near term by government’s competitive auction programme, the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP),

through which more than 6 400 MW of renewable-energy capacity has been procured following four bidding rounds. Wind comprises 62% of this procured capacity.

To date, 36 wind projects with an aggregate capacity of 3 366 MW have been procured.

Despite a three-year hiatus in the procurement of new capacity, the Global Wind Energy Council (GWEC) expects a further 670 MW of wind to be added to the South African electricity mix in 2020, followed by 474 MW in 2021, after the finalisation of outstanding PPAs in 2018.

The next REIPPPP bid window is expected to be launched once the updated Integrated Resource Plan (IRP) has been approved by Cabinet, expected during the course of September.

The draft IRP, which has been the subject of protracted consultations between government, business and labour since the start of 2019, envisages the building of an additional 11 300 MW of wind capacity between 2019 and 2030.

The plan also caters for the introduction of distributed-generation capacity at 500 MW/y.

In a webcast hosted by the GWEC, Grimbeek said the longer-term prospects for wind generators to enter into bilateral PPAs with energy-intensive companies, mines and municipalities looking to lower their carbon emissions or diversify their sources of electricity were also positive.

Such bilateral PPAs have already emerged as a strong driver of wind demand in North and South America, with the GWEC reporting growth in corporate PPAs in several markets, including the US, Mexico and Brazil.

“South Africa can easily compete with Chile and Australia in terms of its renewables endowment to provide similar low-cost electricity to its mining sector,” Grimbeek avers.

The regulatory framework in South Africa already allows for the wheeling of power, but the commercial terms hitherto offered by Eskom for use of the grid for wheeling have proved commercially unattractive.

SAWEA expects the cost outlook to improve once the transmission and system operator functions have been separated from Eskom, in line with an unbundling plan announced by President Cyril Ramaphosa as one of the preconditions for further fiscal support for the utility.

Public Enterprises Minister Pravin Gordhan is expected to release a policy paper outlining government’s approach to the unbundling of Eskom in the coming weeks.

Grimbeek says SAWEA is also looking forward to the policy certainty that will be created by the release of the IRP, and expressed optimism that the next REIPPPP bid window would not include terms that would make future wind investments unpalatable.