South Africa’s ambitious wind energy sector has hit unexpected obstacles as recent bid prices from Bid Window 7 have been labelled “exorbitant” by Electricity and Energy Minister, Kgosientso Ramokgopa.
Alongside Independent Producers’ (IPP) Office Head, Benard Magoro, Ramokgopa has confirmed that the bids exceeded the government’s budgetary expectations, resulting in negotiations being necessary before any preferred bidders can be appointed.
The South African Wind Energy Association (SAWEA) on Tuesday expressed its lack of power to intervene in the pricing dilemma.
This comes shortly after the wind energy sector informed Parliament of their ability to serve only private clients due to limited access to the national grid.
SAWEA highlighted the ongoing discussions within the Ministry regarding the appointment of additional compliant bidders. However, this is contingent on successful negotiations and a potential reallocation of megawatts (MW) within this specific bidding window.
SAWEA said it supported the transparent and structured approach to public procurement and encourages stakeholders to allow this process to unfold as pricing in renewable energy projects was influenced by several interconnected factors.
“Pricing is a commercial matter handled by individual developers. SAWEA does not intervene in the pricing decisions of its members,” it said.
“While the Association represents the interests of its members engaged in the local wind energy value chain, pricing is a commercial matter determined by the developers themselves and falls outside our scope.”
In his December update on the Energy Action Plan, Ramokgopa announced solar but no wind projects as preferred bidders for Bid Window 7 under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
“On wind, the prices we have received are a bit exorbitant or more than we think we can afford. We are not going to announce preferred bidder status for wind. We think there is room for negotiating,” Ramokgopa said.
“We must remember that we must protect the national transmission company as a procurer.”
According to SAWEA, the delays in awarding projects do not only hinder South Africa’s energy transition but also jeopardise the country’s ability to meet its decarbonisation targets as well as ensure energy security.
Energy analyst, Crown Prince Adil Nchabaleng, said the wind sector had insurmountable challenges, including that its unit price per megawatt was higher than Eskom’s producer price and was also intermittent, which made it difficult for the market to forecast on.
“There are many problems with wind. It does not fit into the baseload as the grid requires high capacity and high frequency electricity,” he said.
“The high cost of the current wind technology is uncompetitive. Wind and solar were not created to help Eskom. It cannot use the power and instead dumps it at the gate because it cannot be transmitted.”
Despite these setbacks, the wind energy programme has achieved significant milestones.
To date, a total of 3 342MW of wind energy has been installed, providing reliable electricity to over 3.6 million households annually.
Furthermore, wind projects have generated nearly R900 million in socio-economic initiatives and directed R24 billion towards local content from a total investment nearing R90bn.
Over time, the cost of wind projects has decreased by 70% since the earliest Bid Windows, demonstrating significant efficiency gains and value for the country.
The wind sector plays a critical role in South Africa’s energy landscape, with guidelines showing that over 69GW of new wind energy installations are expected to be added by 2050.
Recent data from the 2024 South African Renewable Grid Survey indicates a promising pipeline of over 33GW of wind projects planned for the next 3-5 years, alongside an anticipated 53GW over the ensuing eight years.
SAWEA is remaining optimistic, urging stakeholders to stay committed as the country works towards an energy-secure future.
BUSINESS REPORT