More local content required for renewable energy projects

Local content for projects bidding in the third window of the renewable-energy procurement programme for independent power producers (IPPs) could be increased to 40 percent, the SA Wind Energy Association (Sawea) said on Thursday. Local content requirements for the previous bidding windows were 25 percent. Sawea chief executive Johan van den Berg said the Department of Energy had proposed this increase and would be meeting stakeholders on June 14 in Johannesburg to discuss if 40 percent was the correct level to reach its target for the green economy and deliver on its mandate on green jobs. The IPPs’ third round of bidding submissions will start next month and close on August 20.

When the first preferred bidders were named in December, the department said 2 209 megawatts of power was still to be procured in the following windows. Van den Berg said the increase of local content could result in a significant job boost in the green economy sector. One can only do so much with digging the ground. It would come to a point where companies would have to do something more significant like putting (up)… a local tower,” he said. He said increasing local content to boost jobs was “exactly the right aim” and that the association had had a localisation workshop with the government last week. Van den Berg said in the foreseeable future there would always be certain skills that South Africa would need to import, as capacity and local skills were not yet sufficient.

But the question is how quickly can we scale up, doing as much as possible ourselves. Whether 40 percent is the right level, I don’t think we know that but we have to find a way to make it work,” he said. Theo Covary, the chief executive of the Sustainable Energy Society Southern Africa, said there was still the challenge of a skills shortage. He said the society’s members saw similar problems in solar-water heating, where there was a huge gap between available skills and required local content. He said unrealistically high levels of required local content at times affected efficiency, because renewable energy was still new in South Africa. We don’t know what we are doing and it’s important to get it right. So we will need skills of those who have done it. But at the same time, I think it’s about time that we see a progression on local skills being developed,” he said.

Covary said in the third bidding window there should be an expectation to develop local manufacturing. He said companies could invest to manufacture items that were not hi-tech and they could use local project managers and engineers. Van den Berg said South Africa was a complex country and sophisticated in what it could do technologically. He said these local content targets could create a market for South African players to grow to a level where there could be capacity for export as well. In January, Cosatu threatened to hold protest actions to put pressure on the government to increase local content requirements in the Department of Energy’s Integrated Resource Plan (IRP2).

The union said that local businesses involved in the renewable energy sector faced closure, because the IRP2 allowed power producers bidding for renewable energy projects to largely use imported components. Cosatu wanted local content to be increased to 50 percent or 65 percent.