It was an African dream to create a cutting edge renewable energy industry in one of the continent’s biggest economies to attract foreign investment and train a pool of talent to run it; that dream is in tatters with the companies, that sank nearly $5 billion into it, left in limbo and out of pocket.
In the next few months, companies behind 37 signed-off renewable energy projects are likely to be on shaky ground because South Africa’s Department of Energy has failed to sign 20-year power purchase agreements. These agreements not only secure a connection to the national grid, but also revenue. Government promised to sign the PPAs on April 11. This evaporated and many fear they may not be signed before the next Integrated Resources Plan – the national plan for the energy mix to take the country to 2050 – to be finalized next year.
Reading between the lines, it appears the Department of Energy is more interested in eking out aging coal-fired operations, which generate more than 70% of South Africa’s power, and planning for a highly expensive nuclear program that could set back the taxpayer $50 billion. There have also been fewer power cuts this year. The feeling among many insiders at Eskom is ‘why should we pay for what we don’t need right now?’ The national power generator also pleads poverty.
“I would say of the 37 projects, 14 are very vulnerable right now,” Brenda Martin, the head of the South African Renewable Energy Council, said.
“If nothing happens in the coming months, companies will not be able to hold on and there will be closures and retrenchments in which hundreds of South Africans will lose their jobs.”
<a href="http://www.forbesafrica.com/cover-story/2015/09/01/power-people-people/" target="_blank" rel="noopener">Power For The People By The People</a>
If you want to check the temperature of the sick South African renewable energy industry you should look across the border into Botswana. It is a minor player in energy, let alone renewable energy, with peak demand of a mere 600MW for its tiny population of fewer than two million compared to around 40,000MW in South Africa.
In May, the state-run Botswana Power Corporation put out a call for an expression of interest for a partnership in a small 100MW solar project. Usually a call like this would attract a handful of bidders. This one attracted a staggering 166 bidders, most from South Africa – a clear indication of the hunger at home. A mere 62 of these were selected.
“It’s just crazy. We have to search to survive,” one of the South African bidders, who asked not to be named, said.
<a href="http://www.forbesafrica.com/focus/2017/06/01/false-dawn-new-nuclear-africa/" target="_blank" rel="noopener">False Dawn For New Nuclear In Africa</a>
The dearth of PPAs in South Africa appears to have unintended consequences across Africa.
“The markets are all opening up across Africa. We have seen shifts happen in sub-Saharan Africa in wind, solar and hydro. Biomass is moving quite fast too and energy from waste is very labor intensive. The bigger companies can go for these projects but the smaller companies won’t be able to afford to,” Martin said.
“But what we are doing now is training wind technicians for jobs in Zambia, Uganda and Ghana. This is the opposite of development that was meant to stimulate jobs for South Africa. We are simply creating jobs for other countries.”
As for a new date for the signing of the PPAs for South African producers?
“I don’t see any strong leadership among government officials right now,” rues Martin.
The Department of Energy requested FORBES AFRICA to e-mail questions over when the PPAs would be signed, which we did and followed up with numerous phone calls. Like the renewable energy producers of South Africa, we didn’t get any joy.

An Ill Wind Blowing Nobody Any Good

Building nuclear power stations in South Africa could benefit other industries that are in dire need of a leg-up.
South Africa’s cabinet has kicked off the Nuclear New Build Programme (NNBP) to get an initial 9,600MW of nuclear power which, according to President Jacob Zuma and Finance Minster Pravin Gordhan, “will be built on a scale and at a rate the country can afford”.
The cost of obtaining this much power will be around $40 billion to $50 billion over 15 years.
Contrary to the view of naysayers, the nuclear power lifetime cost is lower than most technologies. It is also the leading global baseload renewable energy source, topped up with hydro, clean coal independent power producers (IPPs), wind and solar.
The Department of Energy’s strategy has been to engage with nuclear vendor countries, and not only nuclear power plant (NPP) original equipment manufacturers, as they did in the failed 2007 process. Agreements have now been signed with five nuclear vendor countries – France, Russia, South Korea, China and USA/Japan.
These countries are able to supply modern pressurized water reactor (PWR) NPP technology, funding, construction and localization development strategies. Some offer fuel supply and fuel waste management support. These partnerships will last 100 years if you consider the full cradle-to-grave lifecycle of the modern NPP.
Government intends following a transparent procurement process, which will be placed into the IPP Office. This office is currently responsible for the successful renewable energy, baseload coal, and gas to power IPP programs.
“Only once nuclear vendors had entered their bids would South Africa have an understanding of what are the different cost levels [and] what type of technology is available… So it’s going to be a year, or two, or more before we can definitely say how long, how much and over what period of time we are going to be managing this program,” says Gordhan.
The principle vendor countries, and their own domestic technology companies, will look to share risk through international alliances and to embed a strong local content into their offering. This will provide support and funding for broad-based black economic empowerment (BBBEE), the construction and manufacturing sectors, and black industrialists.
Such Sino-Franco partnerships have been successful in building the Taishan NPP in China and the Hinkley Point C NPP in Britain, so watch this space.
South Africa’s nuclear readiness and localisation is an important issue for the initial 9600MW and could range anywhere from 20% to 40%, depending on how advanced the country’s readiness strategy is and its intentions for developing a flourishing nuclear knowledge economy.
South Africa has a proud heritage in power generation construction across all the primary energy technologies, but is now coming off a 2010 construction boom, with a big coal build now rapidly tailing off. The country’s embattled construction sector will be challenged to prepare for a nuclear build program without a well-thought-out and structured national strategy. We need to keep the momentum gained for the foreseeable future.
An early dialogue between the engineering and construction fraternity, the manufacturing sector, government and labor is therefore crucial to devise an incorporated plan for the NNBP. This plan will need to give South Africa about five years to ready itself to ramp-up into the investment and localization of the NNBP and will have to be sustained for at least the following 10 years.
The potential is for over 20,000 construction jobs to be created and a similar amount in the manufacturing and supply to the NNBP. Without a plan, the opportunity will be lost to foreign jobs and higher imported content for the NNBP.
Many industry players could be activated when the NNBP is announced. Supporting infrastructures will be a great stimulus for the local communities near the selected NNBP sites in the Eastern and Western Cape provinces. Currently the local talent pool is small. Group Five and Lesedi Nuclear Services are the only private sector companies currently fully active in the nuclear industry.
In the public sector, the South African Nuclear Energy Corporation (NECSA), Denel, Eskom and the National Nuclear Regulator (NNR) will have major roles in the establishment of the NNBP and in the supply to and execution of the projects.

Can Nuclear Power Up Other Industries?

Aschool bag that doubles as a solar-powered light? You could expect the inventor to be a scientist.
Think again. Thato Kgatlhanye is a 22-year-old who studied art in high school and obtained a brand management degree at Vega School of Brand Leadership without studying a day of science. Kgatlhanye’s company, Repurpose Schoolbags, has won about $40,000 in competitions.
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“The start-up capital came from a business grant of $23,433 that I won in the first competition. I entered the business into the South African Breweries Foundation Innovation Awards and we came second. I’ve recently been selected as a sub-Saharan Africa finalist for the Cartier Women’s Initiative Awards, so in September I’ll be in Paris to attend that,” she says.
Kgatlhanye grew up in Mogwase, one of the townships near the mining town of Rustenburg, in South Africa’s North West province. Her father is a taxi owner and her mother is a nurse.
The idea for her bag came in the second year of college when her class was tasked to find ways of doing more with nothing. She decided to make a bag out of recycled plastic bags. The solar-powered light idea only came after a conversation she had with her mother where she was told to channel her creativity towards helping others.
“My mother told me about how she grew up and used candles to study. If she had one candle for the week and it burned out on Wednesday, she wouldn’t be able to study on Thursday and Friday. That inspired the idea,” says Kgatlhanye.
Her company in Rustenburg, which employs 17 people, designs schoolbags out of recycled plastic and integrates a solar cell which can be charged during the day and used as a study lamplight in the evening.
They make these bags for banks and companies who give them to schools. She doesn’t make more than 500 bags at a time, with one bag costing $20.
“Some of our giving partners include Red Bull, Standard bank, PricewaterhouseCoopers, SAB, ABSA/Barclays, MTN Foundation and CPSI,” says Kgatlhanye.
At a time when power cuts, so-called load shedding, loom in South Africa, Kgatlhanye’s company is well timed.
“Thank heavens for what’s playing out,” chuckles Kgatlhanye.
“Load shedding has made the business an easier sell. The big guys that sign the cheques that didn’t understand before the kind of environment we were talking about, now understand because guess what, their child gets affected by load shedding. They’ll be like ‘oh because of load shedding’ and I’m like, almost, except they don’t have electricity at all,” says Kgatlhanye.
Kgatlhanye is looking to shed light in 24 African countries.
<h4>A Spark In The Nick Of Time</h4>
The flow of renewable energy from the REIPPP couldn’t’ve come at a better time, says energy expert Chris Yelland. Eskom’s aging fleet of power stations, many built more than 30 years ago, cannot meet the demand. They have also been burdened by delays in other power generating projects in South Africa, like the Medupi and Kusile coal-powered plants.
“When Medupi and Kusile are online they will add 25% capacity to the grid. This is great. The only trouble is it should have happened 10 years ago. Between 1999 and 2004, there was a delay as a result of policy decision. Construction started in 2007 and 2008,” says Yelland.
When Medupi’s first unit came online, it was four years late. The cost keeps growing; initially it was expected to cost $2.5 billion, but is now forecasted at more than $23 billion. Kusile (4,800MW) has also failed to escape. Its first unit was expected in 2013, but has been pushed to 2017, and will cost around $92 billion, excluding the interest on delays.
Yelland is a Johannesburg-based electrical engineer turned energy journalist and entrepreneur. He has had a lot to talk about over the last 10 years, but his favorite story is the work of renewable energy dreamers.
“That’s the only success story we have to tell. The success stories are not government success stories, they are private: private capital, private technology – built, owned and operated privately, and generated into the grid,” he says.
Yelland warns that renewables should not be South Africa’s only solution.
“It costs less to produce coal-fired electricity than renewable if you compare apples with apples. If you look at the existing fleet of power stations, the cost per kilowatt hour is certainly lower than the cost to produce renewable energy. But the cost of electricity from a new power station, like Medupi, is a lot higher than the average costs. Because that capital cost is higher.”
For Africa, energy at any price is welcome.

How Dying Candles Kindled A Bright Idea

Wind, solar and hydro energy have all been highlighted as sources of energy that help meet Africa’s growing power needs. Ghana’s Dela Wosornu is using garbage.
Decomposing organic material, known as biomass, releases gas that can be used to create energy in the form of biofuels. In Ghana, a country with a vast amount of degradable material, it is a viable option for alternative energy.
In Ghana, energy is costly and scarce; this hinders economic growth.
Biomass, such as wood and charcoal, is Ghana’s main energy source, supplying around 60% of the total energy used in the country. Biomass resources cover about 20.8 million hectares of land mass in Ghana. Most of this land is made up of crops and plants that can be converted into solid and liquid biofuels. Wosornu, a renewable energy entrepreneur, is taking advantage of this by transferring landfill gas to energy.
He is involved in the Oti Sanitary Landfill Gas-to-Energy Project, which eliminates the emission of harmful greenhouse gases as well as the spread of disease from the waste. The project reduces the reliance on producing power from fossil fuels by producing energy from the waste that would have otherwise been buried in the landfill.
The solution is quite innovative.
When organic material, such as food waste, is buried in the landfill, it is deprived of oxygen. In this condition, the organic material will decompose and turn into methane gas. The methane will slowly be released into the atmosphere, causing global warming. The project at the Oti landfill doesn’t let this happen. They cover the landfill with soil and drill holes into it. Pipes are then inserted and the gas is sucked out into a generator which makes heat and electricity.
“It’s really a matter of just bringing pipes to where the gas has collected and pumping it out through a vacuum process and then directing that gas to a generator,” says Wosornu.
According to Wosornu, the project is the first of its kind in Ghana. As cities grow and produce more waste, the environmental impact from open dumps becomes increasingly intolerable. The conversion of dumps to engineered landfills like the Oti project is essential.
“Our solution can be applied at any landfill that has received at least 400 tons a day of municipal solid waste and is in reasonably good shape. As there are many landfills in Africa and around the world that are not capturing gas, the future for landfill gas to energy projects is bright,” says Wosornu.
Landfill gas to energy projects have underperformed relative to projected gas and power output. Bearing this in mind, the projected output of the Oti project has been discounted by 70% so that its actual output will meet or exceed the projected output. The Renewable Energy Act in Ghana ensures that there are set prices for each class of renewable energy. It also offers an opportunity to redirect future investments into green energy.
The challenge for Wosornu, is finding reliable buyers for the project’s output. The high cost of doing business in Africa also makes the development costs of these projects higher than the rest of the world.
“There is no doubt that, if properly exploited, renewable energy resources in Africa can make a significant contribution to the continent’s energy supply. In particular, the potential of biofuels on the continent is huge. Within the context of the current financial crisis, stakeholders including policy makers, international partners and the UN should lead the debate on and collectively seek strategies for scaling up renewable energy use so as to increase access to energy and enhance energy security among the many potential benefits of these technologies,” says Kandeh Yumkella, Director-General of the United Nations Industrial Development Organization (UNIDO).
Wosornu is playing his part.

Full Steam Ahead

From Junk To Power

When Luke Callcott-Stevens, Gavin James and Doug Jenman first talked to FORBES AFRICA in 2012, they struggled to imagine what their $274-million 100MW wind farm in Dorper, South Africa, would look like. A big project with big risk.
“We built a wind farm, we installed it. All those are effectively at the cost of capital. Now it’s done… Every three days a wind turbine is being installed in South Africa,” says Jenman.
Forty wind turbines and two and a half years later, this trio from Rainmaker Energy can not only take pictures of Dorper, a tiny town in the Eastern Cape province, they are now imagining that they can cover the rooftops of London with solar panels.
“The cities of tomorrow will produce their own electricity. We won’t need power stations,” says James.
With this bold idea, the trio set up shop at 81 Rivington Street, an old electrical showroom, in London’s tech hub Shoreditch, and also, by coincidence, labeled with a fitting coat of arms “More Light More Power”.
“A lot of our growth is happening in the solar field, and it’s out of South Africa. We’ve set up a separate company in the UK, Solar Stone Energy; effectively we are trying to create a utility scale solar project on rooftops. So we are aggregating a bunch of rooftops to build a big solar power plant,” says Callcott-Stevens.
It gets even more pie in the sky – especially when we are talking about a city where the sun doesn’t shine often – the trio want to give solar panels for free.
“We cover the costs of the installation and on-going monitoring and maintenance. There is absolutely zero cost to you. You then get to enjoy the immediate benefit of reduced energy costs because the electricity, which is produced on your property’s roof is yours to use, for free. By generating electricity on your roof, we receive a Feed-in-Tariff (FiT) through a government-backed subsidy program. This is how we fund the solar installations and make a return on investment. It’s a win-win for everyone.”
They feel it could find favor with London’s 8.3 million people.
“If you look at what’s happening in the States and in Europe, in solar and wind energy, people are putting solar on their roofs and creating their own power. That is not a total solution, but it cuts back on the need to create new power plants, it changes the game. The utility business is now losing out on its most profitable market. That demand is now gone,” says Callcott-Stevens.
“Solar has gotten cheaper. Next storage is going to get cheaper. That’s not to say you won’t have coal or nuclear power stations. It just changes the game. It changes the dynamics,” says James.
Back home in sunny South Africa, where 39 renewable energy projects contribute 1,800MW to the grid, the trio’s 100MW wind farm in Dorper has been humming for more than a year. Although James says it will take another 16 years to see a profit, it couldn’t have come at a better time. Eskom, South Africa’s power supplier, regularly cuts the power – a legacy of under investment and delays in coal-fired power stations, such as Medupi and Kusile. The work of renewable energy dreamers has been a saving grace.
“Eskom’s troubles are our blessings in the whole [renewable] industry. It’s been good. The government has put its weight behind the program,” says James.
“They are seeing results and they are happy with it, so the whole fear that renewables is erratic and unreliable actually is false. Apparently the first projects have reduced power cuts by half. We would have double the power cuts if it wasn’t for the renewable projects,” says Jenman.
The competition for new projects is stiff. Last year, Eskom announced that 77 bids were received for Round 4 of the program, for a total of 5,804MW. Of these, 13 were accepted as preferred bidders, for a total of 1,121MW installed capacity at a cost of R23 billion ($1.8 billion).
“By the fourth round, the tariff prices have halved. The game’s changed. The perception of risk is gone. In Round 1 there was no market in South Africa; people were taking a lot of risk without knowing if there was going to be a market. They needed higher returns. Where we are now, the return expectation is lower, as it should be, as the market grows and matures,” says Callcott-Stevens.
“Without getting those high returns in the beginning we wouldn’t be in a place where we are established,” says Callcott-Stevens.
Hope of more business in Africa is in the wind. The trio has a further 330MW of wind and 290MW of solar photovoltaic (PV) projects under development in South Africa.
“Africa is the future – solar is all over. There is potential everywhere. Sub-Saharan Africa is obviously closer to home so it’s easier to look at. The [solar rooftop] model works really well in a deregulated market. In South Africa, we are still highly regulated,” says James.
“The rest of Africa is highly regulated. Either badly regulated, or highly regulated. We don’t want to just get on a plane and go find a site. We like to have an angle before we choose a market. There needs to be a reason before we can just go into that market. We can’t just go into a country and just say we are building a solar plant. We need to have relationships, we need to know people, we need to understand the market first,” says Callcott-Stevens.
From the dream of a small windy farm in the middle of nowhere, in Africa, to the reality of free solar panels on the rooftops of London where the sun hardly shines. What next?

The Cities Of  Tomorrow  Won’t Need Power Stations

She is the fresh face of renewable energy in Africa. By a twist of fate, this young lawyer, who grew up with her grandmother by candlelight, is now spearheading Africa’s dash for energy.  Sometimes it hurts.
“It feels like I haven’t slept for four years, I have been so busy working on deals. But it was the deal of a lifetime.”
So says Linda Olagunju on her deals to put two wind farms and two solar photovoltaic (PV) farms onto the barren landscape of De Aar in the Northern Cape. Two deals she patched together that will contribute 254MW to South Africa’s energy grid.
“The wind projects reached financial close and are currently under construction. It’s a partnership between China Longyuan, Mulilo and DLO Energy Resources in De Aar. It’s been almost one year of signing documents. The legal fees on these sorts of transactions can go up to R20 million ($1.57 million) if you are lucky.”
It’s the fruit of the Renewable Energy Independent Power Producers Procurement (REIPPP) program. In short, Eskom, the country’s power generator, attracted bids for private business to apply for tenders. Under it, investors generate electricity for sale at a tendered rate. This brings the total committed private sector investment in the REIPPP, since 2011, to $13.25 billion (R168 billion). It is fierce competition.
“There about 85 solid IPP [independent power producers] developers in South Africa. In Round One to Four, there was 5,200MW on offer, the next rounds are 6,300MW. It’s a bloodbath. You are competing with international companies that are coming in dirt cheap,” says Olagunju.
This may be a drop in the ocean but it’s a very important one. Renewables have been a saving grace. According to Olagunju, 39 of these projects are up and running, supplying 2,050MW to the grid.
“It’s the first successful program since democracy. It’s not that there haven’t been any independent power producer programs on the continent. It’s just that this one is the largest one of its scale and being backed by government.”
Olagunju’s childhood was far from electricity. She grew up in Matatiele, a village in the Eastern Cape 782 kilometers from the boardrooms of Sandown where she now works and lives with her Nigerian-born husband.
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“It was rural, like candle rural… [My grandmother’s village] only got electricity in 2005,” says Olagunju.
This was in time for the power cuts of 2008, when Eskom admitted that it had run out of capacity to supply electricity. At this time, Olagunju had left home to follow in the footsteps of her father and study law. At the University of Cape Town she studied laws governing fossil fuels rather than green energy.
“I’ve always known I was going to go into resources. I just didn’t know if it was going to be mining or oil and gas. The biggest thing for me is why Africa, which is so well endowed in resources, remains the poorest continent. I always hated injustice, growing up in apartheid South Africa,” she says.
Olagunju struggled to find her niche and ended up as a lawyer for Mulilo, a startup renewable energy company in 2008.
“Mulilo needed a lawyer, but couldn’t afford any. So I said I would do the services in return for shares. I still had to pay for them. At the time, the company [owed] R11 million ($870,000) and the company is now valued at R5 billion ($394 million)… in three years,” she says.
This sparked her idea of entrepreneurship.
“I always felt the way to change things is through entrepreneurship. Through law I had the opportunity to see how government makes these decisions on large scale projects… I said ‘hang on a minute, we have a lot of wind in South Africa and we have a lot sun in South Africa, so why haven’t we put renewables on our grid?’ I started doing research,” she says.
The business of renewables can take years to see a profit.
“There is a lot of risk, anything can go wrong. You are in a contract for 20 years, governments can change and I know there are laws to take care of that risk. The wind may not blow for as long as you thought it would. Your sun may not shine as brightly as you thought it would. They are long-term projects.”
“You identify the land. You go into lease agreements. Do an environment impact assessment (EIA) process that can take three years if you are lucky. You then bid your process with a construction period. If everything goes right, [a farm] will be up in 20 months.”
“Then you start seeing a trickle dividend. A trickle dividend at connection in the first seven years is very minimal. It’s nothing to write home about. It’s not even enough to pay your operational expenses.”
Then, there are the hiccups.
“We have existing infrastructure. And then we have the [REIPPP]. The grid infrastructure hasn’t been expanded to accommodate the increasing demand on that particular infrastructure. It’s not Eskom’s fault necessarily. It’s a matter of planning.”
“One of the points we raised before we began these projects is getting the grid contacted properly before you have a program. But it’s always difficult how you spend on infrastructure not knowing where those programs are going to be awarded.”
“Eskom said that they have developed a map where they now know where the hotspots are for energy projects and where now they are doing their best to upgrade in those regions in anticipation of the other [REIPPPs] being built.”
Olagunju believes gas, coal and nuclear could all go the same way.
“You can go and leverage an asset and try and participate. The key thing about these deals is to learn from them. Once you do one, you have built a portfolio. You can go and knock on a door in Nigeria, rather than say you have an idea,” she says.
If you are Olagunju, at the tender age of 31, you could also argue it’s good to have a foot in the door.

A Bloodbath In The Wind

From the boardwalks of Cape Town to the streetlights of Kigali, billions are being made out of renewable energy. It brings business and government together; it could end the days of smoke-belching coal-fired plants. It could answer Africa’s most burning question – power.
In 2011, many experts scoffed at the thought of Africa running on towering wind turbines and miles of solar panels. It was too expensive; it was inefficient and couldn’t stay charged. But, armed with new technology, a pack of young entrepreneurs dug deep to harness the wind and the sun of Africa, to power future generations.
In this continent, South Africa’s Renewable Energy Independent Power Producers Programme (REIPPP) has moved the fastest. In a few short years, South African entrepreneurs have invested $13.25 billion to sell electricity back to Eskom, the country’s hard pressed power generator.
It is fierce competition. According to South Africa’s President Jacob Zuma, 1,800 megawatts (MW) are on the grid and in the next two and half years, 92 projects will generate up to 6,327MW. Further investment into hydro, gas and nuclear power are also on the cards, says Zuma.
The faces driving this investment are fresh. Thirty-one-year-old Linda Olagunju who grew up in an African village by candlelight is now calling the shots in boardrooms. Homegrown entrepreneurs Luke Callcott-Stevens, Gavin James and Doug Jenman threw in their safe jobs for the cutting edge of renewable energy generation. These are a few of the young and restless generation of investors who are taking risks to charge Africa.
It’s a story that breezes through the wind turbines in South Africa to the landfills in Ghana to the underground heat of Kenya.
Some old heads, like nuclear physicist Kelvin Kemm, say that nuclear may yet have a bigger say. He believes three quarters of African countries can become nuclear within the next six years.
It all adds up to an exhilarating story of youth, vision, risk and reward. This month, FORBES AFRICA dedicates our cover story to it.

Tag: Solar

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