South Africa takes its first steps into the fast-growing wind energy market
Government has set a target of generating 15% of its energy needs from renewable sources by 2014, with this figure including wind, as well as other forms of renewable energy, such as solar and hydropower.
South Africa inaugurated its first wind farm in May, with another two on the drawing board.
The first is the R75-million, 5,2-MW Darling wind farm, in the Western Cape.
If everything goes according to plan, the second wind farm will also be in the Western Cape, near St Helena Bay.
The Western Cape Department of Environmental Affairs and Development Planning, the Saldanha municipality, the Seeland Development Trust, nongovernmental organisation Oxfam UK, and Genesis Eco-Energy have signed a memorandum of understanding to develop a 80-MW wind farm at a cost of R850-million.
Construction could start as early as June next year.
Power utility Eskom is also planning a wind farm, to be constructed near Koekenaap, in the Vredendal area, also in the Western Cape.
The project involves the development of a wind farm with an initial capacity of 100 MW, which is likely to increase to 200 MW.
The completion date has been set as 2010.
Costs are not clear, but Eskom has signed a finance agreement for a 20-year, R1,25-billion loan from French development agency AFD for the partial financing of the project.
Donor funding plays a prominent role in the development of South Africa’s wind farms, especially from European countries where wind energy is already well established.
The Darling wind farm was developed by private group Darling Independent Power Producer, State-owned energy company Central Energy Fund and the Development Bank of Southern Africa, with the government of Denmark contributing about R27-million to the project as a grant.
Denmark is considered a global giant when it comes to wind energy, with about 20% of the Scandinavian country’s electricity consumption of 32 000 MW generated by wind, growing to 25% next year, and a possible 50% by 2025.
Rising energy costs and increasing global concern about harmful emissions caused by traditional fossil fuels have seen Denmark focus strongly on implementing renewable energy programmes in the last decade.
However, a sharper focus on renewable energy on a global scale also presents some pertinent economic opportunities to countries able to develop the technology to support the green revolution.
Coal and oil have been profitable industries for decades, and why should this be different for renewable energy?
The Danish Experience
Denmark has about 5 000 wind turbines dotting its landscape.
Most wind farms have three to five wind turbines. The most substantial wind farms are located offshore, with the largest one producing 160 MW of power, comprising 80 turbines.
Next year, a 200-MW wind farm will be inaugurated, with another one of similar size starting up in 2010.
With its 2 000 members, the Danish Wind Industry Association (DWIA) represents about 40% of the global market, including the world’s biggest wind farm turbine producer, Vestas.
DWIA acting director Jakob Lau Holst says the Danish wind industry represents the entire value chain.
“The global wind industry is very young. It really only started 30 years ago.
“Twenty-seven years ago, when the DWIA started, we had 35 turbine manufacturers in Denmark, but now there is only a handful left. Suppliers have followed the same route. We have seen strong consolidation as the market has grown.”
And the market has indeed grown.
Global installed wind capacity reached 100 GW last year, with 20 GW of that installed only last year.
Another 27 GW to 30 GW will be installed this year, says Holst.
“Every three to four years, the world’s installed wind energy capacity doubles. If this could be compared to any industry in the world, it would probably be the IT sector.”
The Global Wind Energy Council forecasts that the international wind market will grow to 240 GW of installed capacity by 2012, which is an upbeat adjustment on its previous forecast, following what it terms “the unexpectedly strong increase in wind energy deployment around the world”.
Europe is to expand from 41 00 MW to 87 000 MW by 2010, the Americas from 10 000 MW of installed capacity to 30 000 MW, and South and East Asia from 5 600 MW to 21 000 MW.
“Wind energy is not competitive compared with power plants, which have been in operation long and which have been paid off,” says Holst. “But that is true for any power source. What is happening now is that the rising costs of traditional energy sources (such as oil) have seen a sharp increase in the competitiveness of wind energy.”
For Denmark, the growing wind energy market presents several economic opportunities. Wind power is no longer the green wallflower (mostly rich European) governments every now and then danced with to show off their environmental conscience. It has become a potential energy source for all, and a lucrative one at that.
“Sure, we want to save the world, but we also want to make some money in the process,” notes Holst.
Not Such a Niche Market After All
Last year, wind-energy-related exports from Denmark reached €4,7-billion, which is a 30,7% increase over 2006 figures. In 1997, exports totalled €500-million.
“The wind industry is already Denmark’s largest exporter of energy technology. If global growth and market development for wind power continue in double digits as expected, the wind industry is poised to become our largest industry within a few years,” says Holst.
He notes that Germany, Spain and the US have traditionally been the only substantial markets for the Danish wind industry. Now, however, the Indian and Chinese markets are growing rapidly, along with France, Portugal, the UK, Egypt, Morocco, Sweden and Central Europe.
“We don’t have four markets anymore – we have 20. Three, four years ago, when the US market faltered, we would have seen a slowdown in the industry, but now we have other markets that can take its place.”
This increasing global demand for wind energy solutions may explain the problems Eskom has admitted to experiencing in recruiting the necessary skills for its wind farm project near Koekenaap, as well as the long lead times in securing key equipment.
And What About Africa?
There are several reasons why Africa has not yet seen a substantial roll-out of wind energy, says Holst.
He believes a lack of financing, access to a reliable, well-managed power grid, a formal regulatory environment and the simple fact that large parts of the continent lack sufficient wind strength are all reasons why there are not more wind turbines in Africa.
“You need a firm regulatory framework and a grid into which you can sell your power. You need a return on your investment.”
Holst believes the South African energy market is different, though.
“South Africa is special. It has a stronger economy and an organised society,” he notes.
“Wind energy can work in South Africa, and not only on the coast. You can also make use of valleys where there are strong winds.”
Holst, who spent some time in South Africa a few years ago, warns that the country should rather take the “big leap” than the “small step”.
“If you really want the wind energy market to start focusing on South Africa, then small projects of four, five wind turbines are not enough. You need projects of 50 MW, or 100 MW.
“When the Danish industry looks at entering developing countries – and we are looking at them – we would prefer entering the market in larger numbers.”
Holst says the Danish industry is looking at South Africa, Morocco, Kenya and Egypt as possible entry points into Africa, with the rest of the continent to follow.
The Cost Factor
Wind energy has become significantly cheaper since the inception of the industry, says Holst.
Current capital expenditure for onshore wind farms is about €2/MWh to €5/MWh. Offshore wind farms are a bit more expensive, at €4/MWh to €7/MWh.
The capital outlay for gas equals that of onshore wind farms, explains Holst, but then “you still have to put the cost of carbon dioxide emissions on top of that.
“Coal is the same as gas, but again you have to calculate the added carbon dioxide costs.
“Nuclear costs are too difficult to decipher,” concedes Holst.
In the end, he says, gas, wind and coal energy have a “fairly similar price range” – at least this is true for Europe, where there are strict emission standards and penalties.
Holst says wind has other benefits over traditional energy sources, such as the fact that input costs are free, as compared with the fluctuating price of coal, for example.
“In Denmark, when installed, the cost of producing wind power is the cheapest, followed by hydropower, then gas and coal.”
Holst says the wind energy industry in Europe has moved from a niche industry to one which has achieved economies of scale.
“Compared to 20 years ago, the cost has come down and the efficiency of wind turbines has increased substantially.”
In the 1980s, wind turbines could produce 12 kW of power, compared with the 3- and 4-MW machines in operation today, and the 5-MW turbines currently in the pipeline.
“In 1980, the cost of a wind turbine was €12/MWh to €13/MWh. Today it is €3/MWh to €4/MWh,” says Holst.
Should one ask Darling Wind Power CEO Hermann Oelsner his opinion on cost, it might differ from that of Holst.
Money was one of the reasons the project took nine years from conception to completion, especially when considering the fact that South Africa offers the cheapest coal-fired electricity in the world.
In the end, all electricity now produced at the Darling wind farm will be sold to the City of Cape Town at a premium of 25% as part of a long-term power purchase agreement.
However, should Eskom’s desired price increase of 100% by 2012 become a reality, this picture could change significantly.
How it Works
Denmark is one of the ideal spots for wind harvesting in the world.
“The wind blows 95% of the time,” says Holst.
“We also have more wind in the daytime and in the winter, when energy consumption is higher.”
He says each wind turbine is designed according to its allocated site.
“All you need is a wind of around 4 m/s. At 12 m/s to 13 m/s, the turbine operates at optimal capacity. At 25 m/s, the turbine will cut out to prevent damage to the machine.”
A local reference point is St Helena Bay, where one of the new wind farms is planned, which has a general wind speed of 6 m/s.
So, how does it work?
The blades collect the wind’s kinetic energy, slowing down the speed of the wind. The wind then flows over the aerofoil-shaped blades, causing lift, like the effect on aeroplane wings, causing them to turn.
The blades are connected to a drive shaft that turns an electric generator to produce electricity.
Holst says 95% of the time, the wind in Denmark is strong enough for the turbines to produce some energy.
Full capacity is achieved about 40% of the time, especially offshore.
Wind turbines need steady wind, not gusts, which is why coastlines or the countryside are the ideal sites, rather than cities where buildings ‘interrupt’ the wind.
Public Response
Is it nothing but a rosy future for wind energy then?
Not entirely.
Wind turbines have a 20-year life cycle, and then they too have to be refurbished or recycled, the same as any other power plant.
Also, the new and rather gigantic 5-MW turbines currently in the pipeline stand 150 m tall from the ground to the tip of the blade. The glass-fibre blade itself is 61 m long.
Even though the Danes applaud the country’s long-term vision to free their country of its dependence on fossil fuels, there has been some public outcry over the rapid increase in the number and size of wind turbines, says Danish Energy Authority chief adviser: climate division Bodil Harder. (The authority is part of the Danish Ministry of Climate and Energy.)
“Years ago, several farming families used to buy a small windmill together, but now they are too big to do that. People don’t see them as ‘cosy’ anymore.
“They are often seen as noisy, and people are afraid the blades will break.
“Windmills are not as popular as they used to be.”
Lolland, one of the more than 500 islands which comprise Denmark, has experienced public demonstrations over a large offshore wind farm planned for this region.
Holst also notes that dependence on any one energy source is never a good idea for any country, even if it is a clean one.
However, with a $200/bl oil price looming, and the price of coal increasing rapidly, a free energy source such as wind deserves much closer scrutiny, especially as the rapidly growing wind energy industry seems to be making progress in beating the cost curve which once made it a niche market reserved for the environmentally conscious.
