'Localisation demands won't stop renewables'

Niveshen Govender, CEO of the South African Wind Energy Association, says the renewable energy master plan hammered out with the government will not allow localisation to get in the way of putting megawatts on the grid as quickly as possible.

“Localisation is not stopping procurement, it's not stopping renewables, it's not stopping new generation capacity”, he says.

There has been criticism of the plan for focusing too much on ensuring that the components needed for the rollout of renewable energy are manufactured locally, than on the actual rollout itself.

This is seen as problematic given that the government destroyed the country's renewable energy manufacturing capacity when it terminated the renewables procurement programme in 2015, effectively closing down the renewable energy sector for seven years.

Govender says questions about local manufacturing capacity and whether it is ready or competitive enough for the renewables boom have to take that disastrous setback into account.

“The point is we're now trying to beneficiate as much as we can for local manufacturing.

“The renewable energy master plan is about how do we bring that manufacturing capacity back. How do we restore the confidence of investors looking to set up renewable energy manufacturing concerns in the country?

“We as industry have been integral in developing the plan so that it addresses the shortfalls in terms of market certainty and investor confidence so we can make the best of the renewable energy boom.”

Given the country's energy crisis, should there be less focus on building up local value chains for renewables and more focus on getting as many megawatts onto the grid as quickly and cheaply as possible?

“In the master plan it is very clear that we need more renewable energy, we need more megawatts on the grid, we need quick procurement, consistent procurement and rolling procurement.

“But we also need the right policies for local manufacturing. We can't just have a conversation on energy generation. We need to bring in the value chains so that we are building towards an end goal of a developing nation and a developing economy.

“Unfortunately, we're not in a space where we can focus on just one and not the other.

“As much as we have an energy crisis, we have a poverty crisis, we have a skills crisis, we have an unemployment crisis. We have to look at all of these concerns and make sure that renewables provide a holistic approach to the economy.”

To what extent does the master plan create an environment that will give investors, companies he represents that lost hundreds of millions believing in government assurances, the certainty they need to invest in factories all over again?

The renewable energy master plan is based on what investors require, including incentives and policy interventions, he says.

What about trust?

“We need government to come to the party and socially contract with us. To say: 'These are the policies we will put in place, these are the interventions, these are the regulations that will support the investments and attract investors. We need to see what you can bring to the table.'

“That's the conversation we are having as industry and government. To say to the government: 'If you give us rolling procurement for the next 10 years at this amount, this is how much local manufacturing we can bring to the country. We have investors who are ready to come in, but they need this level of certainty and this level of incentive coming from policy.'”

Don't they above all need a cast iron guarantee that procurement of what they manufacture is not going to be dependent on local content?

“The procurement of renewable energy is not going to be halted in any way because of localisation”, says Govender.

The introduction of local manufacturing will be phased in; it's not going to happen overnight

But it is going to be a factor?

“The introduction of local manufacturing will be phased in; it's not going to happen overnight. There's no-one who's going to say: 'Wwe're not going to procure any more until we get local manufacturing.'”

If localisation is government policy doesn't that mean it's a government priority?

“It is a priority, but not an immediate priority. It is going to be phased in over time. It's not going to stop procurement. It's just a case of, as we build new generation capacity can we not start introducing local manufacturing.”

What happens if localisation targets are not met?

“One of the major things we put back into the master plan is not to have any targets on localisation at this point. When targets will come in is a conversation between industry and government.”

If government can give them the certainty of markets, then industry will be able to start ramping up local manufacturing, he says.

“That is how targets will be developed. In terms of a social compact between industry and government. One can't make the decision about targets without the other.”

The wind energy sector has always overachieved on localisation targets anyway, says Govender, who worked on renewable energy policy for the department of energy and headed the South African Photovoltaic Industry Association for seven years before becoming CEO of the wind energy association 18 months ago.

“We've performed to an average of 47% local content which is 7% above the government-set target.”

There's a significant skills gap on the operations and maintenance side, "which we are dealing with", but on the manufacturing side 95% of the balance of plant components (internals such as connections and gears) in all wind farms in the country are locally made. Of the major components the tower is locally made while blades, hub and cell, are imported. 

The biggest challenge to new generation capacity from renewable energy is access to the grid, he says. Lack of grid capacity is in the areas — Western, Eastern and Northern Cape — that have the best resources in terms of wind and solar PV.

“We need transmission infrastructure to be upgraded as soon as possible; it's a major concern.”

But the biggest constraints to investment in renewables manufacturing are lack of certainty around policy and continuous procurement.

“If we get policy certainty right and we get rolling procurement right we'll find the investors.”