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The economics of wind energy in South Africa
PERGAMON
Renewable Energy 16 (1999) 869-871
THE ECONOMICS
OF WIND ENERGY IN SOUTH AFRICA
*H.A. van der Linde and **A.A.M. Sayigh *Faculty of Electrical Engineering, PE Technikon, Port Elizabeth Private Bag X601 1, Port Elizabeth, 6000, South Africa.
ABSTRACT Battery charging and water pumping has been the only applications for wind energy in South Africa till now. A conservative estimate of the wind resource indicates that approximately 5% to 6% of the South African energy demands can be supplied from wind. However the low cost of ekectricitydue to the abundance of cheap coal has made it difficult to justify the use of grid connected wind turbines. As with other countries where wind energy is now a part of the total energy package, South Africa will also have to go through a process of wind energy having to prove itself as a viable option while at the same time have a cost disadvantage. Q 1998 Published by Elsevier Science Ltd. All rights reserved.
KEYWORDS South Africa, Wind energy, Niche applications, Turbines, Economics.
WIND ENERGY UTILISATION AGAINST THE SA ENERGY BACKGROUND To date wind energy has only been used for water pumping and battery charging. Bulk generation of electricity has traditionally been done by means of a number of coal fired power stations, which makes up approximately 96% of the total installed capacity, with the rest being generated by means of a nuclear power station, some hydro power stations, pump storage stations and a gas turbine. The last three mainly being used for maximum demand supply. Virtually all the power stations in South Africa are situated in the North Eastern part of South Africa. One of the fktors which could have a positive impact on the utilisation of wind energy. However the main factor which will inhibit the utilisation of wind
Figure 1
0960-1481/99/$_see front matter 0 1998 Published by Elsevier Science Ltd. All rights reserved Pll: SO960-1481(98)00290-O
870
WREC 1998
turbines for bulk generation of electricity is the cost of electricity, with South Africa being among the lowest in the world, as shown in Fig. 1
THE SOUTH AFRICAN WIND RESOURCE An extensive study of the wind energy resource indicates that approximately 5% to 6% of the South African energy demands can be supplied from wind. This corresponds to a total of approximately 3,600MW installed capacity. Typical of wind resource trends, the highest wind speeds tend to be along the coast, refer to fig 2. The average wind speed, measured at 10m height, along the coastal areas are in most areas above 5m/s annual mean. Corrected to hub height this translates to an average wind speed of above 7.5m/s. In terms of international trends the wind resource is at exploitable levels and has the potential to become economically viable.
Figure 2
ECONOMICS AND OTHER FACTORS It is obvious that a major problem which has to be solved is the economic viability of wind energy as a competitor of conventional energy sources not unlike anywhere else in the world during the initial stages of wind energy implementation. Until a point of economical viability is reached either a subsidy would have to apply and/or niche applications have to be investigated. That is, it should be seen as a supplementary energy source with a number of advantages. In South Africa, with its unique electricity network and electricity pricing, it has a role to play in terms of decentralised power plant and maximum demand supply. Typical of these are’
a) b) c) 4 c)
Most of the electricity is generated more than IOOOkmfrom the coast. Large electrification programmes and renewed economic growth is in the process of placing a significant burden on the existing capacity in terms of maximum demand supply. A number of towns in areas with proven wind resource are supplied via spur lines with limited capacity. Stand-alone wind diesel systems would, in large parts of the country, be the only economic option as apposed to grid extensions. A consideration which does not feature very strongly in South Africa, when compared to Europe, is pollution. However, with South Africa becoming a member of the international community again, “Green-taxes” such as the tax on COz, SO,, and NOx might be imposed in South Africa as well.
INCOME VERSUS CAPITAL OUTLAY If electricity from wind had to compete with conventional energy sources such as coal or even nuclear, on an equal footing, it would be an immediate non-starter. The balance sheet tells it all. A typical price for a wind turbine, supplied to a site in South Africa, installed and commissioned amounts to approx R 10 OOO/kW. Taking a 250kW wind turbine the total cost is R 2 700 000. The income generated over its life time would
WREC
1998
871
be R 7 217 729 ifthe Maxflex tariff, charged by Eskom, is used and the site chosen has an average of 8 m/s at hub height. This is approximately twice the installed cost of the turbine, however O&M and interest still has to be added into the equation. To get the 111picture one has to do the necessary costing in terms of interest and depreciation as well as other factors such as a constantly changing exchange rate and peripheral equipment such as transformers and transmission lines. Term Developments A breakdown reveals that approximately 50% of the cost lies in the installation, which if done by South African trained technicians, could be significantly reduced. If a partial local production and component sourcing can be initiated, a proportionate amount in import duties can be avoided. Local manufacturing and sourcing of components can introduce a firther saving. It is difficult to accurately estimate the overall saving which can be achieved until a demonstration project has taken place.
To date, no demonstration projects to prove wind turbii as a viable component of the South African energy package, in terms of grid connected wind turbines or large standalone wind/diesel systems, are in place. Fortunately some demonstration/pilot projects are being planned. The only draw back at the moment is the economic viability thereof To overcome this and get a South African wind energy industry off the ground, financial assistance in the form of grants and/or preferential rates and prices will have to be introduced. However economic viability does not have the same meaning with niche applications such as maximum demand supply or remote area supply. Even with such applications pilot projects are required to enable a local infrastructure to be developed and a human resource pool to be trained.
CONCLUSION As with most countries, when wind energy was in its infancy, South Africa also has a growth process to go through. On the surface wind energy does not seem to have the economic viability for it be added to the local energy pool. On closer inspection a different picture appears which shows that wind energy has the potential but still requires some pioneering spirit for full implementation. Maybe, factors such as niche applications and international pressures regarding environmental issues are required for a breakthrough. Factors which should be borne in mind are, economic growth, the value of the local currency in terms of other currencies, the interest rates applicable to financing such projects and inflation. Inflation could have a positive or a negative impact depending on whether the real impact is on the cost of electricity or capital outlay and its relation to the exchange rate. REFERENCES Diab, R. (1995) m Van der Linde, H.A. (1995) m Conference. London: Eskom.( 1998) Eskom’s
Pretoria: Department of Mineral and Energy. - Where Does It Fit In? BWEA 17 Annual Services 1998
** Director General of WREN, 147 Hilmanton, Lower Earley, Reading RG6 4HN, UK
Renewable Energy 16 (1999) 869-871
THE ECONOMICS
OF WIND ENERGY IN SOUTH AFRICA
*H.A. van der Linde and **A.A.M. Sayigh *Faculty of Electrical Engineering, PE Technikon, Port Elizabeth Private Bag X601 1, Port Elizabeth, 6000, South Africa.
ABSTRACT Battery charging and water pumping has been the only applications for wind energy in South Africa till now. A conservative estimate of the wind resource indicates that approximately 5% to 6% of the South African energy demands can be supplied from wind. However the low cost of ekectricitydue to the abundance of cheap coal has made it difficult to justify the use of grid connected wind turbines. As with other countries where wind energy is now a part of the total energy package, South Africa will also have to go through a process of wind energy having to prove itself as a viable option while at the same time have a cost disadvantage. Q 1998 Published by Elsevier Science Ltd. All rights reserved.
KEYWORDS South Africa, Wind energy, Niche applications, Turbines, Economics.
WIND ENERGY UTILISATION AGAINST THE SA ENERGY BACKGROUND To date wind energy has only been used for water pumping and battery charging. Bulk generation of electricity has traditionally been done by means of a number of coal fired power stations, which makes up approximately 96% of the total installed capacity, with the rest being generated by means of a nuclear power station, some hydro power stations, pump storage stations and a gas turbine. The last three mainly being used for maximum demand supply. Virtually all the power stations in South Africa are situated in the North Eastern part of South Africa. One of the fktors which could have a positive impact on the utilisation of wind energy. However the main factor which will inhibit the utilisation of wind
Figure 1
0960-1481/99/$_see front matter 0 1998 Published by Elsevier Science Ltd. All rights reserved Pll: SO960-1481(98)00290-O
870
WREC 1998
turbines for bulk generation of electricity is the cost of electricity, with South Africa being among the lowest in the world, as shown in Fig. 1
THE SOUTH AFRICAN WIND RESOURCE An extensive study of the wind energy resource indicates that approximately 5% to 6% of the South African energy demands can be supplied from wind. This corresponds to a total of approximately 3,600MW installed capacity. Typical of wind resource trends, the highest wind speeds tend to be along the coast, refer to fig 2. The average wind speed, measured at 10m height, along the coastal areas are in most areas above 5m/s annual mean. Corrected to hub height this translates to an average wind speed of above 7.5m/s. In terms of international trends the wind resource is at exploitable levels and has the potential to become economically viable.
Figure 2
ECONOMICS AND OTHER FACTORS It is obvious that a major problem which has to be solved is the economic viability of wind energy as a competitor of conventional energy sources not unlike anywhere else in the world during the initial stages of wind energy implementation. Until a point of economical viability is reached either a subsidy would have to apply and/or niche applications have to be investigated. That is, it should be seen as a supplementary energy source with a number of advantages. In South Africa, with its unique electricity network and electricity pricing, it has a role to play in terms of decentralised power plant and maximum demand supply. Typical of these are’
a) b) c) 4 c)
Most of the electricity is generated more than IOOOkmfrom the coast. Large electrification programmes and renewed economic growth is in the process of placing a significant burden on the existing capacity in terms of maximum demand supply. A number of towns in areas with proven wind resource are supplied via spur lines with limited capacity. Stand-alone wind diesel systems would, in large parts of the country, be the only economic option as apposed to grid extensions. A consideration which does not feature very strongly in South Africa, when compared to Europe, is pollution. However, with South Africa becoming a member of the international community again, “Green-taxes” such as the tax on COz, SO,, and NOx might be imposed in South Africa as well.
INCOME VERSUS CAPITAL OUTLAY If electricity from wind had to compete with conventional energy sources such as coal or even nuclear, on an equal footing, it would be an immediate non-starter. The balance sheet tells it all. A typical price for a wind turbine, supplied to a site in South Africa, installed and commissioned amounts to approx R 10 OOO/kW. Taking a 250kW wind turbine the total cost is R 2 700 000. The income generated over its life time would
WREC
1998
871
be R 7 217 729 ifthe Maxflex tariff, charged by Eskom, is used and the site chosen has an average of 8 m/s at hub height. This is approximately twice the installed cost of the turbine, however O&M and interest still has to be added into the equation. To get the 111picture one has to do the necessary costing in terms of interest and depreciation as well as other factors such as a constantly changing exchange rate and peripheral equipment such as transformers and transmission lines. Term Developments A breakdown reveals that approximately 50% of the cost lies in the installation, which if done by South African trained technicians, could be significantly reduced. If a partial local production and component sourcing can be initiated, a proportionate amount in import duties can be avoided. Local manufacturing and sourcing of components can introduce a firther saving. It is difficult to accurately estimate the overall saving which can be achieved until a demonstration project has taken place.
To date, no demonstration projects to prove wind turbii as a viable component of the South African energy package, in terms of grid connected wind turbines or large standalone wind/diesel systems, are in place. Fortunately some demonstration/pilot projects are being planned. The only draw back at the moment is the economic viability thereof To overcome this and get a South African wind energy industry off the ground, financial assistance in the form of grants and/or preferential rates and prices will have to be introduced. However economic viability does not have the same meaning with niche applications such as maximum demand supply or remote area supply. Even with such applications pilot projects are required to enable a local infrastructure to be developed and a human resource pool to be trained.
CONCLUSION As with most countries, when wind energy was in its infancy, South Africa also has a growth process to go through. On the surface wind energy does not seem to have the economic viability for it be added to the local energy pool. On closer inspection a different picture appears which shows that wind energy has the potential but still requires some pioneering spirit for full implementation. Maybe, factors such as niche applications and international pressures regarding environmental issues are required for a breakthrough. Factors which should be borne in mind are, economic growth, the value of the local currency in terms of other currencies, the interest rates applicable to financing such projects and inflation. Inflation could have a positive or a negative impact depending on whether the real impact is on the cost of electricity or capital outlay and its relation to the exchange rate. REFERENCES Diab, R. (1995) m Van der Linde, H.A. (1995) m Conference. London: Eskom.( 1998) Eskom’s
Pretoria: Department of Mineral and Energy. - Where Does It Fit In? BWEA 17 Annual Services 1998
** Director General of WREN, 147 Hilmanton, Lower Earley, Reading RG6 4HN, UK