UNDP adviser highlights renewable energy tender approach drawbacks

Alternative Energy - Tanzania

Tender-driven policies as a fiscal instrument to introduce renewable energy into a country’s energy mix should be approached with caution, United Nations Development Programme (UNDP) regional technical adviser Lucas Black said on Tuesday.

Speaking at the opening session of the inaugural South African Wind Energy Association (Sawea) conference in Cape Town, Black said that the UNDP completed a study on wind energy in 2008, that listed a number of problems with the renewable energy tender approach, which the South African government is now following.

These included that when tenders are not part of a long-term programme they can be seen by investors as stop-and-go policies as there is no long-term visibility on prices and quantities; investors have to pay preparation costs for all the projects in which they bid even if they only win a few; and prices resulting from tenders are often brought down by low and unsustainable bids.

“I know that tendering has been done by several countries and in many cases it’s been abandoned for feed-in tariffs,” said Black. “I completely respect the government of South Africa’s choice to go with a tender, but as this report mentions . . . tender-driven policies as a fiscal instrument have major drawbacks.”

Global Wind Energy Council secretary general Steve Sawyer stressed that while there was a lot of debate about the “right” system to implement, the “crucial point was not which mechanism gets used, but which conditions it helps to create”.

Sawyer said that there were a number of areas that government and industry needed to pay attention to in order for a renewable energy programme to be successfully implemented.

These included unambiguous signals from government about targets to attract investment, a clear pricing support and priority access to the electricity grid.

Sawyer said that, in terms of wind energy, the biggest problem to overcome was the perception that it was significantly more expensive than coal. He said that among some policy makers there is an idea that wind was over four times as expensive as coal, while in fact, when looking at new build programmes, wind was competitive.

Sawea chairperson Mark Tanton said that he would not be surprised if wind energy was cheaper than energy generated from newly built coal-fired power stations. “It’s not about the cost anymore. For us the debate has moved to convincing the people doing the planning that wind can be relied on in terms of our energy mix . . . As the wind association we’re quite confident that government should be planning for a lot more wind than they are right now.”

Tanton lamented that the concept of a reliable base-load supply, which in South Africa is generated from coal, was an outdated concept with the diverse array of power options available.

“The reality we’re faced with is that for a coal-fired power station we’re looking at an availability of maybe 50% to 60% and some of the wind sites in South Africa even get capacity factors of around 40% to 45% . . . and that’s getting pretty close to what’s available from a coal perspective. If you distribute that across the country then that gets blended in and the variability in a way gets dealt with.”

Tanton said that the debate would likely only be settled after the construction of the first wind farms, when the evidence of their reliable capacity could be shown.

Edited by: Creamer Media Reporter
By: Jean McKenzie