NERSA Public Hearing

Wednesday 13 July 2011

By

Donald McGillivray

& Emil Unger

• Energy White Paper of 1998 adopt the policy that South Africa needs to diversify it’sgeneration supply options.

• The White Paper on Renewable Energy of 2003 sets the target for the country toachieve 10 000 GWh of Renewable Energy (RE) by 2013 (4% of current generationcapacity)

• In 2009 and early 2010 NERSA and DoE announced the introduction of REFIT –currently in process of refinement.

• South Africa’s future energy mix according to IRP 2010 published in April 2011indicated that the future generation supply options will lean towards nuclear baseload, coal fired power and a mix of renewable energy in 2030.

• In order to enable IPP’s, Co-generators to supply electricity into the grid, theIndependent System and Market Operator (ISMO) draft legislation has been developedand is currently been taken trough the Legislative process of Government.

• Eight years after the White Paper on Renewable Energy has been released, no realprogress has been achieved in RE generation in the country for various reasons.

• This generation application is an attempt to bridge this gap between policy andstrategy published over the last 12 years into a practical demonstration that aRenewable Energy project (in this case wind generation) is commercially viable.

Energy Policy Background

• Worldwide capacity reached > 165 000 MW end of 2009 (>200 000 MW end 2010).• New Developments of 44 000 MW were added in 2010. (Electrawinds 1.8MW in SA)• Wind power showed an annual growth rate of ~ 30 % in 2010.• The trend continued with wind energy capacity doubling every three years.• Wind turbines installed by end 2010 worldwide are generating about 350 TWh per

annum, equivalent to the total electricity demand of Italy, the seventh largesteconomy of the world, but equalling 2% of all global electricity consumption.

• The wind energy sector in 2010 had a turnover of $55 billion !• The wind energy sector employed 550 000 persons worldwide.• In the year 2012, the wind energy industry is expected to create more than 1 million

jobs.• China continued its role as the locomotive of the international wind generator

industry and added 13 800 MW new wind energy in 2010 – as the biggestinternational market for new turbines – more than doubling the its installations forthe fourth year in a row.

Wind Facts

• Background: • NMBM Renewable Energy initiative 2005 (PE – “Windy City”)• Identification of possible RE workable options (Wind, LFG, SWH, Pyrolysis…)• Obtain inputs from various role-players on RE proposals

• History of wind generator at Coega IDZ.• Why the site is such an ideal wind farm site. Wind Resource, grid, IDZ, access, logistics…

History of Coega 1.8 MW Wind Turbine

TMA Area B for PE airport (applies from 2500 to 12 500 feet)

CTR zone for PE airport (applies

from groundlevel to 2000 feet)

Location of turbine and monitoring mast

Port Elizabeth

Airport Airspace

© CSIR 2006

www.csir.co.za

Windmap of Coega site

Project & Agreements History• Project Development Completed 2009• Wind resource mapping: 10 years PEMet Airport data

3 ½ years 40m wind mast data at Driftsands;1 ½ years 60m wind mast data on site - P90Mapping and Energy Yield done by Kjeller EU

• Project Finance and Developer: Electrawinds• Project Implementers: Africoast/Electrawinds/Fluopro Investments• Land Lease Agreement: Coega Development Corporation• ROD: Received 18/2/2010• COD 11 July 2010•Turbine: 1.8MW Vestas V90 WTG @ 95m hub height• Grid Connection Agreement: With NMBM • Grid Connection : NMBM 11 kV grid• Consulting Engineers: Afri-Coast Engineers• Construction company: Ursa Civils, • Construction to Commissioning: March - May 2010 – 104 days - world record !• PPA December 2010• Green Credits Agreement January 2011

Background of application:• This application for a generation license is based on a bilateral Power Purchase

Agreement (PPA) between Electrawinds and Nelson Mandela Bay Municipality forthe sale of energy at the Eskom Local Authority Megaflex tariff.

• The green energy generated by the turbine will be sold to BHP Billiton head quarters.• Electrawinds Africa and Indian Ocean Islands (Pty) Ltd is the developer and owner of

the wind turbine. Electrawinds owns and operates a number of commercialrenewable energy projects, such as wind farms in Belgium, Europe and Africa.Electrawinds have experience in planning, structuring, developing and executinggreen energy projects and thereafter operating and maintaining such projects to bestcommercial advantage. (DVD)

• Africoast Engineers SA (Pty) Ltd is an experienced South African consultingengineering and project management company with civil, electrical and renewableenergy expertise involved in the planning, design and development of a number ofstrategic wind and renewable energy projects in South Africa.

• Fluopro Investments (Pty) Ltd is a local renewable energy development company.• The generator is situated on the premises of Coega Industrial Development Zone No

9, between R 334 and N2, north of Coega river, within the boundaries of NMBM. Thewind generator is located at latitude 34º 45’ 14” S and longitude 25º40’35” E.

• The expected life span of generator is 20 years.• Capacity factor of 30% confirmed with > 1 year operational data.

Generation Application

• 1.8 MW maximum generating capacity (MW) is expected to be available from thegenerator and 5 000 MWh energy will be produced per year, of which 4700 MWh willbe sent out.

• Maintenance programme: Maintenance will be done in line with manufacture’sspecifications, which range between 1 day in a 30 day cycle, and three days for each 6months cycle.

• The estimated decommissioning cost is R7.5 million (present value 2010 costs). Ifmore wind generators are constructed, this cost could be reduced to R3.5 million.Normally if the turbines are decommissioned, a new generator is mounted on thetower, depending on the condition of the tower which will significantly reduce thedecommissioning cost.

• Electrawinds secured finance for the project. The debt, equity ratios are discussed infinancial model, while the terms and conditions of the agreements are covered in theShareholder Agreement.

• The financial modeling included in the application was based on the PPA and ‘greenelectricity’ Agreement.

Generation Application (cont…2)

0.000

0.500

1.000

1.500

2.000

2.500

3.000

3.500

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Tari

ff P

rice

(ZA

R)

Date (year)

ESKOM Tariff (ZAR)

Green Tariff (Wind) (ZAR)

Renewable Energy Tariff from this Project

ESKOM Tariff

REFIT Tariff

Renewable Energy Tariff from this Project

GRID PARITY

ESKOM Tariff

Tariff AnalysisMid Term Projection - Brown Power vs Green Power

Job creation during design, construction and operation:• Estimates for no of labourers / man days during Development Stage

• Labour Employment during construction:

• A local firm has been trained and appointed to do the routine maintenance and smallrepair work, while Vistas monitoring the turbine via a satellite connection that arelinked to more than 280 sensors in the turbine. For mayor repairs, Vestas techniciansfly out and assist together with local technicians.

Generation Application (cont…3)

Task No of Staff Days worked Qualifications

Wind data collection 2 50 Professional

Planning process 3 450 Professional

Approval process 3 120 Professional

M&V process 2 20 Professional

Labour Man-days

Unskilled 120

Semi-skilled 1392

Skilled 36

Plant Operator 1256

Manager 294

(a) Environmental ApprovalA Notice of Intent (NOI) followed by an Environmental Impact Assessment (EIA) weresubmitted to the Department of Environmental Affairs (DEA) in terms of the NationalEnvironmental Management Act (Act 107 of 1998).Environmental Authorization was granted on 18/2/2010 for the project in the Recordof Determination (ROD) from DEA. The ROD has been included in the applicationsubmitted.

(b) Aviation ApprovalAviation Approval of wind turbine safety analysis for Port Elizabeth airport has beenobtained and is included in application.

(c) Certificate of OccupancyThe Certificate of Occupancy from NMBM is included in application.

Generation Application (cont…4)

Social Responsibility• Electrawind’s social responsibility includes three scholarships for local students in the

area to further their tertiary studies in the engineering field specialising in renewableenergy.

• The first three students have successfully completed their first year studies at theNelson Mandela Bay University and are now in their second year of studies.

Broad Based Black Economic Empowerment• ELECTRAWINDS is in the final stages of concluding a Black Economic Empowerment

agreement with a prominent BEE Group in this country. Further detail of thiscollaboration will be made available as soon as practically possible.

• The BEE partner will acquire a stake in Electrawinds Africa and Indian Ocean Islands(Pty) Ltd, one of the Joint Venture Partners.

• In terms of its BEE score card, Electrawinds only procures local services fromestablished BEE accredited companies

Generation Application (cont…5)

• By purchasing this Power, the NMBM will benefit in the following ways:

• No Environmental Levy on 2c/kWh ( x5 Gwh = R100 000 pa)

• 30% Capacity Factor reduction on 1800kVA demand charge

• Transmission network charge = R3.48/kVA

• Distribution Network charge = R6.82/kVA

• Network Demand charge = R12.94/kVA

• Total = R23.24 (x30% x 1800kVA x 12 months = R150 600 pa)

• A R100/MWh potential reduction in a National Treasury Carbon Tax amounting to a possible reduction of

5000MWh x R100/MW = R500 000pa)

• Total R750 000pa

Benefits to Nelson Mandela Bay Municipality

© CSIR 2006

www.csir.co.za

132 kV Dedisa substation north of the wind turbine site

No deep grid costs

Conclusion• The application is hereby presented for the 1.8 MW wind generator at Coega IDZ has

been erected and is operating currently as an experimental unit. Valuable practicalexperience and data has been gathered by feeding into NMBM distribution network.

• Financial modeling done on real wind data due to the generation of electricityindicates that under current funding and tariff structures this wind generator isfinancial viable.

• This generator will have not only practical advantage for the region, but NMBM willfinancially benefit from it. In addition it will also add to the network stability intransporting electricity to NMBM.

• No additional cost was or is required in terms of existing transmission infrastructure.• All statutory approvals have been obtained and have been submitted as part of the

generation license application to NERSA.• This application is fully supported by the Nelson Mandela Bay Metro, the local

business community via PERCCI, the local communities next to the development, theCoega Development Corporation as well as various academic and research institutionsin the East Cape.

• The project has had a positive catalectic effect on other renewable wind energyprojects in the region.

Future Phase 2 Coega Wind farmcurrently under development

Questions…

NERSA Public Hearing

Wednesday 13 July 2011

By

Donald McGillivray

& Emil Unger