PV Insider examines the potential of South Africa's PV market to drive local industry development and job creation in future rounds of the IRP
Solar photovoltaic technology has emerged as the big winner in Phase I and II of South Africa's 20 year Integrated Resource Plan (IRP) for renewables. The announcement on the 21st May confirmed that a further 9 PV projects were awarded in window II of the IRP, totaling 417.1 MW of new build generation capacity. This has taken the total pipeline to 27 PV projects in window I and II, totaling a staggering 1.04 GW in this emerging solar PV market.
However, despite this substantial growth many experts have raised concerns over the South African government's aims to boost industrial development, economic growth, and employment creation within the IRP. Under the IRP the government placed sustainable employment as a central pillar of their 20 year plan for renewable technologies, focusing on manufacturing development and balanced job creation to tackle the high unemployment rates in this region. Yet the ability to successfully unlock the strong opportunities for local manufacture and compete with established markets in the United States, China and Europe remains unclear.
In the initial stages of the IRP the government highlighted the importance of the local content requirement, setting out specific prescripts for project developers. Under these requirements the industry committed to a minimum local content level of 35% for the initial roll-out of renewable projects. However, with local content defined as the total costs attributed to projects, this figure is not restricted to key plant components, but also a range of products and services needed when developing large-scale plants.
Consequently, developers are continuing to import the majority of their components from cheaper suppliers in Europe and Asia, as modules and inverters are not yet manufactured on a large-scale in South Africa.
To date the true manufacturing potential in South Africa remains minimal, with 2 active players who export the majority of their product to Europe. Solaire Direct has a 36 MW solar module production facility based in Cape Town South Africa, which started in January 2009. Whilst Tenesol, who have recently strategically merged with SunPower, have a production capacity of 800,000 solar panels a year, at two plants, one in Toulouse, France, and the other in Cape Town.
Experts have continued to argue that support for manufacturing must be pushed further to create and retain as much benefit to the country as possible and develop local manufacturing opportunities. The financial risk of opening a large manufacturing plant in this region, to reach the economies of scale needed to compete with stronger markets, remains high.
Many point to the positive policy environment that has driven the Chinese market, which has included high government subsidies for manufacturers to reduce financial risks, as an example that more action is needed in South Africa.
Although local content levels have increased in round II, the true manufacturing output remains low, and if foreign manufacturers are to see the benefit of opening plants in this region financial reassurance and market longevity must be proven. To date projects awarded in windows I and II are not enough to support large-scale manufacture, and the actual MW allocation in future rounds remains unclear. In addition experts believe that the ability to export to neighboring countries in Africa and elsewhere could be a key driver to increase local content potential.
At the heart of South Africa's manufacturing challenges, lays the need for developers to see the cost benefit of procuring components locally as opposed to abroad. To discuss the critical challenges of creating a local manufacturing base in South Africa, PV Insider has announced this week that leading industry players will participate at the PV Project Development Summit South Africa (3-4 September, Johannesburg).
Developers such as solar Reserve, Mainstream Renewable Power, Momentous Energy and Gestamp Solar will detail their experiences in procuring components in phase I, and how a local supply chain could benefit projects in years to come. Furthermore, SAPVIA will provide an in depth analysis of what future support is needed to boost manufacturing in this region.
Other confirmed participants include Eskom, Soitec, Fotowatio FRV, First Solar, Juwi Solar, Abengoa, Fluor, BioTherm Energy, Group 5 and many more leading players in the South African market.
The event is set to take place on 3-4 September in Johannesburg, with over 200 delegates in attendance. For more details about the summit go to the website www.pv-insider.com/southafrica