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WINDABA: SA's content conundrum

The South African government's expectations for a local wind-energy supply chain are on a collision course with current market realities, according to industry figures.

South Africa's current renewables strategy, launched to cheers in late 2011, envisages about 500MW of wind being added annually over the next few years – a breakthrough for the often-frustrating Africa wind market.

Yet experts say that will likely not be enough to lure some key segments of the supply chain to the country, and particularly turbine manufacturers, potentially souring the government's appetite for wind energy.

“There is no example of a healthy manufacturing industry in a country with a market smaller than 1,000MW a year,” says Tom Pedersen, Siemens Wind’s director for the Middle East and Africa.

Pedersen's comments came at the WINDaba conference taking place this week in Cape Town.

South Africa has already had some success in establishing a local supply chain, with many companies willing to bet on sustained market growth in the coming decades.

Local engineering firm DCD is building a tower factory in Port Elizabeth, and Denmark’s LM Wind Power has confirmed its intention to build a blade plant in the country.

The big prize, however, is a full-blown turbine manufacturer – and one the South African government seems unlikely to look past.

Pretoria, which has already imposed strict domestic content requirements on renewables projects, has made clear that its ongoing support for wind and solar hinges on significant local job creation.

The media's perception of whether that goal is being met, especially in the absence of a turbine manufacturer, may also be an issue.

A 500MW market is "neither fish nor fowl", says Steve Sawyer, secretary general of the Global Wind Energy Council.

“It’s not small, but it’s not big enough to support a manufacturing industry.”

The prospect of luring a turbine maker is worsened by the currently huge overcapacity in the global wind market.

Nevertheless, Sawyer believes there is a “high likelihood” that the South African market will eventually grow 500MW a year, tipping the scales in favour of more local manufacturing.

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