Sere’s costs compare ‘favourably’ with private wind farms

Terence Creamer | 20 May 2013 | Engineering News

State-owned power utility Eskom claimed on Monday that the cost of generating electricity at its R2.4-billion, 100 MW Sere wind farm would compare “favourably” with those achieved by private wind developers during the first two bidding rounds of the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

The utility added that the project’s total overnight cost of $2 516/kWh was within the International Energy Agency benchmarks and incorporated grid connection costs, including a 45 km transmission line.

Eskom group executive for sustainability Dr Steve Lennon told Engineering News Online the wind farm’s final levelised cost would be 77 c/kWh and were reflective of the project’s lower cost of capital. Funding for the project was secured from a group of development finance institutions, including the World Bank, the African Development Bank, Clean Technology Fund and Agence Française de Développement.

The average levelised cost achieved by wind projects during the first REIPPPP bid window was R1.14/kWh, which declined to the 89.7c/kWh for the second-window projects, which reached financial close in early May.

CEO Brian Dames said Eskom was pleased to have been able to take advantage of attractive financing “to construct the project at costs which compare favourably with the market”.

The project, which secured a licence from the National Energy Regulator of South Africa in mid-May, would be developed at Koekenaap, in the Vredendal area of the Western Cape.

It was expected to deliver first power to the national grid in the first half of 2014 and reach full commercial operations by the end of 2014.

Taking its name from the Nama word for ‘cool breeze’, Sere was also the coal-heavy utility’s first large-scale renewable-energy project, with preparatory work still under way on a 100 MW concentrating solar plant (CSP), proposed for development near Upington, in the Northern Cape.

The CSP project had also secured development finance, having been included in the World Bank’s 2010 Eskom Investment Support Project. The $3.75-billion loan was supporting the Medupi coal-fired power project, as well as Sere, the CSP project and the Majuba rail project.

Sere was expected to avoid nearly 4.7-million tons of carbon emissions over its 20-year operating life, while producing 233 000 MWh, or enough energy to power about 97 000 standard homes.

But Eskom also stressed that it remained fully supportive of the REIPPPP, having already signed power purchase agreements for 47 wind, solar and mini-hydro schemes, collectively representing 2 460 MW of renewables capacity.

The request for proposals documentation for a third bid window has also been released, with August 19 having been set as the submission deadline. Preferred bidders would be named by October 29, 2013, and power purchase, connection, direct and implementation agreements should be finalised on July 30, 2014.

Eskom’s Sere wind farm will comprise 46 wind turbine generators, the contract for which was awarded to Siemens earlier in May. The turbine contract represented about 65% of the project’s total budget.

The main outstanding contract was for the supply, installation and commissioning of a 132 kV transmission line and a substation, which Lennon said would be awarded soon.

He added that the engineering and project management services contract was awarded last year to GNF, of Spain, while Raubex won the access-roads contract.

The project was expected to attract local content of about 28% and, during the construction phase, up to 170 direct jobs would be created.

However, Lennon estimated that it would create about 2 000 employment opportunities in total, should the indirect construction-phase jobs be taken into account.

During the operation of the facility, ten permanent jobs would be created, with Siemens employees taking initial operational and maintenance responsibility before transferring these skills to Eskom’s own staff.

Lennon defended Eskom’s decision to pursue renewables investment notwithstanding the DoE’s procurement of such capacity from independent power producers (IPPs), saying that the company is keen to include “a renewables portfolio as part of its total fleet”.

“The reason for that is the same reason that South Africa wants to diversify its primary energy mix – and that is to manage our risk better.”

The diversification being pursued implies a smaller proportion of coal, as well as higher proportions of renewables, nuclear and imported hydropower.

“This is not about taking business away from the IPPs. But with Eskom being able to access bigger tranches of finance, at lower cost, we do believe we can play an important anchor role in the establishment of local industries, and in that way also assist the IPPs.”

SOURCE: http://www.engineeringnews.co.za/article/seres-costs-compare-favourably-with-private-wind-farms—eskom-2013-05-20

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