IN January, the Spanish government did the inevitable — it suspended subsidies for renewable energy projects in order to curb its budget deficit. A pioneer in developing renewable energy plants, Spain had come to realise that the incentives were a burden. This meant renewable energy giants such as Abengoa and Iberdrola had to look outside Spain and Europe for opportunities and growth.
While Spain was scaling back on the renewable energy subsidies, South Africa was taking the first steps to develop its own renewable energy industry.
With things not going well for Spain or Europe, South Africa is an attractive destination for big renewable energy companies looking for new markets. It is thus no surprise that some of the biggest developers of renewable energy projects in South Africa are Spanish. They have taken to the local renewable market like ducks to water, undeterred even by South Africa ditching a feed-in tariff mechanism in favour of a bidding process.
The government, through the integrated resource plan for electricity, seeks to introduce 17,800MW of renewable energy online by 2030. There is a feeling in certain quarters that South Africans underestimate the significance of the government-run renewable energy independent power producer procurement programme.
That could be true. For companies looking for attractive destinations, the country certainly offers what they are looking for. Almost unanimously, the preferred bidders in the procurement programme say they are here for the long haul.
Finding new markets for these Spanish companies is key. Renewable energy giant Abengoa Solar says its commitment to geographic diversification in new markets is one of the key factors behind its sustained growth.
The company is building two concentrated solar power plants in South Africa as part of the procurement programme. The two projects are a 50MW solar power tower, Khi Solar One, and a 100MW parabolic trough plant, KaXu Solar One, in Northern Cape. Khi Solar One is Abengoa’s third commercial solar power tower and its first outside Spain.
Abengoa is the majority shareholder of the projects. The Industrial Development Corporation is also a shareholder.
Gestamp Wind, a Spanish company that develops‚ constructs and operates wind farms in the world’s leading wind energy markets, is lead developer of the 75MW Karoo Renewable Energy Facility. With €5bn turnover, Gestamp is a big player in global wind energy. It owns 60% of the wind facility.
In its application to the National Energy Regulator of South Africa for the plant’s licence, Gestamp said it would develop a wind tower manufacturing facility in South Africa, either in the Western Cape or Eastern Cape. Such a facility would also supply steel towers to other preferred bidders in the first window of the procurement programme.
Shanduka Energy MD Nandkishor Moharir says those plans are still intact. Shanduka owns 25% of the wind project.
Gestamp Wind says the mooted plant will help to spur large-scale foreign direct investment. "This will be a catalyst in the further and sustainable development of the renewable energy sector in South Africa. The manufacturing process will bring fully transferrable and currently nonexistent skill sets to the country," the company says.
Mr Moharir says Iberdrola, Spain’s largest energy group, has bagged the engineering, procurement and construction contract for the project. It will do the work with construction firm Group Five.
Gestamp’s solar business also has a presence in the local market. Gestamp Solar, a multinational developer and operator of utility-scale photovoltaic plants, is part of the Gestamp Mulilo consortium whose two photovoltaic projects were part of the 28 preferred bidders in the first bid window of the procurement programme.
Gestamp is in partnership with Mulilo Renewable Energy, a locally owned company developing renewable energy projects in Southern Africa.