The Eastern Cape is home to a wind farm that can power about 35 malls or four mines.
When the R4.9bn 140MW Ishwati Emoyeni Wind Farm starts generating electricity in 2026, it will be supplying power to large power users all over the country through NOA Group Trading, an aggregator licensed by energy regulator Nersa earlier this year.
Being the first sizeable renewable energy project in SA to sell all the electricity it generates to a registered trader, Ishwati is pioneering a new phase in the rapidly developing private participation electricity supply market in SA.
A trader or aggregator is a middleman that aggregates electricity from its own- and third-party generators spread over different locations and using different technologies, to supply to clients with diverse patterns of electricity use.
By blending different technologies, the aggregator can overcome the limitations of, for example, solar PV that is only available when the sun shines.
Using the trader as a middleman also overcomes the limitation of companies and plants that are too small to enter into long-term contracts with IPPs (independent power producers) on their own.
The aggregator groups them together and takes the risk of the long-term contracts IPPs require to get funding upon themselves.
Construction on Ishwati has already commenced.
Led, co-sponsored and developed by African Clean Energy Developments (ACED), it has the African Infrastructure Investment Managers (AIIM) managed IDEAS Fund and Reatile as shareholders.
ACED will provide construction management services, while Energy Infrastructure Management Services (EIMS Africa) will manage operations on the project, which is situated next to two of the ACED-EIMS-IDEAS-Reatile generation consortium’s other wind farms.
Ishwati Emoyeni will comprise 32 4.5MW wind turbines.
To put this in perspective, just one 4.5MW generator can power a small town or a large industrial facility.
Koeberg, SA's only nuclear plant, has a combined capacity of 1,860 MW from its two reactors, each contributing 930 MW to the grid. This is about 5% of SA's total supply, according to Eskom in December.
ACED CEO James Cumming said the deal was extremely complex and required “a leap of faith” to contract with the trader.
“You are taking risk in an intermediary without any balance sheet, just contracts [with end users like mines and malls], but that is how you create markets.”
He says in putting the deal together, the parties took lessons from bilateral power purchase agreements (PPAs) that were concluded since the electricity supply market was opened to private players.
ACED had five at the time. Its first was with petrochemical giant Sasol.
These bilateral PPAs had large, established companies buying their electricity and “one could take a view” regarding the risk involved.
NOA, on the other hand, does not yet have a trading history and the contract had to provide measures to mitigate the associated risk.
NOA Group CEO Karel Cornelissen says with its trading licence, “we are authorised to purchase electricity from Ishwati, other third-party IPPs and NOA’s own generation facilities, aggregate it, and wheel it through the Eskom grid to geographically dispersed off-takers [electricity users] across the SA market.”
The trader has been supplying green energy to Harmony Gold for almost 18 months from its three solar farms and earlier concluded an agreement with the Netcare health group to supply green energy to six of its facilities.
Standard Bank acted as lead arranger for the transaction. Sherrill Byrne, its executive for project finance, energy and infrastructure finance, said: “NOA is facilitating not wind or solar energy to end users but rather a profile of green electrons achieved by aggregating multiple generators [wind, solar and battery projects] and providing this to multiple end users under more flexible arrangements”.
The ACED and EIMS Africa teams have brought more than 600MW of hydro, wind and solar projects to financial close and construction in the last 24 months, in addition to more than 1GW of projects they have already developed and operate via the SA Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
The financial close of the Ishwati Emoyeni Wind Farm comes against the background of severe grid constraints that has brought the REIPPPP to a virtual standstill in terms of the procurement of wind generation.
The last wind projects that were awarded were in bid window (BW) 5 in 2021 with 23 projects left stranded in BW 6. When the winning bidders for BW 7 were announced in December, not one of the 3,200MW earmarked for wind projects was awarded.
Electricity and energy minister Kgosientsho Ramokgopa said at the time that eight wind bids were received. Only four were compliant, but they were too expensive.
He indicated that the government would enter negotiations with those four bidders on an acceptable tariff and would also consider switching some of the initial wind allocation to solar.
Cummings said while SA had good wind resources, it was very location specific and located around specific grid nodes. “Wind is more capital intensive than solar PV, but it is meeting and beating solar PV in the private market because of its generation profile.”
There was, however, a material drop-off in efficiency outside specific nodes. The resources in Mpumalanga, KwaZulu-Natal and the Free State were just not viable due to factors such as population density, birds and bats and other environmental sensitivities, Cumming said.
The national energy regulator Nersa has not yet approved a framework from Eskom aimed at freeing up more grid capacity.
The rules for grid allocation are also not yet finalised.
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