Renewables: Cheap energy at a high cost?



 

Recently, I read with both disgust and trepidation the story involving the contract extension of 30 Cuban water engineers. While we know there is a shortage of engineers in this country, there is no shortage of graduates looking for work, and surely it would not be difficult to find 30 local engineers.

Mike Rycroft

The arrival of the Cubans in 2015 was greeted with criticism  from many sources, and the Department of Water and Sanitation (DWS) claimed that they would be used to train some of the new recruits in the engineering and science disciplines, and fast-track some of them to achieve professional registration.

Detractors of the agreement questioned the decision to import a water-related skills base, when South Africa was well known to host world-class civil engineering professionals in the water sector.

Claims were made that the imported engineers would provide the capacity necessary to close the gap that exists currently. Now the DWS sees it necessary to extend the contract. What has not been achieved? The underlying implication that Cuban engineers were superior to the local variety is particularly insulting to the profession in this country.

A similar situation has arisen with the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP), although for different reasons.

A round table discussion, held recently among REIPPPP players to discuss issues of concern, raised the matter of skills transfer and establishment of a local industry. The root cause here is the bidding system and the mad rush to reduce prices for renewable energy (RE) projects. Price reduction requires maximising electricity production, and this means using the latest available equipment at the time of construction, which also means an almost total importation of RE equipment.

This approach does not allow for any local development. In addition, price constraints mean that only experienced engineering staff are used, both by developers and contracting engineering firms.

One comment made was that a difference in 1% in output could make or break a project, and such close performance margins required expertise and experience to achieve. Quite often that expertise resides in the older generation of engineers and pressure on the project did not allow for engagement of trainees or younger engineers requiring experience, with the net result that no skills transfer took place.

This also applied to locals employed on the project, the comment being made that while there were people on site, they did not learn much. The same applied to inexperienced engineering staff: they were just not allowed to get involved. There is too much at risk to put a trainee on the job when margins are so tight.

In many cases the installation staff was imported for the construction period, which was also critical, and local staff relegated to a spectator or menial function. This reminds me of the rumours of imported personnel doing acceptance and maintenance on wind farms during the guarantee periods, without much involvement by local staff.

The REIPPPP contracts specify skills transfer and training of staff, but the question has been asked as to who monitors whether such skills transfer actually takes place. It would appear that compliance is not being monitored, or is being pushed aside by the obsession to achieve lower prices.

A big fuss has been made about the reduction in unit prices for renewable energy, and claims have been made that RE is cheaper than conventional generation, but this has come at a cost, if the claims are to be believed.

What do we gain by achieving lower costs if all the skills and components are imported and there is no development of local expertise or local industry? Start-up local industries have not been successful, and the international renewable energy industry seems also to be driven by achieving lowest costs, which raises questions as to the effect on quality.

At least one local manufacturing facility has been closed, ostensibly because of an uncertain market, but news that the company concerned had also moved its other worldwide manufacturing facilities to a cheaper location places this statement under question.  The whole RE industry seems to be driven by an obsession to achieve some magical goal of low prices, but whether such a drive is sustainable is questionable.

In our case, prices for wind and solar in the REIPPPP are already low, so do we need to target even lower prices while failing to meet other commitments?  Should we not accept a slightly higher price and reap the benefits of a skilled local staff and established local industries?

Claims were made that South Africa would become the hub of a renewable energy industry for sub-Saharan Africa, but most projects outside of this country in Africa still import directly from the major manufacturers in the world market, and we are lucky to get an EPC contract here and there.

Perhaps the reluctance of Eskom to sign PPAs for the latest round is a good thing, and may force a closer look at what is actually happening in this programme, and a reconsideration of goals by the players.

Send your comments to energize@ee.co.za

 

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