Denmark-based LM Wind Power, the world's largest manufacturer of turbine blades, is considering establishing a plant in South Africa to supply the African market and other top emerging wind markets such as Brazil, a senior official said on Wednesday.
The mooted plant, which would be LM's first in the southern hemisphere, could also boost a nascent wind power market in Africa's strongest economy as it moves away from coal, which supplies more than 90 percent of South Africa's electricity.
"Our typical plant layout will have investment of around 24 to 25 million euros ($34 million). We are looking at a plant of about 100,000 square meters," Nirmal Gupta, director for key accounts and strategic positioning at LM, told Reuters on the sidelines of a wind conference.
The firm is in talks with South African development financier, the Industrial Development Corporation, and expects to make a final decision before year-end, he said.
Two sites for the plant have been identified in the Western Cape and Eastern Cape provinces, Gupta said.
The decision will depend not only on South Africa's immediate demand but also on anticipated demand from other African countries developing significant projects, such as Kenya.
"Our logistic team also reported to us that the shipping routes from South Africa are much more economical to countries like Brazil, so we are not only looking at Africa," Gupta said.
Brazil's blustery coastlines and growing electricity demand have spurred a wind power rush as investors flock to build turbines and establish wind farms.
China's Goldwind and Indian wind turbine maker Suzlon Energy have already indicated they wukk consider setting up manufacturing plants in South Africa.
Jack Zhao, senior commercial manager for Sinovel Wind Group's South African operations, supported the notion of local procurement to help reduce costs.
"South Africa exports the fibreglass materials to China, and then in China they manufacture the blades and transport it back to Africa countries. That way you add more than 30 percent of the cost, so it is a huge challenge," Zhao told delegates.
Local procurement is a key feature of South African tenders as the country tries to build stalled industrial capacity and also broaden the economic base to include the black majority.
The green sector has been identified by government as a key sector as it tries to create 5 million new jobs by 2020 and make inroads into a stubbornly high unemployment rate pegged at around 25 percent of the workforce.
However, some developers and manufacturers said South Africa was not ambitious enough in its renewable energy procurement strategy. They said the minimum 400 MW designated to wind in the first phase of the procurement programme until 2013 was too little to lure investors and build a viable local manufacturing base.
"Half the jobs that are created will come without any problem whatsoever, in towers, in blades possibly, but I cannot see sales being economical in this country on the back of 400 MW," said Tom Pedersen, Siemens' head of wind power for Middle East and Africa.
He said 1,000 MW would be the minimum to create a sustainable market.
In the medium term, South Africa plans to buy 3,725 MW of renewable power from independent producers by 2016, with 1,850 MW coming from wind power.