SA's prospective developers of renewable energy may not fully understand the risks they face.
The first local renewable energy project, the Darling Wind Farm, experienced a number of difficulties . Darling Wind Power CEO Hermann Oelsner says he wasn't aware of all the risks that come with developing a new project.
SA is just starting its journey towards a renewable energy industry. Under government's Integrated Res ource Plan, 42% of all energy produced in new projects up to 2030 has to be renewable.
Most of the renewable projects planned in SA will be solar and wind power and these will be undertaken by independent power producers.
Renewable energy insurer GCube, which has experience of insuring projects around the world, says risks are always higher in a new market, both for project developers and for insurers.
The uncertainty about regulations and tariffs is a risk which will be shouldered by the developers themselves. The same goes for commercial risk, for example wind or sun availability. Other risks can be transferred to insurers, however.
These include problems with design, implementation and construction , as well as loss of profit, delays in start-up and asset damage.
GCube recently teamed up with SA engineering underwriter C&G to collaborate on underwriting new renewable energy projects in SA. Jatin Sharma, the head of GCube's offshore unit, says one of the main problems in new markets is a lack of domestic capability to support the industry, especially in operations and maintenance.
Another problem is that developers "don't look at the operational expenditure over 20 years ". You have to budget for failures in the longer term.
Oelsner says the Darling wind farm experienced some of these problems. The basics of the project were correct. For example, the company had taken wind measurements for over five years before implementation. Rather, the problem was in the implementation.
Because local expertise has yet to be built up, projects have to rely on the assurances of new partners. Oelsner says this was the case with the turbine supplier. But the four turbines which were planned to have a 1,3MW output each did not reach that , and they couldn't get certified. A different design and manufacturer will be used for the 14 new turbines at Darling, located just north of Cape Town, and 20 new turbines 12km further north, he says.
