ELECTRICITY CRISIS
Sibanye-Stillwater inks deal to buy power from SA’s largest private wind farm to be built near De Aar
Diversified metals producer Sibanye-Stillwater has concluded its first power purchase agreement, which will see a consortium finance and build an 89MW wind farm in the Northern Cape. This will be the largest private wind farm to date in South Africa. Sibanye has guaranteed it will purchase its power for 15 years, making the project financially viable.
As Stage 8 of load shedding looms, South Africa’s renewable energy drive led by the private sector has some wind in its sails.
Sibanye announced on Monday that it had concluded its first power purchase agreement (PPA) and achieved financial close for an 89MW wind farm to be built near De Aar in the Northern Cape. Construction should commence in June with commercial operations starting in early 2025.
The largest such private wind project to date in South Africa, the Castle Wind Farm looks set to be a win-win for all involved.
“The project consortium consists of African Infrastructure Investment Managers (AIIM), through its renewable energy project development and delivery platform African Clean Energy Developments (ACED), and Reatile Renewables. AIIM is a division of Old Mutual Alternative Investments (OMAI) and has invested in the project through its IDEAS Fund, one of South Africa’s largest domestic infrastructure equity funds,” Sibanye said.
The consortium will build, finance and operate the Castle Wind Farm. It was able to secure finance for the project because Sibanye has agreed to buy the energy generated for 15 years.
“They finance and build it and we guarantee off-take of the power for 15 years at agreed prices. This helps them to finance it because they can guarantee the income flow to the financiers,” Sibanye spokesperson James Wellsted told Daily Maverick.
For Sibanye, the appeal is obvious. Sibanye does not have to invest any capital itself in the project – mining is after all its core focus – but it will get a reliable source of power that is also green, enabling it to reduce its greenhouse gas emissions as it strives to decarbonise.
“This marks our first major step in delivering over 550MW of our renewable project portfolio and is a significant milestone in our journey to carbon neutrality by 2040,” said Sibanye-Stillwater CEO Neal Froneman.
“The project will not only play a pivotal role in reducing carbon emissions and mitigating climate change but also results in cost savings on electricity and provides energy security benefits for Sibanye-Stillwater’s SA operations. Additionally, it will also contribute to addressing the electricity challenges in South Africa.”
The power will be supplied to Sibanye via a wheeling agreement with Eskom.
South African mining companies and the private sector more widely need to take such initiatives because of Eskom’s unreliability as a power provider and its heavy reliance on coal.
With the prospect of rotational power cuts reaching Stage 8 or higher, the mining sector will be hard pressed. According to the main industry body, the Minerals Council SA (MCSA), at Stage 6 the sector is curtailed by 2,000MW or 20% of its use. If Stage 8 is imposed, it would lose another 666MW, slashing production further.
South African companies are also in a race to decarbonise to prevent the future exclusion of their products in key markets such as Europe, which will impose “green tariffs” and other restrictions on imports with a heavy carbon footprint. They must also meet growing demands from their own investors to meet carbon reduction targets.
According to the MCSA, about 7,500MW from green energy projects are in the mining sector’s pipeline, with funding from the companies’ own balance sheets or from PPAs such as the one Sibanye has just clinched. Gold Fields’ 50MW solar plant for its South Deep mine west of Johannesburg, which is already up and running, is one of many examples.
With an abundance of wind and sun, South Africa would be much further ahead on this front were it not for regulatory bottlenecks that have been removed at a pace that hardly matches the urgency of the unfolding energy crisis. It was only two years ago when the government announced a 100MW cap for embedded generation, up from the paltry 1MW that was obtained before.
Such dithering on this and other green energy policy fronts has been a disaster, and Stage 8 will be one of the consequences. But at least the ball is now rolling and turbines in 2025 will be churning out wind-generated energy in the Northern Cape for gold and platinum mines. DM
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While this is a great positive step, how will the electrons get from the NC to the Platinum mines?
In the last bid round a huge number could not close due to a lack of grid capacity. Unless this bottleneck is removed then this stranded power will be nothing but a good news story. Eskom continues to drag its feet in the expansion of transmission infrastructure in the RE rich Cape Provinces.
The grid was constrained out of this part of the northern Cape precisely because private wheeling projects like this jumped in early and secured space. Good thing a new PPP tender is out to build 400kV of Grid from best parts of the Northern Cape all the way to N West, to where the main Grid still has capacity
As I understand it, the bottleneck was created by these private initiatives buying up the transmission capacity in advance which meant the REIPP bidders couldn’t secure transmission capacity to make their projects viable. There is not currently a physical bottleneck – there is still transmission capacity as we speak. The problem is that before you can get financing for a renewable project you have to prove that you have secured the transmission capacity once the project is ready to go live. This is where things got stuck recently as all the future transmission capacity has been contracted by various private sector projects and possibly speculators.
This is not a bad thing as it seems that private deals like this Sibanye will come online faster than the REIPP projects as the private sector has less red tape and higher productivity than government.
We deserve a PAIA application to disclose who, other than IPP that supply the nation, have been given what transmission capacity for how much money, since 2010. Full details with beneficial ownership of the entities please. It would seem that the lucky few have hijacked what little national grid we had and that should have been allocated to a host of IPP that have already competitively bid and won PPA.
If mines are slowly breaking their Eskom dependency, their Eskom power usage must be less. Yet, Eskom loadshedding is getting worse and worse. Eskom is in worse shape than the public and press even realize or imagine.
The lack of grid capacity is all the doing of Mantashe, he has been the stumbling block for the problems we have now. He should be axed from the government.