South Africa suffers from unemployment rates of 23.5% and renewable energy is seen as key to boosting employment. The government's target of 50,000 jobs in the renewables sector by 2020, is tied into its energy strategy to 2030, which allocates 33% of electricity to renewable energy, including 9,200MW of wind. Wind energy has already been allocated 1,196MW through two auction rounds.
However, a major problem threatens wind's potential in South Africa. The country faces a massive skills shortage — a report by analysts GL Garrad Hassan for German development bank GIZ, published in July, estimates that the South African wind industry will need around 6,250 people a year for construction, installation and manufacture.
The problem is compounded by the government's stringent rules on local content. These set minimum thresholds and aspirational targets for the proportion of employees who are South African, black South African and from the local community (see tables overleaf).
Chanda Kapande, general manager at developer Wind Prospect, says that the South African industry is not yet set up for local manufacturing or using local people. To meet the targets, international developers need to buy up a South African company or train a team, but the timescales the government has set for projects to be developed is not enough to allow for training. "It's a bit of a chicken and egg situation really," she says.
"There's a very difficult balance to be made in South Africa. The industry is so young that it's nearly impossible to find South Africans with wind experience and then you add on the criteria that they are black or female, there's so few people that are available."
However, South Africans have a very can do attitude, she adds. There is a large population and a skills base to work with.
James White, sales manager at Vestas, agrees. "The skills shortage in South Africa is severe, but unemployment is also severe, which is counterintuitive," he says.
Unknown risk
Vestas has been very successful in winning tenders through South Africa's auction process. In the second round in June, it won contracts to supply 289MW of turbines for five of the projects, to add to the 138MW from the first round.
The company is using South African contractors for its round one projects and its recruitment is ongoing, White says. How the skills shortage will eventually impact the industry is largely undetermined, he says. "The wind industry doesn't even know what it's in for yet. I don't think the risk is really qualified at this stage. It's a 'known unknown'," adds White.
Salaries for engineers are already 25-50% higher than in Europe, Kapande says. "Once you have someone trained up who is black, coloured or Indian they tend to get head-hunted a lot because they are valuable commodities," he explains. "It's difficult to get people and retain them." This pushes project costs up and will therefore have an impact on the bid price and on the viability of projects, she says.
Greg van der Toorn, Garrad Hassan's country representative for South Africa, agrees that the skills issue will put pressure on prices as South Africa has a competitive bid process. The second bid already saw average prices drop by 28% from ZAR 1,143/MWh ($137/MWh) to ZAR 897/MWh in the second round, but van der Toorn warns that there will be a price correction at some stage due to extra expenditure on staff. "Wind companies will have to invest quite heavily in training and train more people than they need because other people will poach them."
Round one projects had a target to reach financial close by the end of June. But developers struggled to do this. Banks are keen to lend but developers are competing for the few skilled staff available, she explains. The government has now pushed the target for financial close back to February.
Consultants and developers are also suffering from a lack of people. Wind Prospect has increased its South African team from two at end 2010 to eight currently, with 15 potentially employed by the end of the year.
Each project needs environmental consultants, construction engineers and lawyers and technical people to work on due diligence both before the bid and before the project reaches financial close. "At the moment it's similar companies working on all the projects so you have a limited number of people working flat out on a load of projects.
"The potential outcome if you carry on like that is burn out because they're having to work at such a pace for a prolonged period of time," Kapande says. The government has now delayed its third round bid from August to October, which will give everyone breathing space, she says.
O&M shortfall
But the most urgent skills deficit is in operations and maintenance (O&M). The Garrad Hassan study found there will be a need for 2,000 people in this sector by 2020 and 4,500 by 2030.
Trainees in the O&M sector need to work on actual wind farms for several months to gain knowledge and experience, but there is so little wind in operation in South Africa that that is not yet possible. Vestas has resorted to sending people overseas for a few months to train or, alternatively, flying in trainers from overseas.
One initiative that should help ease the situation in the medium term is already underway. A consortium of universities and colleges including Stellenbosch University and the University of Cape Town are working with national and provincial government to establish the South African Renewable Energy Training Centre, which will predominantly train people for the wind industry. The proponents are developing a qualification for wind turbine service technicians and working on plans for a brand new facility featuring a turbine hall, a climbing tower, laboratories, lecture halls and offices. The building will cost ZAR 80 million and around ZAR 10 million a year to run.
The consortium hopes that most of the funding will come from the government higher education and training department, but it is also approaching industry and some other donor organisations.
If its application for funding is given the green light, the centre will be built on the campus of the Cape Peninsula University of Technology in Cape Town, which already has a post-graduate module on wind energy. The consortium hopes to have it ready by early 2014 and the first priority will be to train maintenance staff. Students will receive three months' training at the centre, followed by nine months' on wind farms.
Vestas is supportive of the idea. The problem in South Africa is that the basic education level is not good enough to provide people who manufacturers can then take on and train. "The idea to link with the technical colleges is great because those are the people who are going to be service technicians and installation managers," he says.
Professor Wikus van Niekerk, director of the Centre for Renewable and Sustainable Energy Studies at Stellenbosch University, who is working on the initiative, says that the centre should be able to train up to 200 people a year in theory.
"But whether we find 200 people to be trained is another question. South Africa has a challenge on the output from school so it's hard for us to get people into that programme," explains van Niekerk. Students will typically be graduates from the National Diploma in Electrical Engineering, but there is competition for the same people from the automotive sector.
"We have a lot of people without jobs, but it's not that we don't have jobs, it's just that the people who need the jobs don't have the skills to take them on. Those who have the skills are sought after and competition is tight, adds van Niekerk.
More positively, van Niekerk says the reputation of the renewable energy industry may help attract students. "Renewable energy has quite a bright future in South Africa – people are excited about the wind industry and they want to be involved."
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