Commercial feasibility study of a small-scale wind turbine manufacturing in South Africa

Yazdani, Vahid (2015-12)

Thesis (MEng)--Stellenbosch University, 2015.

Thesis

ENGLISH ABSTRACT: Increased energy demand, price of energy carriers and the threat of climate change phenomena over the whole world have already had negative effects on the world’s economy. Different strategies were adopted to address these problems. Among those, renewable energy sources have received substantial attention over the past 40 years. As a result various manufacturers all over the world started producing devices for capturing renewable energy and convert it to electricity for industry or household use. Currently wind energy plays a fair share in electricity production around the world. However till recently small-scale wind energy generation hadn’t received as much attention as the commercial wind turbines. The number of manufacturers of small-scale wind turbines is growing in the last few years and only 5 countries account for 50% of the production of small-scale wind turbines, none of which is located in the Africa. Although the African continent and specifically South Africa is considered ideal places for harvesting wind energy, the growth of small-scale wind turbines has been disappointing. Therefore, the financial feasibility as well as the risk of investment in such industries in South Africa were unknown. In this study the financial feasibility of manufacturing small-scale wind turbines in South Africa is investigated. Initially a market study is performed identifying the target market, international and domestic competitors, target market share and the market growth in a 5 year forecast. Factors that affect the market are discussed. Having the market study and the market demand estimation the technical and financial @Risk model is developed by gathering information regarding the manufacturing methods, required raw material, machinery and equipment, required human resources and administrative section’s requirements. Having the model, 4 scenarios are defined and the model is run for each of the scenarios. In the first scenario the production range is considered as the first 10 percentile of the potential target market demand defined in the market study section, 10 to 30 percentile is used for the second scenario and 30 to 50 percentile for the third scenario. The model outputs relating to these inputs are investigated and discussed. A breakeven analysis is performed for the three scenarios and the scenarios are compared by the defined metrics such as Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR) and Net Present Value (NPV). In the fourth scenario the condition that the wind turbine has to compete on sales price with photovoltaic (PV) cells, is investigated. Therefore the sales price is set to the same price as the PV panels in the market and breakeven analyses as well as the mentioned metrics are investigated. The model gives an indication that it is financially feasible to manufacture small-scale wind turbines in South Africa by considering all the various outputs of the model. In addition the comparison of the first three scenarios shows that the second scenario has preferable results due to a moderate initial production volume for the first year of the entry into the market. This seems to be a rational decision for such product that is very dependent on external factors as well as the declining growth rate of the MIRR when the production volume increases, that you should not over-capitalize. In the fourth scenario it is shown that by having the sales price the same as that of PV panels, the change required in sales is 27% more than for the breakeven point of the first three scenarios. For future work, small-scale renewable hybrid systems, as well as more economical manufacturing methods for Africa could be considered.

AFRIKAANSE OPSOMMING: Toenemende energieverbruik, koste van energie draers en dreigende klimaatsverandering in die wêreld, het reeds negatiewe uitwerkings op die wêreldekonomie. Verskeie strategieë word reeds gebruik om hierdie probleme aan te spreek. Onder meer het hernubare energie benutting groot aanhang verkry gedurende die laaste 40 jaar. Gevolglik het heelwat vervaardigers, reg oor die wêreld, toegetree tot produksie van toestelle wat hernubare energie vasvang en omskakel na elektrisiteit vir industrie of huishoudings. Wind energie het tans ʼn redelike aandeel in elektrisiteit opwekking in die wêreld. Tot onlangs het klein skaal wind generators egter nie sulke groot aanhang verkry soos kommersiële wind turbines nie. Die aantal vervaardigers van klein skaal wind generators het gegroei in die laaste aantal jare, maar steeds word 50% van die produksie behartig deur 5 lande, waarvan nie een in Afrika is nie. Alhoewel Afrika en meer spesifiek Suid Afrika ʼn ideale plek is om wind energie te ontgin, toon die lae groei in gebruik van klein skaal wind toestelle dat dit nie baie aandag geniet nie. Dus is die finansiële en risiko situasie onbekend vir moontlike beleggers in die tipe industrie in Suid Afrika. In die studie word die finansiële vatbaarheid vir die vervaardiging van klein skaal wind generators in Suid Afrika ondersoek. Met die aanvang word marknavorsing uitgevoer om te identifiseer waar die teiken mark, internasionale en plaaslike kompetisie, doelwit mark aandeel en groei in verkope sou wees in die volgende 5 jaar. Faktore wat die mark kan beïnvloed word bespreek. Met die kombinasie van marknavorsing en vooruitskatting van verkope, word ʼn tegniese en finansiële @Risk model ontwikkel, wat vervaardigingsmetodes, benodigde rou materiaal, masjinerie en toestelle, menslike hulpbronne en administratiewe behoeftes insluit. Vier uitkomstes word gedefinieer en die model word geloop vir elke scenario. In die eerste scenario is die produksie volume beskou as die eerste 10 persentiel van die potensiële mark, die tweede scenario gebruik die 10 tot 30 persentiel en die derde scenario die 30 tot 50 persentiel van verwagte verkope. Die model se uitsette ten opsigte van die insette word dan ondersoek en bespreek. Die gelykbreek analise vir die drie uitkomstes asook ander bekende maatstawwe soos Interne opbrengskoers (IRR), Veranderde Interne opbrengskoers (MIRR) en Netto Huidige waarde (NPV) word vergelyk. In die vierde scenario word ondersoek hoe die situasie sou wees indien die wind toestelle direk op prys moet meeding met fotovoltaïese (PV) selle. In die geval word die verkoopsprys dieselfde gehou as soortgelyke PV selle, en gelykbreek analise asook die ander genoemde maatstawwe is ondersoek Die model gee ʼn aanduiding dat dit lewensvatbaar behoort te wees om die produksie van klein skaal wind turbines in Suid Afrika te onderneem, deur al die uitsette van die model in ag te neem. Verder, deur die eerste drie uitkomstes te vergelyk, word waargeneem dat scenario twee meer voordelig behoort te wees, veral as risiko’s in die eerste jaar van toetree tot die mark in ag geneem word. Dit blyk ook logies te wees dat dit riskant is om te oor-kapitaliseer voor verkope in die eerste jaar bewys lewer van die aanvraag. Verder is die groei in MIRR laer indien die produksie volume verder opgestoot word. In die vierde scenario word gewys dat indien daar direk op prys meegeding word met PV selle, dat daar steeds gelyk gebreek word, wel teen 27% hoër verkope as tydens die ander uitkomstes. Vir toekomstige werk, kan klein skaal hernubare hibriede stelsels, asook goedkoper vervaardiging tegnologie vir Afrika oorweeg word.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/98091
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