As South Africa accelerates its transition to renewable energy, the wind sector is emerging as a critical growth engine — but not without friction.
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Despite strong project pipelines under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), increasingly complex contractual frameworks are creating barriers for contractors, potentially constraining broader industry participation.
According to construction law expert Natalie Reyneke of MDA Attorneys, navigating these legal and commercial risks has become a defining challenge for players looking to capitalise on the country’s expanding wind energy market.
Director at construction law specialists MDA Attorneys, Reyneke says that while wind energy has been part of South Africa's power-generation landscape since 1796, the modern wind farm era presents unique obstacles for contractors seeking to capitalise on opportunities created by the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
"The introduction of large-scale wind farms using numerous turbines to harness wind energy is relatively new to South Africa," says Reyneke.
"With the expansion of the REIPPPP programme, we are seeing more wind farms being constructed and operated across the country, creating significant opportunities for contractors. However, there are substantial barriers to entry that contractors need to understand and navigate."
Reyneke points to the inherent risks associated with power purchase agreements (PPAs) as a primary concern for contractors. "A senior project manager at one of South Africa's large renewable energy EPC contractors recently told me that the biggest risk on these contracts is the offtake – the generation and transmission of electricity under a PPA that is signed long before construction begins on site," she explains.
"The majority of these projects are funded based on meeting specific commercial operation dates, so the ramifications for not meeting that looming deadline are enormous."
Contractual risk cascade
Drawing on her experience representing contractors responsible for the balance of plant on numerous wind-farm projects, Reyneke identifies a troubling trend in the independent power producer (IPP) space.
"We're seeing an increase in IPPs preferring single-point contracts rather than split contracts," she says. "The IPP seeks to employ one contractor – typically an EPC (Engineering, Procurement and Construction) contractor – who carries sole responsibility for delivering electricity under the PPA by the commercial operation date."
This approach creates a cascade of challenges, according to Reyneke. "The EPC contractor may not have the necessary skills to perform all works required to deliver the project. For example, if the turbine supplier is appointed as the EPC, they will need to subcontract civil and electrical work to specialist contractors."
The structure of these subcontracts has become particularly problematic. "We're seeing subcontracts drafted in ways that pass EPC risk down to subcontractors, often pitting them against each other by requiring mutual indemnities for delays or additional costs that one might cause the other," Reyneke notes. "In my experience, it amounts to contractual mistrust."
Risk undermines collaboration
This dynamic manifests in several ways that affect market competitiveness. "Subcontractors are over-qualifying the subcontracts, not wanting to accept certain risks being passed down from EPC contractors," says Reyneke.
"They're reluctant to collaborate too closely with fellow subcontractors. More accurately, they don't want a contractual nexus to exist, or they're building significant risk allowances into their pricing models, which effectively prices them out of jobs."
Beyond subcontracting arrangements, the issue could also arise in negotiations between potential EPC contract joint-venture partners when the IPP requires a single point of contact, leading to issues around risk allocation and reluctance to accept joint contractual responsibility.
Reyneke cautions that these challenges are particularly acute for new market entrants. "For contractors entering the wind-farm construction market, these contractual dynamics will add to the already significant pressures of delivering on time, at the required quality and within budget," she says.
As South Africa continues to expand its renewable energy capacity to address ongoing electricity challenges, Reyneke's insights highlight the need for more balanced risk allocation in wind-farm contracts to ensure a competitive and sustainable contractor market.
