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South Africa’s renewable energy programme has succeeded beyond everyone’s wildest dreams. The decision to improve on Germany’s approach by applying competitive pricing has attracted interest from renewable energy companies worldwide – and in successive rounds dropped the price to a quarter of what taxpayers paid in the first. This is an excellent example of allowing market forces to incentivise human ingenuity and deliver benefits for consumers. Renewables are firmly entrenched on the Moore’s Law curve (annually doubling output at the same cost) so South Africans can look forward to even keener pricing as its green energy’s contribution grows exponentially from the current 1.8%. And with the coal-fired power stations generating 88% of the total, the nation’s required base-load is well catered for on those rare days when the sun doesn’t shine or the wind doesn’t blow. The argument that even more base-load is required is a tired and irrational argument. But seems to be the only one left for promoters of nuclear, an expensive and dangerous alternative which costs 12 times that of an identical coal powered plant. To say nothing of the proposed nuclear fleet’s $100bn price tag which threatens to bankrupt the country. – Alec Hogg
By Paul Burkhardt
(Bloomberg) – Near a massive iron ore mine in the Northern Cape, almost 320,000 photovoltaic panels mounted to track the sun cover the rust-colored earth. Spanish developer Acciona SA built the 94-megawatt Sishen solar project in about 16 months under some of the strongest sunshine in the country.
In South Africa, the fifth-biggest producer of coal, which is burned to generate most of the country’s electricity, solar and renewable power are gaining fast. The alternatives have attracted 193 billion rand ($15.5 billion) of investment since 2011, helping the government ease blackouts. Two coal-burning power plants first approved in 2007, now costing $17 billion, are over budget and more than seven years behind schedule.
South Africa’s experience shows how renewables are spreading across the developing world, opening new markets with a reputation for convenience and plunging costs. That’s challenging the traditional selling point for the most widely-used fossil fuel, which prides itself on being the easiest way to boost power supplies.
“In the past we all looked at green and everybody was thinking, ‘Well that’s great, but it’s very expensive, and it’s for the rich,’” said Karen Breytenbach, head of the Independent Power Producer office, a group established by the government to procure energy from private sources. “We have moved the market from very expensive green power to affordable power.”
Renewables are a lone bright spot in South Africa’s power industry. State-owned Eskom Holdings SOC Ltd. has struggled to meet demand, cutting power supplies on 99 days this year to protect the grid while the shortages stunt the economy. Eskom’s older power stations are susceptible to breakdowns from lack of maintenance.
Trouble with bringing the coal plants online is emblematic of the industry’s difficulties worldwide. Coal prices have tumbled 50 percent since the start of 2011, tipping more than three dozen mining companies including Patriot Coal Corp. and Alpha Natural Resources Inc. into bankruptcy. Envoys from more than 190 nations including South Africa will try to reach a historic deal in Paris in December limiting fossil-fuel emissions everywhere, suggesting more regulations against coal.
Renewable installations, meanwhile, are surging in South Africa and elsewhere in the developing world. Minister of Energy Tina Joemat-Pettersson in April accelerated the program, which follows the country’s National Development Plan. Auctions first started in 2011 under a framework the government designed with developers and banks.
Starting with almost zero utility-scale photovoltaics in 2010, South Africa now has procured solar capacity of more than 1,000 megawatts, a little more than what a nuclear reactor produces. Instead of offering fixed incentives in the form of feed-in tariffs as Germany did, South Africa designed a competitive tender process for developers to bid on the renewable energy projects.
The government will procure over 6,000 megawatts of wind, solar and hydro plants in South Africa, as part of the biggest surge in power capacity since the 1980s. The nation saved 4 billion rand in fuel costs and avoided some blackouts in the first half of 2015, according to a study by the Council for Scientific and Industrial Research, a Pretoria-based research group that found renewables may be the cheapest way for the nation to prevent shortages.
“Changing from a feed-in tariff to an auction has been a blessing and turned what many thought would be an expensive exercise into one where solar and wind are extremely cost competitive in global standards,” said Derek Campbell, an analyst at Bloomberg New Energy Finance.
India and Brazil are also using auctions like South Africa’s to boost renewable capacity. By 2040, $12.2 trillion will be invested in power generation worldwide, 78 percent of that in emerging market nations and two-thirds of the total in renewables, according to Bloomberg New Energy Finance.
For South Africa, the interest in the renewables program “was far beyond our wildest dreams,” said Breytenbach at the Independent Power Producer’s office. It pushed the costs of solar and wind power lower, allowing the government to reduce the price paid for power, through successive auctions.
Coal remains South Africa’s dominant power source, accounting for 88 percent of electricity supplied in the first half of the year, according to the CSIR. Solar and wind together were 1.8 percent.
Bringing on new coal plants hasn’t been as easy as the government anticipated. Labor disputes and construction delays hit both the 4,764-megawatt Medupi power plant in Lephalale and the 4,800-megawatt Kusile power plant in Emalahleni. Neither will be fully operational until at least 2019.
Even more baseload generation is needed for future demand, and the IPP office plans to procure 2,500 megawatts of coal stations by 2021.
On a rare, overcast day, a computer in the control room at the Sishen solar plant shows 14 megawatts flowing from the panels supplied by JinkoSolar Holding Co. Other than a squeak as the GPS adjusts their position for maximum radiation, the rows of panels are silent.
Through the competitiveness of its bidding rounds, South Africa has reduced tariffs for solar power to as little as 786 rand a megawatt-hour from 3,288 rand, according to data compiled by Bloomberg.
The average cost of energy from independent power producers using renewables is 2,172 rand a megawatt-hour, which is cheaper than the 2,573 rand from turbines using diesel, the state-owned power company reported this year. Baseload power – primarily coal – is still the cheapest at about 300 rand.
In spite of the tariff reductions, the procurement program is “well planned” and predictable, Rafael Mateo, chief executive officer of Acciona’s energy unit, said at a visit to his company’s project. He expects to bid again in successive renewable energy auctions.
“It is a good example of how to drive renewables as part of the solution to South Africa’s current energy crisis,” Mateo said.
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