SA’s clean energy transition doesn’t need to cost a cent – David Fickling

South Africa's energy landscape is undergoing a remarkable transformation, marked by the rise of household solar power in the midst of chronic problems with major coal power projects. Delayed and over-budget coal stations have crippled the nation's economy, while looser regulations and power cuts have propelled a surge in solar adoption. As the country shifts towards renewables, the potential and risks of this transition are evident, underscoring the importance of government policies that empower individual energy choices over incumbent interests..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..How to Build a Giant Power Station Without Spending a Cent: David Fickling.By David Fickling.(Bloomberg Opinion) –In South Africa, building enough electricity generation to power 2 million homes is the sort of thing that can undermine the entire state..Since work began in 2007, the Medupi and Kusile coal power stations — at 4.8 gigawatts each, some of the largest generators ever conceived— have become emblems for the chronic problems plaguing sub-Saharan Africa's most developed economy. Nearly a decade late and billions over budget, the 300 billion rand ($15.8 billion) plants are mired in a welter of alleged corruption and mismanagement, will never turn an economic profit, and still haven't been finished. Their parlous state, and the impact on crumbling state-owned utility Eskom Holdings SOC Ltd., is one of the many reasons why credit ratings companies downgraded the country's debt to junk status six years ago..Read more: SA Presidency maps out plan to end loadshedding.Imagine, then, if you could build the same capacity of new electricity generation without spending a cent of public money in the space of little more than a year. That's what's happened since looser regulations and hundreds of days of rolling power cuts driven by Eskom's collapse opened the floodgates to a new wave of household solar..South Africa was for many years a laggard on renewable generation. It still gets about 84% of its electricity from coal, by some margin the highest level among major economies. A thicket of red tape has until recently protected Eskom, requiring that all solar panels be made locally (a near-impossible task given the state of the manufacturing sector) and allowing the utility a veto on all but the smallest grid-connected renewable plants..Coal has deep political roots, too: President Cyril Ramaphosa began his political career running a union for Black mineworkers in the struggle against apartheid. Mining unions remain central to the ruling African National Congress's coalition, and about a fifth of pit workersdig for coal..That makes the revolution of the past two years all the more remarkable. About $2.5 billion of solar equipment has been brought in during the first half of this year, equivalent to the combined total in the previous two years, according to Gaylor Montmasson-Clair, an economist at think tank Trade & Industrial Policy Strategies..As a result, the estimated capacity of solar panels on rooftops has risen from 983 megawatts in March 2022 to a Medupi- or Kusile-sized 4.74 gigawatts last month, according to Eskom. BloombergNEF estimates that home systems will account for the majority of a further 3.2 gigawatts of panels that will be connected this year..It's not just individuals getting involved, either. Units of Daimler Truck Holding AG and Toyota Motor Corp. this year announced major solar installations to help power their operations. Another started last October at a Heineken NV brewery, while Sibanye Stillwater Ltd. and Anglo American Plc are partnering with renewable developers to provide electricity for their mines..European logistics and engineering companies have lodged bids for a 50 billion rand project to export green hydrogen from the arid northwest, while a unit of Shell Plc and Norwegian renewables developer Scatec ASA are targeting customers seeking to escape the tyranny of Eskom's rickety grid..Read also: Democratising solar power – Gosolr's R1740pm solution, no capital upfront.If only politicians in South Africa and beyond could grasp the potential of this transformation. The country's electricity minister is planning to strike a major deal with China during the BRICS summit in Johannesburg this week to ensure a better supply of solar equipment, Bloomberg News reported recently. That sounds promising until you consider that he's not looking to buy panels, but equipment for manufacturing them locally..That's a quixotic and counterproductive ambition. South Africa's manufacturing activity is still running at pre-pandemic levels — thanks, not least, to those power shortages that make it costly and unpredictable to churn out the simplest products, let alone cutting-edge semiconductors. Meanwhile, the vast supply chain that's been built in China drove the price of modules to a record low of 17.1 cents per watt in July, according to BloombergNEF's Jenny Chase. That's pushed her estimate for worldwide installations in 2023 up by 43 gigawatts in the space of a month, to 389 gigawatts. South Africa would be far better off further reducing impediments to solar imports and installations, instead of embarking on a doomed quest to become a panel manufacturing hub..Political leaders in rich countries are little better. The US Department of Commerce last week announced that it would impose punitive tariffs on solar panels made by Chinese companies operating in Southeast Asia from 2024, overturning an exemption introduced by President Joe Biden last year..Read more: Banks love solar, but nuclear is the future for South Africa – Ivo Vegter.That's an unreasonable constraint on products essential for the energy transition. China's solar industry is cheaper not because it's cheating but because its scale, sophistication and complexity is vastly ahead of the competition everywhere else in the world. (The solar industry has gone to great efforts to ensure it's not using materials made with forced labor in Xinjiang, after the US Congress passed a separate law on that topic.) By effectively banishing Chinese solar equipment from the US market, Washington will only succeed in raising costs for local consumers and protecting an uncompetitive coterie of local manufacturers..South Africa's example shows the potential and the risk of the shift to zero emissions. Where governments and local monopolies get out of the way and let individuals and businesses find the cheapest sources of energy, the world can decarbonize at a dazzling pace. Where they use their influence to coddle incumbents, however, they can still smother the transition in its crib. Those watching the wreck of South Africa's once-envied power sector shouldn't look to emulate it..1South Africa's peak electricity demand is about 30 gigawatts, so a 4.8 gigawatt generator would be sufficient to supply about one sixth of peak loads. South Africa has about 18 million households, so that would be sufficient for 2 million households..2There will eventually be a small fiscal cost. Tax incentive programs for renewables introduced in this year's budget and applying for 12 months from March will cost about 9 billion rand, according to the government..3Across both peak and non-peak periods, rooftop solar generates at only about 15% of the output implied by its gigawatt capacity, compared to a 45% rate for South African coal generators..Read also:.Lings: Decoded Eskom data, unleashed private sector brings SA hope for loadshedding's endCape Town 'wheeling people' to give loadshedding, poverty and pollution another deadly blowCSIR's Monique le Roux: SA's loadshedding solution in abundant gas, renewables – execution required.© 2023 Bloomberg L.P.

SA’s clean energy transition doesn’t need to cost a cent – David Fickling

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