January 2015

“Zero cost” renewables the shortest term supply solution to ease energy crisis

Dear members

Please find below a media release that the South African Renewable Energy Council (SAREC) issued.

28 January 2015


The South African Renewable Energy Council welcomes the conclusions of a recent CSIR report showing that the net cost of South Africa’s renewable energy in 2014 was less than zero and reiterates that the industry is willing, ready and able to do much more to ease the country’s electricity shortage, now predicted to lead to load shedding for the next 3 – 5 years.

The Council points out that the value of renewable energy in a constrained electricity system is clear and has previously been pointed out by The University of Stellenbosch Centre for Renewable and Sustainable Energy Studies (http://www.crses.sun.ac.za).

The CSIR report “Financial benefits of renewables in South Africa in 2014”, released on 21 January 2015, demonstrates that the 1,600 MW of renewable energy installed by December 2014 has saved the country ZAR 5.3 billion in diesel, coal and avoided load shedding while costing the country only ZAR 4.5 billion in tariffs.

“The results of this study truly underline the economic value of renewable energy to the South African electricity consumer”, said Mike Levington, board member of SAREC who has been participating in recent discussions between government and business. “While Round 3 of the Renewable Energy Independent Power Producer Procurement Programme (“REIPPPP”) has seen the prices for electricity from the major renewable technologies generally fall well below the likely cost for new Eskom power, the constrained grid and the very high costs for diesel/load shedding have meant that renewables built under Round 1 saved the country more in 2014 than they cost.”

The CSIR report noted that the country was saved ZAR 3.7 billion in diesel and coal fuel costs and a further ZAR 1.6 billion through the avoidance of 120 hours of load shedding.  Government’s far-sightedness in establishing REIPPPPP in 2011 is now yielding dividends in making a measureable contribution to easing Eskom supply problems and will contribute even more as the plants presently under construction come online on a continuous basis through 2015 and beyond. Moreover, it is expected that the preferred bidders for Round 4 will be announced soon, potentially putting another 1,100 MW of renewable energy into the pipeline to produce electricity. The CSIR report was done on conservative assumptions and did not factor in the job creation and socio-economic benefits of the REIPPPP programme, with more than ZAR 11 billion already pledged by the industry for investment into rural communities over the next twenty years.

Professor Wikus van Niekerk of Stellenbosch University is unequivocal in his response: “We are electricity constrained as a country and using far more peaking power for mid-merit generation than we should”, he asserted. “Renewable Energy, particularly wind and PV, are “fuel-savers” and could therefore make a significant contribution at this time, saving Eskom and the country money. There are however a number of barriers to particular for roof PV projects put in place by Eskom that need to be addressed to allow even Eskom-subsidised projects to connect to the grid.   A reasonable feed-in tariff for rooftop PV – lower than at the Eskom generation cost at Medupi and Kusile – could facilitate a number of roof to PV project to come online, still in this year.”

Pancho Ndebele, also of the SAREC Board, stresses that renewable energy is the most feasible supply option that can be deployed at scale within the timeframe of the severe electricity crunch. “A total of 6,000 MW of renewable energy projects were bid in Round 4 of REIPPPP”, he stressed. “These are projects that have done all feasibilities, received environmental and all other regulatory approvals and have been assessed by lending institutions as being financially sound. They are ready for implementation and will be funded by private capital at very affordable rates. Importantly, a number of these projects can be constructed and connected to the grid in a 14-24 months’ time frame. In light of the load shedding and fuel savings demonstrated in the CSIR study, these projects can take considerable pressure off diesel purchases and load shedding schedules. Other supply options, when large, tend to be ten or more years away, and if smaller tend to be still more than five years away. Renewable energy is a viable part of the solution to the present supply crisis. With about ZAR 1 billion per month being spent on diesel and load shedding costing the country ZAR 87/kWh, we should aggressively increase our renewables ambition.”

Carryn Bateman, who represents SESSA on the SAREC Board, adds that the present crisis is one to which SESSA members have a lot to contribute. “Rooftop Solar PV is perhaps the fastest supply side solution available”, she points out. “And it can be done at significant scale close to where the electricity is needed“. Her colleague James Green, who heads SESSA’s solar water heater division, agreed and said that solar water heaters had the potential to significantly alleviate the electricity crisis. “We can install about 50,000 high pressure units before year end”, he predicted, “saving the country a usage of 8 kW daily in each case, and also removing all peak from those electric geysers going solar. This a fast track for getting both GWh and peak off the grid, with payback to consumers in less than 5 years.

Proponents of wind energy are equally enthused. Mark Tanton, SAREC Board member representing SAWEA, stressed that for wind, 0.6 GW of wind installed saved the system real cash on a net basis, because the pure fuel savings value of wind was 0.23 R/kWh higher than the cost of the wind power produced. “If avoided load shedding is added, the value of wind power to the country is even more compelling”, he asserted.

Notes to Editors:

For more detail about SAREC, see www.sarec.org.za
For interview requests and more detail, call Marilize Stoltz at +27 (0) 11 214 0660
For the full CSIR media release, see http://ntww1.csir.co.za/plsql/ptl0002/PTL0002_PGE157_MEDIA_REL?MEDIA_RELEASE_NO=7526622

DoE tests market for near-term power demand reduction offers

South Africa’s Department of Energy (DoE) has issued a formal appeal for companies and individuals to provide it with information on possible near-term solutions to reduce or shift electricity demand, as well as to immediately improve supply – the responses will guide the design of future procurement processes.

Government’s Independent Power Producer (IPP) Office released the request for information (RFI) in mid-December and responses need to be submitted by February 2.
 The RFI documentation notes that demand response and/or distributed generation strategies are “critical” to improving the reserves needed by the system operator to better employ available generating capacity and to allow for higher levels of power-station maintenance. The anticipated daily shortfall, the RFI adds, is likely to be between 3 000 MW and 5 000 MW until additional generation capacity is introduced.

Differing seasonal requirements are also highlighted, with savings targeted for between 9:00 and 21:00 in the summer months from September to April and between 17:00 and 20:00 from May to August.

The RFI follows the adoption by Cabinet in December of a five-point plan designed to stabilise the electricity supply sector, which has become increasingly prone to disruption, owing to a delay in Eskom’s build programme and a decline in the performance of the utility’s aging generation fleet.

The paid-for advertisement also acknowledges the depth of the electricity problem, describing it as a “crisis” – a stark deviation from the official stance adopted by Eskom, which has continually avoided using the word crisis to describe the state of the power system.

Included in the Cabinet-endorsed plan is a directive that private IPPs, cogeneration and demand-side solutions be harnessed with the support of various procurement programmes. Also emphasised is an ambition to manage demand “through specific interventions within residential dwellings, public and commercial buildings and municipalities through retrofitting energy efficient technologies”. The DoE believes that demand-side could free up 500 MW within six months.

This approach has been strongly supported by Business Leadership South Africa, which says big business stands ready to support the implementation of the five-point plan, including through the accelerated demand side management interventions.

The specific objective of the RFI is to gather information and test the market for innovative demand response and/or distributed generation solutions. The DoE notes that similar exercises proved useful ahead of the design of the renewable-energy procurement process, through which nearly 4 000 MW of capacity has been procured. In addition, market testing is helping guide the design of baseload and cogeneration procurement initiatives.

This RFI is particularly interested in companies and individuals with dispatchable demand response solutions, as well as in energy efficiency, load management and fuel switching proposals. In addition the RFI is also seeking information on distributed generation prospects, despite the fact that the regulations are not yet fully supportive of allowing individuals and businesses to feed excess capacity back into the grid.

“This RFI is intended to generate information to assist the department to assess the size, type and nature of the possible solutions available to enable it to develop appropriate strategies, as well as the options with solutions to implement such strategies,” the department explains.

Responses are being sought from independent demand-response aggregators, developers of innovative demand-side management projects and distributed generators, but the DoE stresses that the RFI will not be used as a basis for prequalification.

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