Government must act now to realise renewable energy dividend for SA’s economy
Amid an electricity supply crisis, new statistics show that without renewables the situation would have been worse.
BY Brenda Martin and Tebogo Movundlela
Government has, for the most part, said all the right things about SA’s energy future in recent weeks. In his reply to the state of the nation address debate last week, President Cyril Ramaphosa hit the right notes pledging to continue to encourage investment in cleaner energy through the world-renowned renewable energy independent power producer programme (REI4P), but will Tito Mboweni follow through with concrete budget commitments during his maiden budget speech on Wednesday?
The electricity supply crisis, which saw Eskom instituting stage 4 load shedding last week to avert a total collapse of the grid, means this year’s budget will be more crucial amid a host of competing spending priorities.
The renewable energy sector is hoping that the Minister will recognise the need to provide a sufficiently enabling environment for public/private partnership to optimally assist with addressing the spectrum of urgent socio-economic needs, not least a stable, reliable and sustainable electricity supply.
The deeply indebted state-owned power utility, which still largely relies on coal-fired power and supplies more than 95% of SA’s electricity, has been severely compromised by maintenance backlogs and the badly designed mega power stations – Medupi and Kusile – which are still not operating at optimal levels.
It can be argued that the focus on these mega projects, rather than on smaller scale renewable projects, has been a key contributor to the current electricity crisis. Energy planners seem stuck on large solutions, often overlooking smaller, less risky options. Yet the huge advantage of smaller projects is that risk is more appropriately spread out. When large projects fail, the impacts are similarly large.
It is estimated that load-shedding comes at a cost to the economy of R90 per kWh and has led to billions of rand in lost productivity at a time when South Africans can least afford it. The electricity crisis undoubtedly subdues any efforts to boost investor confidence.
It is worth bearing in mind that without renewables, effects of the supply crisis would have been even worse.
Recent statistics compiled by the Council for Scientific and Industrial Research (CSIR) Energy Centre, show that without renewables, SA would have experienced higher stages of load shedding more frequently in 2018. The numbers also reflect that renewables reduce the economic cost of load shedding.
The authors of the report point out that by the end of 2018 the combined production of electricity from the wind, solar PV and concentrated solar power plants was 4.6% of SA’s system load – notably higher than the country’s imports of electricity. Solar PV plants are yielding energy at an average yearly capacity factor of 25%; and the wind fleet at an average yearly capacity factor of 36%. The data also confirms a degree of complementarity
between the two main sources of renewable power supply: the fact that wind production tends to rise as the sun is setting, a trend that is more pronounced in the summer than the winter months.
The positive contribution of renewables plants during periods of load-shedding relates to the fact that most of the rotational cuts were implemented in mid-morning and suspended in the evenings. One of the authors of the report, Jarrad Wright, provides an illustrative example: “There is a direct correlation between aggregated solar PV output and high-demand periods, which were also the periods at which we were load-shedding the most. So in the event of stage 1 load-shedding during the day there is a solar PV fleet of 1 500 MW that is generating during those periods, which means you are avoiding going from Stage 1 to Stage 2 just by having that fleet in place.”
Previous CSIR research confirmed that in 2015, 85% of all foreign direct investment in SA was attributed to the local renewable energy industry. Today, renewable energy is the cheapest form of new-build electricity and the price gap between renewables and coal will continue to grow.
These are important figures which should inform SA’s debate on the energy mix. It is something Mboweni will no doubt take into account as South Africans continue to face uncertainty about whether the lights will stay on.
While government has consistently pledged its support for renewables, the window of opportunity to fully realise the potential of this sector won’t stay open for ever.
The sector urgently requires policy certainty that is backed up by procurement. As an absolute minimum, it will be crucial for procurement for the next round of renewables to be announced by the end of the first quarter 2019 to provide certainty and unlock further investment.
Eskom has retained its monopoly status over the course of several decades, mainly due to its previous capacity to produce electricity at globally competitive tariff rates, but those times have ended. Globally, growing climate change awareness has seen an energy transition away from coal toward cheaper and more sustainable renewable energy investments. The direct correlation between competitive auctions and declining renewable tariffs have been confirmed. The CSIR research also shows that there are already strong indications that SA’s actual wind and solar plants’ performance is in the category of world class.
We have an opportunity to realise the renewable energy dividend and fix SA’s ailing energy sector and by extension its economy, but government needs to act now.
Brenda Martin and Tebogo Movundlela are the CEO and Chairperson respectively of the South African Wind Energy Association (SAWEA), which represents the interests of its members who are invested in the South African wind power value chain.