NEAR a huge iron ore mine in the Northern Cape, almost 320,000 photovoltaic panels mounted to track the sun cover the rust-coloured 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 SA, the fifth-biggest producer of coal — the resource that is burnt to generate most of the country’s electricity — solar and renewable power are gaining fast. The alternatives have attracted R193bn of investment since 2011, helping the government ease blackouts.
Two coal-burning power plants first approved in 2007 are over budget and more than seven years behind schedule.
The first 794MW at the Medupi plant near Lephalale only came online last week after delays owing to strikes, technical problems and cost overruns.
SA’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 a fossil fuel that is the most widely used as well as 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 SA’s power industry. State-owned Eskom has struggled to meet demand, cutting power 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% since the start of 2011, tipping more than three dozen mining companies into bankruptcy. Envoys from more than 190 nations, including SA, 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 SA and elsewhere in the developing world. In April Energy Minister Tina Joemat-Pettersson accelerated the programme, which follows the 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, SA now has procured solar capacity of more than 1,000MW, a little more than what a nuclear reactor produces. Instead of offering fixed incentives in the form of feed-in tariffs, as Germany did, SA has a competitive tender process for developers to bid on renewable energy projects.
The government will procure more than 6,000MW of wind, solar and hydro plants, as part of the biggest surge in power capacity since the 1980s. SA saved R4bn in fuel costs and avoided some blackouts in the first half of this year, according to a study by the Council for Scientific and Industrial Research (CSIR) that found renewables may be the cheapest way to prevent shortages.
The auction tender was a “blessing” and “and turned what many thought would be an expensive exercise into one where solar and wind are extremely cost-competitive by global standards”, said Derek Campbell, an analyst at Bloomberg New Energy Finance.
India and Brazil are also using auctions to boost renewable capacity. By 2040, $12.2-trillion will be invested in power generation worldwide — 78% of that in emerging-market nations — and two-thirds of the total will be in renewables, according to Bloomberg New Energy Finance.
For SA, the interest in the renewables programme “was far beyond our wildest dreams”, said Ms 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.
The programme has been praised for its clarity and transparency, and “could be a useful model for private funding of other types of infrastructure projects”, management consultancy McKinsey said in a report on Tuesday.
Coal remains SA’s dominant power source, accounting for 88% of electricity supplied in the first half of the year, according to the CSIR.
Solar and wind were at 1.8%.
Bringing on new coal plants hasn’t been as easy as the government anticipated.
Labour disputes and construction delays hit the 4,764MW Medupi plant and the 4,800MW Kusile plant in Emalahleni — neither will be fully operational until at least 2019.
Even more baseload generation is needed for future demand, and the Independent Power Producer’s office plans to procure 2,500MW of coal stations by 2021.
On a rare, overcast day, a computer in the control room at the Sishen solar plant shows 14MW flowing from the panels supplied by JinkoSolar. 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, SA has reduced tariffs for solar power to as little as R786 per megawatt/hour from R3,288, according to data compiled by Bloomberg.
The average cost of energy from independent power producers using renewables is R2,172 per megawatt/hour, which is cheaper than the R2,573 from turbines using diesel, Eskom reported this year.
Though baseload power — primarily coal — is still the cheapest at about R300.
In spite of the tariff reductions, the procurement programme is “well planned” and predictable, Rafael Mateo, CEO of Acciona’s energy unit, said during 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,” he said.
Pretoria – South Africa saved R4 billion ($310 million) in fuel and by avoiding blackouts in the first half of 2015 due to renewable-energy projects, according to a study by the Council for Scientific and Industrial Research.
From January to June, 800 megawatts of wind and 1 gigawatt of solar photovoltaic power-generation saved about 3.6 billion rand in diesel and coal-fuel costs, according to the Pretoria- based center.
During 15 days in the period, renewables either prevented or limited rolling blackouts, the study showed.
South Africa’s state-owned power company Eskom Holdings has imposed rolling blackouts almost every other day this year as it struggles to meet demand. The government’s five-round program of clean-energy tenders has awarded more than 5 000 megawatts of projects since 2011.
With renewable power saving about 200 hours of unserved energy and fuel, it generated as much as R4 billion more in financial benefits than it cost, according to the study.
The financial benefit in 2014 was R800 million after costs, the CSIR said in an earlier study. The weighted average tariffs paid for new wind and photovoltaic projects have decreased.
The CSIR has developed a methodology “to determine whether at any given hour of the year, renewables have replaced coal or diesel generators or whether they have even prevented so-called ‘unserved energy’,” Tobias Bischof-Niemz, who heads up its energy center, said in a statement.
Ireland-based developer already in process of delivering about 850MW of wind and solar power in the country.
Mainstream Renewable Power looks set to secure its latest round of South African contract wins, after it was awarded preferred bidder status for 250MW of wind energy projects as part of a government tender.
A consortium led by the Irish wind and solar company was last week awarded the status for two projects by the country’s Department of Energy, paving the way for about €420m (£308m) of fresh investment in the country’s fast-expanding renewable energy sector.
The 140MW Kangnas Wind Farm in the Northern Cape and the 110MW Perdekraal East Wind Farm located in the Western Cape add to the 848MW of wind and solar projects Mainstream has been awarded under the South African government tender programme since 2011.
The latest deals underline Mainstream’s position as the most successful developer in the tender programme, having secured move development contracts than any other player in the market.
In addition to the two projects awarded this month, Mainstream is currently building three wind farms in South Africa’s Northern Cape, totalling 360MW, which were awarded under Round 3 of the programme. And last year the company delivered three wind and solar facilities into commercial operation in South Africa under the first round of the programme.
Barry Lynch, Mainstream’s managing director for onshore procurement, construction and operations, said green energy ticks three “important boxes” for South Africa.
“First, the cost of these projects is now cheaper than new coal-fired generation. Second, they can be brought into commercial operation at the speed required and third, they meet the scale needed to address the country’s growing electricity demand,” he said. “Mainstream is once again delighted to be able to play a leading role in South Africa’s burgeoning renewable energy sector.”
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By Edna Molewa
In December last year, one of the largest solar energy plants in Africa was connected to the national grid. The Sishen Solar Energy Facility will have the highest level of electricity output of all the operational photovoltaic plants in Africa — an equivalent of 100,000 households’ consumption.
Its significance lies in three “Cs”: construction time, cost and carbon footprint.
Despite its size, it took 16 months to build. The cost of the facility is about R2bn — versus an estimated R91bn for an average-sized coal-fired power station.
Clean energy will be used at the plant. According to Acciona Energia, the technology being used at the facility will avoid about 208,000 tonnes of CO² emissions.
The plant came online as the Council for Scientific and Industrial Research (CSIR) released the results of a study into the increasing financial benefit of renewables in SA. It found that energy from SA’s (first window) wind and solar (photovoltaic) projects created R800m more financial benefits to the country than they cost during 2013. This amounted to a financial benefit of R3.7bn in diesel and coal fuel cost savings.
These figures give pause for thought to naysayers who argue that renewables are light years away from achieving the baseload capacity needed. If one considers that these first projects have generated about 3,922MW of renewable power — with an additional 4,000MW expected to go online by the end of the next window, what has been achieved is impressive.
Developing baseload should and does happen incrementally — and over time. Our achievements are all the more impressive if we take into account that this has taken place over a mere two and a half years.
Renewable energy is becoming cheaper, faster and cleaner.
Bloomberg New Energy Finance forecasts that the growing need for power in Africa will see about 1.8GW of renewable energy capacity being commissioned in the region this year — more than the amount that came online during the past 14 years combined.
With or without subsidies or incentives, renewable energy sources retain a competitive advantage over fossil fuel sources.
Technology costs are also falling.
Over the first three project windows in SA, prices have steadily dropped; with photovoltaic tariffs decreasing by about 68% and wind dropping 42%, in nominal terms. By the fourth window, they are expected to drop even further.
According to the CSIR, the cost per kilowatt hour of renewable energy for new projects is now far less than R1 for solar photovoltaic and 60c-80c for wind projects — thereby “keeping the net financial benefits of renewables positive, even in a future with a less constrained power system”.
Unlike many other countries, there is no policy or regulatory uncertainty. In last year’s state of the nation address, President Jacob Zuma emphasised the importance of a sustainable energy mix.
The Integrated Resource Plan clearly outlines the vision for a sustainable energy mix for SA that includes the use of fossil fuels, renewables, alternative energy and nuclear. It is a vision further supported by the National Development Plan.
In a Guardian Sustainable Business article last year, analysts cited SA as a “good role model on renewables” because of its competitive tendering process that both “align(s) with the long-term goals of government and also creates sustainable jobs locally”.
Although the World Bank has noted that renewable energy projects have resulted in improvement in economic development commitments, particularly as this relates to benefiting rural communities, those responsible in the public sector should ensure that this translates into real benefit for South Africans: both in terms of job creation, as well as localisation. As local renewable energy projects steadily increase their contribution to stabilising the grid, several businesses, among them several JSE-listed firms, are producing their own energy, much of it produced as part of industrial processes, such as sewage processing, sugar refining and paper making.
They are working with us, as the government, as co-generators of energy through the Renewable Energy Independent Power Producers Procurement Programme.
For example, sugar giants Tongaat Hulett and Illovo produce energy from sugar bagasse and trash at their milling plants.
Paper producer Sappi uses pine-tree resin removed before the pulp-and-paper production process to fuel boilers that supply steam to its turbines, enabling the company to meet about 50% of its own energy needs. Companies are able to sell the surplus to Eskom by means of power purchase agreements.
Others are reportedly researching biogas. A local company, Bio2Watt, is already generating energy from methane collected from waste at one of the country’s largest feedlots. These businesses are innovating in response to the collective energy challenges we all face: taking the lead in investing in their own energy in ways that are both cost-effective and green.
Their initiatives should be both welcomed and emulated.
We, as the government, are not far behind. Late last year, Zuma opened Environment House, the Department of Environmental Affairs’s new headquarters.
Not only does the building harness solar energy, it has state-of-the-art water-saving mechanisms, as well as an onsite grey-water treatment works — setting the standard for the type of government buildings that we hope to have in the future.
The Department of Public Works is tasked with the implementation of the government’s Energy Efficiency Programme in all government buildings. This will see, among other things, existing buildings being retrofitted.
Although not all sectors are able to generate their own energy, we are leading by example.
Because, ultimately, energy saving is everyone’s responsibility.
Independent generation using clean energy sources makes business sense. It is cost-effective, reduces uncertainty caused by often unpredictable power cuts, and reduces demand on the national grid.
As lack of access to stable electricity continues to hamper economic growth in Africa, renewable energy holds immense transformative potential.
The climate is ripe for this kind of investment. The number of renewable energy investments SA has attracted in the past three years outstrips those undertaken across the entire continent in the past 20 years.
The International Energy Agency predicts the sub-Saharan African economy as a whole could be boosted by as much as 30% by 2040 under certain conditions, namely greater investment in the power sector, more co-operation on cross-border energy projects, and better resource and energy revenue management.
Addressing this country’s energy challenges that we collectively face requires lateral thinking, innovation and vision.
Falling global oil prices should not delay a transition to cleaner energy, by putting low-carbon projects on the back burner in favour of traditional coal-and diesel-powered electricity.
Working with the private sector, we ultimately aim for such innovative renewable energy initiatives to become mainstream — so that they become the norm, as opposed to the exception.
• Molewa is Minister of Environmental Affairs.
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