CSIR’s Report Points to Financial Benefits of Renewables in South Africa

Renewable energy could help South African utility Eskom overcome its growing energy crisis.
Published: Tue 10 Feb 2015

The South African Renewable Energy Council (Sarec) has welcomed the conclusions of the Council of Scientific and Industrial Research’s (CSIR’s) ‘Financial benefits of renewables in South Africa in 2014’ report, published in January.

Economic value of renewables

According to Sarec board member Mike Levington, the results of the study “truly underline the economic value of renewable energy to the South African electricity consumer.”

The report shows that the net cost of South Africa’s renewable energy in 2014 was less than zero, with South Africa’s first wind and solar projects last year delivering R800 million (US$69 million) more in financial benefits for the country than they cost.

The report also demonstrated that the 1,600W of renewable energy installed by the end of 2014 had saved the country R5.3 billion (US$455 million) in fossil fuels such as diesel and coal and help to avoid load shedding, while costing the country only R4.5 billion (US$385 million) in tariffs.

The study was based on actual hourly production data for the different supply categories of the South African power system, including coal, diesel, wind and solar photovoltaic (PV) energy sources.

Levington points out that the South African government’s 2011 Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is beginning to yield dividends in making a measurable contribution to easing state-owned electricity supplier Eskom supply issues and will contribute even more as the plants presently under construction come online on a continuous basis through 2015 and beyond. [Engerati – Scene Setting – an Eskom perspective.]

It is expected that the preferred bidders for Round 4 would be announced soon, potentially putting another 1,100MW of renewable energy into the pipeline to produce electricity.

According to Levington, the CSIR report was based on conservative assumptions and did not factor in job creation and socio-economic benefits of REIPPPP, with more than R11 billion (US$0.9 billion) already pledged by the industry for investment into rural communities over the next two decades.

Renewable energy - feasible option for supply problem

Stellenbosch University’s Professor Wikus van Niekerk adds that renewable energy, particularly wind and PV, are fuel-savers” and can therefore, make a significant contribution in the current constrained period, saving Eskom and the country money. He adds that rooftop PV projects, put in place by Eskom, 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 coal-fired power stations Medupi and Kusile currently under construction – could facilitate a number of rooftop PV projects to come online during 2015.

Sarec board member Pancho Ndebele also stressed that renewable energy was the most feasible supply option that could be deployed at scale within the timeframe of the country’s severe electricity crunch.

Round 4 of the REIPPPP involved renewable-energy projects totalling 6,000MW. “These are projects that have done all feasibility studies, 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 14 months to 24 months,” he added.

Meanwhile, Sustainable Energy Society of Southern Africa representative Carryn Bateman noted that rooftop solar PV was “perhaps the fastest supply-side solution available”.

Proponents of wind energy were equally enthused. South African Wind Energy Association representative Mark Tanton noted that each 0.6GW of wind power installed saved the system real cash on a net basis, as the pure fuel savings value of wind was R0.23/kWh (US$0.02/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.

While these findings are exciting, South Africa continues to grapple with severe load shedding once again. As a result, the country finds itself facing an economic loss of approximately R3 billion (US$250 million), says Chris Whelan, CEO of Accelerate. Many businesses and households are fed up with the unreliable power supply that Eskom offers and are now seriously considering photovoltaics, hydrogen fuel cells and gas.

Further reading

CSIR-Financial benefits of renewables in South Africa in 2014 [PDF].