South Africa’s PV Development- No Longer a Silent Revolution

Solar power is becoming a viable replacement for coal-fired power generation in South Africa.
Published: Mon 16 Mar 2015

As South Africa’s ageing coal-fired generation fleet approaches the end of its economic lifetime, there is an urgent requirement to find viable replacements.

Moeketsi Thobela, Chief Executive Officer, SAPVIA (South African Photovoltaic Industry Association) told Engerati that PV has the advantage of cost-competitiveness and ability to “follow the grid”, which means the technology is a front-runner as a mid-merit option to replace the coal-fired power generation capacity that will be decommissioned from the early 2020s. PV will achieve this in conjunction with other renewable energy technologies such as wind and concentrating solar power (CSP), as well as natural gas-fired combined cycle gas turbines (CCGTs).

Thobela points to the Council for Scientific and Industrial Research (CSIR) report which reveals that PV has, together with wind, contributed to net financial and economic savings amounting to R800 million (US$64 million) in 2014, due to reductions in the consumption of coal and diesel, as well as load-shedding. For the first time - anywhere in the world - large-scale renewable energy has been introduced without subsidies – and in fact with a resulting net benefit to the economy. [Engerati-CSIR’s Report Points to Financial Benefits of Renewables in South Africa].

In addition, the ability to deploy the technology closer to South Africa’s economic powerhouse – Gauteng Province – will be key to the advantage of PV as an energy security option, explains Thobela.

South Africa’s PV sector in the next 10 years

SAPVIA is actively advocating for a three-tier market, which includes large-scale Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) projects, mid-scale projects (5-50MW) and embedded PV (e.g. residential, commercial and industrial projects).

According to Thobela, if current trends continue (e.g. price reductions), the REIPPPP segment will be dominated by multinationals and other players that have strong financials. The other two market segments have significant potential, and should therefore be developed in such a way as to ensure that broad participation is encouraged.

The downward price trajectory of PV power is expected to counter the effects of increasing fossil-fired generation costs, thereby resulting in the uptake of PV being increasingly a ‘no regret’ option.

“So PV will displace more of the coal-fired power generation on which South Africa has traditionally relied, as it becomes a more important mid-merit generation option. In addition, the expected drop in storage costs will enable PV to provide power during peak consumption periods as well,” explains Thobela.

PV development-the challenges and solutions

At a time when the country is short of generation capacity, it is counter-productive to limit the amount of PV that can be made available, explains Thobela. He adds that it is therefore imperative that the allocation for PV capacity is increased. “At least 2,000MW of PV capacity should be rolled out annually over 5 years, across the three market tiers mentioned earlier. This will have a very positive effect on the viability of projects in the context of falling prices.”

The delays that have been experienced in Rounds 3 and 4 of the REIPPPP have put a damper on the enthusiasm that was associated with the first two rounds, explains Thobela. So it is imperative that proactive steps are taken to ensure delays like these are not repeated. “The first step is the expeditious announcement of Round 4 preferred bidders. The second step is to rapidly move to Round 5 of the REIPPPP, and incorporate mechanisms to address grid capacity constraints, including a viable ‘self-build’ model for increasing transmission capacity and deployment of PV plants where there are no grid constraints.”

With respect to the mid-scale market segment, Thobela says that policy has to recognise that low prices, as a result of competition, render projects in the range 5–50MW economically unviable. Therefore, fixed prices are needed to boost the development of this market segment. The competitive prices discovered through the REIPPPP can be used for reference purposes. This approach will go a long way towards de-risking projects in this market segment.

Another challenge is that embedded PV for households requires the establishment of safety standards (for wiring) and training of installers. “We’re addressing these challenges by contributing to the finalisation of best practice guidelines and standards, as well as supporting initiatives aimed at training installers.”

A further challenge related to embedded PV is concern from the local government sector that as more customers take up rooftop PV solutions, municipal revenues - which are mainly derived from electricity sales - will fall. Thobela points out that SAPVIA is considering an approach that compensates municipalities for the loss of revenue while allowing customers to benefit from own PV-based generation. This will require net metering, which is being introduced steadily.

Economic viability of PV in off-grid applications

The economic viability of PV in off-grid applications is self-evident. This is especially true for those who rely heavily on diesel for power, given the high cost of acquiring the fuel. The potential is also there to increase the deployment of off-grid PV in areas where the extension of municipal or Eskom distribution networks is too costly to support the government’s drive to increase access to modern energy services.

Perceptions of PV by traditional electricity providers

According to SAPVIA, the uptake of embedded PV power in South Africa has been steadily increasing, though quietly. As the ability for homes and businesses to generate their own power is enhanced, what has traditionally been referred to as the ‘silent revolution’ will increasingly become a ‘loud disruption’ to the traditional, centralised, fossil-fired electricity generation market.

As customers increasingly migrate away from sole reliance on centralised power generation, the availability of PV as an alternative source of electricity is providing much-needed relief to a financially constrained national utility. This is a reality that is fast becoming obvious, says Thobela.

The advent of load-shedding has also highlighted the importance of PV as an option to support energy security – for instance by reducing the requirement for the extensive running of Eskom’s diesel generators. This comes at a time when the need to re-fuel Eskom’s diesel generators is typically cited as one of the reasons for load-shedding during weekends.