Re­new­ables: Sav­ing SA bil­lions

Finweek English Edition - - INSIGHT - BY FIN­WEEK STAFF

As power-hun­gry South Africa waits for the end­lessly de­layed thou­sands of megawatts from Eskom’s new Medupi and Kusile coal-fired plants, cheap re­new­able energy is qui­etly piling on ca­pac­ity.

Eskom’s des­per­ate drive over the past seven years to bol­ster energy avail­abil­ity has seen a slew of mostly in­de­pen­dently funded wind and so­lar projects be­ing launched, many of which are al­ready feed­ing the coun­try’s grid. By June 1 800MW of re­new­able power had been added, while the depart­ment of energy has al­lo­cated another 7 000MW for pro­cure­ment from in­de­pen­dent power pro­duc­ers (IPPs). The cost of power pro­duc­tion from re­new­able sources has plum­meted since the depart­ment of energy opened the com­pet­i­tive bid­ding process in 2009. In the f irst-round bids six years ago, wind power was snapped up at 115c/ kWh, but by round two, bids came in at 100c/kWh. Round three saw com­pa­nies bid their power at 74c/kWh, and by the time round four was reached in Au­gust 2014, the bid price had dropped to 62c/ kWh.

The cost of so­lar power dropped from 275c/kWh in round one to 79c/kWh in round four.

In con­trast, the ex­pected cost of coal­fired power gen­er­a­tion from Medupi is in the re­gion of 128c/kWh. The fi­nal costs of nu­clear power are forecast to be more ex­pen­sive than coal.

The Coun­cil for Sci­en­tif ic and In­dus­trial Re­search (CSIR) re­ported last month that re­new­able energy pro­vided around R4bn in ben­e­fits to South Africa in just the f irst half of this year. The num­bers were quan­ti­fied by cal­cu­lat­ing how much the coun­try would have lost − or would have been forced to spend − with­out ac­cess to these power sources.

In the re­port, the CSIR said the 2TWh (ter­awatt hours) pro­duced by mostly wind and so­lar energy had re­placed the elec­tric­ity that would have oth­er­wise been gen­er­ated from the open­cy­cle diesel-fired tur­bines and coal-fired power sta­tions. The re­search body cal­cu­lated this to have been a sav­ing of around R3.6bn. In ad­di­tion, power from the coun­try’s so­lar and wind projects had saved the econ­omy R4.6bn by negat­ing the need for in­ten­sive power users to shut down oper­a­tions.

The re­search body worked out that 203 hours of cur­tail­ment − also called “un­served energy” − had been avoided par­tic­u­larly in Jan­uary when the sup­ply was des­per­ately tight. Be­tween Jan­uary and June re­new­able energy had helped de­lay load-shed­ding, en­abled lower stages of load-shed­ding, or en­abled Eskom to avoid im­ple­ment­ing load­shed­ding at all.

Ac­cord­ing to Jo­han van den Berg, CEO of the South African Wind Energy As­so­ci­a­tion, the cost to the econ­omy of load- shed­ding stands at around R75/kWh. The ben­e­fits of re­new­able energy comes at a cost, how­ever: tar­iff pay­ments to IPPs amounted to R4.3bn from Jan­uary to June this year. And be­cause of Eskom’s empty cof­fers, at least one func­tion­ing re­new­able power sta­tion can’t be con­nected be­cause the util­ity can’t af­ford to put up the re­quired t rans­mis­sion l i nes. This sit­u­a­tion − cost­ing Eskom about R2m a month − be­gan in Oc­to­ber 2014, but the in­fra­struc­ture is ex­pected to be func­tion­ing by next month. And while re­new­able energy might be cheap and clean, the down­side is that it isn’t al­ways re­li­able. The sun doesn’t al­ways shine, the wind doesn’t al­ways blow as hard as it is re­quired to, and in pe­ri­ods of low rain­fall, hy­dro power be­comes in­creas­ingly un­avail­able.

Crit­ics say that for ev­ery megawatt of power re­new­ables pro­duce, another megawatt needs to be made avail­able from tra­di­tional sources like coal, gas and diesel as in­sur­ance against the va­garies of the weather.

How­ever, Van den Berg said this crit­i­cism isn’t en­tirely ac­cu­rate. Around two years of con­tin­u­ous as­sess­ment of wind avail­abil­ity and speed is car­ried out be­fore a de­ci­sion is taken to put up a plant. Van den Berg said that a range of wind har­ness­ing tech­nolo­gies are now avail­able. The choice of wind-

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