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South Africa continues to benefit from renewable energy investments, says study

Out-Law News | 25 Aug 2015 | 4:46 pm | 2 min. read

Renewable energy from South Africa’s first wind and solar plants generated more than 4 billion rand (ZAR) ($309 million) for the country during the first six months of 2015 than they cost, according to a new study.

The independent study by the South African government-owned Council for Scientific and Industrial Research (CSIR), the second of its kind, comes as the Department of Energy continues with a procurement programme to expand the nation’s electricity generating capacity.

The CSIR said the “first benefit, derived from diesel and coal fuel cost savings, is pinned at ZAR 3.6bn ($278m)”. “This is because 2 terawatt hours (TWh) of wind and solar energy replaced the electricity that would have otherwise been generated from diesel and coal (1.5 TWh from diesel-fired open-cycled gas turbines and 0.5 TWh from coal power stations)”.

According to the CSIR, the “second benefit” was a saving of ZAR 4.6bn to the economy “derived from 203 hours of so-called 'unserved energy' that were avoided thanks to the contribution of the wind and solar projects”.

Unserved energy is the expected amount of energy that would fail to be supplied owing to generating capacity deficiencies or shortages in basic energy supplies.

During the 203 hours, “the supply situation was so tight that some customers' energy supply would have had to be curtailed if it had not been for the renewables”, the CSIR said. “The avoidance of unserved energy cumulated into the effect that during 15 days from January to June 2015, load shedding was avoided entirely, delayed, or a higher stage of load shedding prevented thanks to the contribution of the wind and solar projects.”

The CSIR said direct cash savings on fuel spending for the national power utility Eskom and “the macroeconomic benefits of having avoided ‘unserved energy’ are countered by the tariff payments to the independent power producers (IPPs) of the first wind and solar projects”. According to the study, those payments amounted to ZAR 4.3bn ($332m) from January to June 2015. Therefore, renewables contributed a total net benefit of R4 billion (or R2 per kWh of renewable energy) to the economy.

The CSIR said: “As for wind alone, these projects were cash positive for Eskom to the tune of ZAR 300m ($23m), saving ZAR 1.5bn ($116m) in fuel payments while costing only ZAR 1.2bn ($92m) in tariff payments to IPPs.

The head of the CSIR’s ‘energy centre’ Tobias Bischof-Niemz said the study was based on actual hourly production data for the different supply categories of the South African power system, such as coal, diesel, wind and solar. “We've 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’.”

Bischof-Niemz said the study showed that a trend established by the CSIR’s first study, the results of which were published last January, “continued and speeded up, and that renewable energy provided a huge net financial benefit to the country”

“Without the solar and wind projects, we would have spent significant additional amounts on diesel, and energy would have had to be 'unserved' during more than 200 additional hours from January to June 2015,” Bischof-Niemz said.

The cost per kilowatt-hour of renewable energy for new projects in South Africa is now close to ZAR 0.80 (about $0.06) for solar and between ZAR 0.60-0.70 ($0.46-0.54) for wind projects, Bischof-Niemz said. “That will keep the net financial benefits of new renewables positive, even in a future with a less constrained power system.”

In June 2015, South Africa’s energy minister announced plans to step up the procurement process for new gas-fired plants to revitalise the country’s struggling energy sector amid severe power shortages.

Tina Joemat-Pettersson told South Africa’s National Assembly (17-page / 300 KB PDF) that the “lack of timely coordination of our planning, alignment and implementation of our country’s energy programmes has created serious challenges for us”.

Private sector involvement in South Africa’s energy sector through the IPP programme will also continue apace, with a further 17,000 megawatts of electricity generating capacity set to come on stream from renewables, coal, gas and co-generation “towards the end of 2022,” the minister said. In addition, South Africa has launched a process to procure a new generation of nuclear power plants.