Relief for wind and PV as South Africa takes the long-term view

ANALYSIS | With investors nervous over the antics of Eskom, a long-term commitment to wind and solar was just what was needed, writes Jo Reeves

South Africa’s long-awaited draft Integrated Resource Plan (IRP) this week brought some much-needed reasons for positivity for its wind and solar PV industries.

The policy document, which is supposed to be updated every two years, has not been renewed since 2010, causing uncertainty across all energy sectors.

Combined with utility provider Eskom’s recent refusal to sign power purchase agreements (PPAs) for independent power producers participating in the government’s Renewable Energy Power Producer’s Procurement Programme (REIPPPP), the tardy IRP has contributed to decreasing investor confidence over the past year.

The latest IRP allocates 37.4GW to wind energy and 17.6GW to solar PV, to be operational by 2050. This is in addition to the 13GW of renewable energy by 2025 already apportioned by the REIPPPP, 2.9GW of which is already operational – the vast majority of it wind and PV.

The released document lays out a clear path for wind and solar in the future. It will also help to alleviate investor concerns over whether the industry would continue to flourish after recent setbacks slowed the remarkable pace of growth that has taken place in five years.

The South African Wind Energy Association (SAWEA) is hailing it unqualified good news, as the figure represents what that organisation submitted as being achievable when participating in the consultation process. Solar PV body SAPVIA is more cautious, describing it as a step in the right direction, but not representative of the full amount that the technology could contribute by 2050.

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Concentrating solar power (CSP) has been left out of the allocations entirely, which has caused dismay amongst its supporters, who claim the dismissal ignores the contribution the technology can offer to base-load supply.

The draft IRP shows that wind and solar energy are conclusively the cheapest and fastest new-build energy options available to South Africa. By the fourth bidding round of the REIPPPP, prices for wind and solar averaged ZAR0.62/kWh ($0.044), more than 40% cheaper than new coal from both IPPs and Eskom.

This all adds up to good news for renewable energy. While current obstacles are causing short-term delay  – Eskom’s delay tactics and the knock-on effect of postponing REIPPPP progress – the long-term commitment demonstrated by the government to these technologies suggests these will just be stumbling blocks, and that the market will recover and continue to grow exponentially.

Former CEO of SAWEA Johan van den Berg said: “The IRP is to renewable energy what the engagement ring is to the wedding ceremony: the assurance upon which the big financial decisions are made and all those involved are brought together for a ceremony and a formal long-term union.”

On the subject of Eskom delaying PPAs he added: “The IRP is premised on the fact that Eskom will manage its conflict of interest as a vertically-integrated monopoly and do what its legal mandate requires it to do – facilitate IPPs generally and sign PPAs specifically.

“On this assumption, it is sensible to conclude that the current impasse will be resolved. The electricity sector is in dire need of further private sector investment and the country needs direct foreign investment.”

The draft document is now out for public consultation and allows for transparency in terms of least-cost options. It is scheduled to be made into policy by March 2017.

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