Can you briefly tell me where we are with renewable energy in SA?
We have a Renewable Energy Independent Power Producer Procurement Programme (called REIPPPP) that is run by the Department of Energy, the national energy regulator (NERSA) and Eskom. Its target is to procure 3725MW of renewable energy, mainly wind and solar, biomass and CSP (concentrated solar power), as per the Integrated Resource Plan, by 2016. The first two rounds of the programme have been run and Round 3 closes on the 7th August 2013. In this round, the last 1165MW of the original figure will be procured. Bidders are evaluated 70% on price and 30% on their socio-economic development and enterprise development commitments and have to achieve certain thresholds before Government will consider the bid as being compliant. So it’s a bidding process that is driven by SED/ED commitments and pricing. In total 18 solar PV projects were awarded licenses in Round 1, and 9 in Round 2.
When will these projects begin construction?
Round 1 projects are going into construction now. It takes about one year to construct, so these first projects will be commissioned by April-May 2014. The projects in Round 2 only reach financial close in March 2013.
The size of projects in the first round was quite small. In the second round there were a greater number of larger projects. And that’s the trend; you’re starting to see people going for bigger projects because it’s very hard to make some of the smaller projects work, especially because the grid costs are starting to impact quite severely on projects.
What is the likelihood that a local manufacturing industry making solar panels will emerge in South Africa?
There is already solar manufacturing in SA: SunPower/Tenesol and Solaire Direct. Some people will still use panels from outside SA depending on price and availability. It’s a lot easier for manufacturers to set up solar plants in South Africa than it is for them to set up big capital plants making wind turbines, nacelles and blades.
I’m assuming solar energy is still a lot pricier than fossil fuels. What is your outlook for the price of solar energy?
No, it is not. Fossil fuels have a major externality cost which solar does not. The University of Pretoria study shows that the externality cost of coal is up to R1.90/kwh...add on the 65c/kwh that Eskom says coal costs, and that will give you an idea of the indicative prices. Solar is already more affordable than Eskom and Council power in most of the big urban load centres because of the heavy mark ups by the Municipalities.
What are the benefits of solar PV technology compared to other types of renewable energy?
PV is a lot more portable, a lot more flexible than wind energy is. It’s a lot less confined to geographic areas across the country and it’s easier to construct. We’ve got a pretty good solar regime right across South Africa, it’s only problematic along coastal areas where there’s mist and cloud. Solar energy should make up 50% of South Africa’s renewable energy mix.
1450MW has been set aside for solar PV until 2016. What happens after that in SA?
1165MW is left to put up in Round 3 of the REIPPP. If anything gets left over from this round, all of that is likely to get put into a new procurement program. The government’s intention is to have one procurement round roughly in August of each year. There are also the large solar parks of roughly 5000MW planned, and then there is the Ministerial Determination of a further 3200MW of renewable energy. Also you need to note that the IRP2010 makes provision for 8400MW of solar PV to be procured by Government.
Is the government doing enough to encourage the uptake of solar energy?
The solar roadmap process is being driven by the Department of Energy, and Department of Science and Technology, so government is putting its shoulder to the wheel. Life would be a lot easier if government would have stuck with the feed-in tariff. We still believe a feed-in tariff would have been a better mechanism to get stability into the market, into pricing, and to de-risk the economy.
What projects is Mainstream carrying out?
Genesis/Mainstream is now going into construction on the two 50MW PV plants in Kimberley and de Aar. The joint venture between the two parties has developed over 4500MW of solar and wind projects in South Africa.