Dr Eddie O’Connor, co-founder and chief executive of Mainstream Renewable Power, a renewable energy group discusses the cost of wind and solar power in South Africa.
Currently Eskom is procuring electricity from renewable energy companies that are cheaper than power generated from new coal-powered plants. Analysts estimate the cost per kilowatt hour from Medupi is in the region of ZAR1.28.
Compare this to ZAR62c per kWh for wind power and ZAR79c per kWh for solar power. These were prices bid for the wind and solar projects awarded in the Government’s most recent renewable energy tendering process.
Why is this the case?
The most fundamental benefit of wind and solar power is that the fuel is free. Once the wind or solar farm is paid for, it goes on generating electricity for many years without having to pay for fuels such as coal or gas. This, coupled with the economies of scale and technology costs, has driven down the cost of wind and solar here in South Africa over the past four years.
The drop in prices from Round 1 (of the Renewable Energy Independent Power Producer Procurement Programme) in 2011 and Round 4 in 2015 has been quite dramatic.
|Round 1||Round 4|
The question is will these prices continue to drop as more bidding rounds are introduced or is there a threshold?
It is likely that pricing will reduce further, especially looking at the trend since Round 1, although it is probably reaching a floor. There may also be some changes to Government’s renewable energy procurement process in 2016, such as increased local ownership and local content which may influence tariffs to stagnate or potentially increase.
Where do I see South Africa going in the next 2-5 years in terms of utility scale renewable power?
South Africa’s grid is impressive and currently in good shape. There are some areas that are grid constrained, particular for wind.
For solar we expect to see projects move closer to the load centres and towards the east of the country – where the resource may be lower but grid easy and affordable.
In the short term, grid access especially transmission, can be enabled and streamlined by improving Eskom’s policy on transmission self-build. We need a scenario where transmission self-build is guaranteed and not determined on ad-hoc basis.
I predict a change in how municipalities generate and sell their power taking place over the coming years. With the business case for renewable energy being so strong I see Municipalities resurrecting the systems where they generated and sold their own energy to their residents 50 years ago.
So it’s a very exciting and changing time for electricity generation in South Africa.
Eddie O’Connor holds a Bachelor of Chemical Engineering (1970) and a Master’s in Industrial Engineering (1976) both from University College Dublin as well as having a doctorate in Business Administration from the International Management Centres, Europe. He is an honorary Director of the European Wind Energy Association. He was presented with the first ever Leadership award at the annual Ernst & Young Global Renewable Energy Awards.