SA should not shy away from renewable energy
• Government must fully commit to green technology including solar power and proceed with projects in pipeline
For years, solar panels seemed an inadequate, minor solution for Africa’s energy needs. With more than 600-million people living without electricity service and many more experiencing daily interruptions, could this technology ever make an impact?
Yes. In less than a decade, the cost of producing solar photovoltaic (PV) panels has dropped 80%, thanks to technological advances and a surge in demand amid climate-change concerns.
Even without subsidies, solar tariffs are now near parity with coal-, oil-, and gas-fired electricity. Bloomberg New Energy Finance predicts that solar PV will be the least-cost generation technology in most countries by 2030, as well as one of the fastest to build.
The consequences of these market shifts are already apparent. In developed and developing countries, solar panels are moving beyond household and off-grid uses to supply industrial power and feed clean energy into national grids at large scale. This is driven by economics as much as policy — virtually every month, there are new recordlow tariffs in solar power, including in emerging markets.
The challenge today is that we must ensure that these lower costs provide affordable power that allows businesses to create jobs and the poor to improve their lives.
Through its ambitious renewable energy programme, SA has shown that encouraging private sector investment can create a new market for largescale solar power across a continent in which hydropower and fossil fuels have dominated the energy mix for decades. Since the government outlined plans in 2010 to triple its renewable energy generation within a decade, Eskom has strung hundreds of kilometres of highvoltage power lines to more than 50 private wind and solar plants across the country.
Auctions have attracted R194bn in private sector financing for projects that will add 6-gigawatts (GW) to SA’s grid, mainly through solar and wind power, including both solar PV and concentrated solar power. The tenders have driven down solar PV tariffs 75%, from R3.65 per kilowatt hour in the first round to 91c/kWh in the most recent one.
Regrettably, SA’s programme has stalled for a host of reasons — even though investor interest has remained strong. But SA’s results to date have already had an effect for countries across sub-Saharan Africa. For one thing, the South African experience helped inspire a new programme called Scaling Solar — designed to replicate the best aspects of SA’s renewable energy auctions in smaller countries with utility-sized solar projects that may not otherwise attract much investor attention.
It includes a set of standardised, pre-negotiated documents for governments and developers to use, reducing risks for everyone involved. Scaling Solar includes an offer of World Bank Group financing and guarantees to boost confidence that projects will advance.
Four countries have signed up so far — Zambia, Senegal, Madagascar and Ethiopia — with plans to develop more than 1GW of solar power through the process. Zambia was the first country to run a Scaling Solar tender and, that auction yielded the lowest tariffs for solar power to date in sub-Saharan Africa – 6 US cents per kilowatt hour, fixed for 25 years. This provides a country in which only onefifth of the population has access to electricity with a new source of affordable, clean energy, with no added burden on the government’s budget.
There is no guarantee that subsequent Scaling Solar tenders will achieve the same prices as seen in Zambia, but this is an encouraging start for the programme.
It shows that ideas as simple as standardised documents and clearly written rules can create a new market for solar power across Africa and in other regions. Governments should take note.
SA now faces critical decisions in its energy planning. We hope that SA moves ahead with its renewable projects in the pipeline. One way forward is a plan by the Department of Energy that would increase SA’s solar and wind power in combination with dispatchable gasfired generation. SA also could explore the expansion of publicprivate partnerships to support the development of energy storage, with batteries that help solar power systems distribute electricity, not only when the sun is shining. Economies of scale will be necessary to drive down the costs of batteries and other storage technologies.
This could be another gamechanger for global energy markets, and for SA. And there’s good reason to believe that SA could take the lead again in innovation in renewable energy – after all, it has already done it.
ESKOM HAS STRUNG HIGH-VOLTAGE POWER LINES TO MORE THAN 50 PRIVATE WIND AND SOLAR PLANTS
■ Le Houérou is the CEO and executive vice-president of International Finance Corporation, the private sector arm of the World Bank Group.