Highlights :
- South Africa’s problems in many ways mirror those of another country in India’s neighbourhood, Pakistan. A dysfunctional distribution entity weighed down by debt slowing down progress on much needed and faster adoption of renewables.
South Africa Announces Tender for 5 GW Renewable Capacity under BW7
South Africa has long been plagued by an energy crisis now. This has led to a situation where the nation faces rolling blackouts or load shedding as it has been called, for the past decade and more. It says something for the state of the power sector that a challenge that was predicted well over a decade back saw little to no effort made to prepare, leading to the current situation.
Blamed primarily on an ageing fleet of coal-fired power plants, managed by a remarkably corrupt and inefficient state owned distributor Eskom, 90% of South Africa’s energy (over 70% of electricity) still comes from coal. Not only does that make it the world’s 14th biggest green house emitter, but what has surprised many people is that despite great conditions for renewables, it has done so little to build on those natural advantages. Both solar and wind have made little inroads yet, despite their obvious demand and need in the country. A renewable energy programme introduced reluctantly in 2011 has added less than 6.5 GW to the grid in 13 years, way below other countries, at comparable levels of consumption. Wind energy capacity by contrast, has reached just 3 GW by 2023 end.
However, with a renewable target of 18 GW by 2030, mostly solar, South Africa faces the challenge of doubling up the rate of solar additions in the next 6 years to reach that target.
Falling Solar Rates Support Market
Falling solar rates might have pushed the country’s consumers past a critical threshold however. In 2023, rooftop solar additions reached 2.6 GW, according to figures from Eskom. In fact, since the start of 2023, installed rooftop solar photovoltaic (PV) capacity has more than quintupled. That momentum means South Africa is projected to become the 10th largest PV market in the world in 2024. Just in time to offer some respite to the better off who can afford solar, including solar with storage. However, even here, the government is giving mixed signals, as it did by removing the input tax credit for solar in February 2024. However, as a string of recent solar plans underscore, at current prices, the market can, and is, keen to add solar to the mix. Multiple utility scale plants of 100 MW and above are up and running, and now, plants larger than 250 MW are also being built.
Even at the municipality level, Solar has emerged as the first choice for users and municipalities.
According to a report from Stats SA titled “Solar energy for the poor,” solar has led with over 77% share in alternate sources of energy provided by municipalities. A total of 193,290 low-income households that were unconnected to the grid were covered in total. The breakup by power source includes:
-Solar – 149,919 (77.6%);
-Bio-ethanol gel (fire gel) – 9,702 (5%);
-Paraffin – 22,421 (11.6%);
-Other – 11,248 (5.8%).
However, out of South Africa’s 257 municipalities, only 21 municipalities across 7 provinces have taken up supply of solar home systems to 149,919 low-income households.
This is 36,722 more households than the 113,197 recorded in 2017 or around 7,300 new household installations each year. Leaving huge scope for improvement.
Progress With Storage To manage Renewables In Grid
In November 2023, South Africa announced preferred bidders for the first Battery Energy Storage IPP Procurement Programme tender, which aims to add 360 MW of dispatchable battery storage capacity to the national grid, subject to power purchase agreements (PPAs) with Eskom. Building on the success of this initial tender, South Africa has announced plans to release a second tender in June 2024 with more than 1200 MW capacity.
Within its Risk Mitigation IPP Procurement Programme, South Africa also signed project agreements with six hybrid solar PV, wind and battery storage projects that could see more than 400 MW of capacity added. Out of those, three projects with a capacity of 150 MW have already begun commercial operation under a 15‑year PPA with Eskom, while the rest are expected to start in 2024.
Challenges to Faster Adoption
At the municipal level, as always, it is all about money. Municipalities in South Africa depend heavily on the revenue generated by selling electricity to residents. Thus, affluent consumers moving off grid could impact municipal finances, leading to the costs of grid maintainance and other charges being passed on to those without solar. In a warning to go slow on solar roll outs, the government has given the example of a municipality in the Eastern Cape that recorded a R350 million ($18 million) loss in electricity sales, in October ’23. This issue of energy apartheid, where the richer get their energy at cheaper rates thanks to solar, while the poor bear the cost of grid maintainance and rising power costs is a challenge not just in South Africa but in any country today. Especially when governments offer subsidies, which end up benefiting the better off disproportionately for obvious reasons, like access to a terrace for solar, finance for remaining amount etc.
The biggest challenge remains Eskom. The government owned utility has unsustainable debt levels, very high operating costs, and little political will to fix those problems. Without tackling that problem head on, South Africa’s broader energy crisis, now into its second decade, and its solar ambitions, are both at risk.
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