Financial Benefits of Renewables in South Africa

South Africa has started implementing an ambitious programme to diversify its power generating mix by bringing new renewables (mainly wind and solar) into the system.

The CSIR Energy Centre has developed a methodology to quantify the financial costs and benefits of the first 1 600 megawatt (MW) of wind and solar photovoltaic (PV) projects that came online during 2014.
The result is that during 2014, renewables generated more financial value for the South African economy than they cost. R3.7 billion in conventional fuel savings together with R1.6 billion economic value of avoided curtailment of customer load, so called “unserved energy”, give a total benefit of R5.3 billion in 2014, while the tariff payments to Independent Power Producers were only R4.5 billion in the same period.

In a recent talk, Dr Tobias Bischof-Niemz, head of the CSIR’s new energy initiative, explained the details of the methodology, the assumptions that were used, and how the approach, which only looks at short-term fuel-saving implications, in a second phase needs to be expanded to cover medium- and long-term benefits of renewables as well.

South Africa’s power system is currently under severe constraints, with power generators meant to be the “barely-ever-used” safety net for the system (diesel-fired gas turbines) running at more than 15% average annual load factor, and with one controlled load shedding in early March 2014, and several more in late 2014.

At the same time, the Department of Energy is running a procurement programme to expand the generation capacity in the country. It has already procured close to 4 000 (MW) of renewable capacity (mainly wind and solar) from Independent Power Producers (IPPs). The Power Purchase Agreements (PPAs) of all 4 000 MW were signed between the IPPs and , South Africa’s state-owned power company, as the off-taker/buyer. By the end of 2014, approximately 1 600 MW of wind (600 MW) and PV (1 000 MW) projects had been commissioned and were feeding energy into the grid.

InusInus Dreckmeyr, CEO of Netshield who attended the forum, had this to say:

“It is amazing to see that there is already so much renewable energy being created in South-Africa through photo voltaic panels and wind turbines.” He went on to say, “The eventual success is all dependant on NERSA and their position and regulations regarding the feedback of independent energy through grid tied systems.”

This study addressed the questions how much fuel costs the first 1 600 MW of wind and PV saved during the year 2014 (by reducing utilisation of diesel-fired gas turbines and the expensive part of the coal fleet) and how much of “unserved energy” they have avoided that would have been necessary without them.