South Africa: Calls for 1.5 GW of annual PV, 55,000 new jobs – comment

Speaking of the positive benefits of solar at Energy Indaba, held last week in Johannesburg, SAPVIA chairperson Davin Chown unveiled a five point action plan to boost the renewable energy. Top of the wish list was an annual installation rate of 1.5 GW of PV.

Looking at the current installed capacity, however, there is a lot to be done before this goal can be achieved.

Based on Bloomberg New Energy Finance’s (BNEF’s) installation figures, South Africa is on track to install just 320 MW this year, which would represent a decrease of 13% on 2016. Meanwhile, by the end of 2016, cumulative installations had reached 1.47 GW, according to the country’s Council for Scientific and Industrial Research (CSIR).

The PV association could not be reached for comment. Chris Ahlfeldt, energy specialist at Blue Horizon Energy Consulting Services tells pv magazine, however, “SAPVIA’s 5 point plan is a proactive approach to highlight the opportunity the solar sector presents for government to help meet its goals of inclusive economic growth and job creation.

“Whether or not 1.5GW/yr is realistic depends on SAPVIA’s assumptions for growth in customer demand, the role of other generation sources in helping meet this demand, and the decommissioning rate of Eskom’s current generation fleet as many of Eskom’s current power plants are nearing the end of their planned operational lifetime.”

Regarding government support for solar in South Africa, Ahlfeldt says that some areas have been more supportive than others. However, it is currently primarily focused on the ruling party’s National Conference in mid-December.

“Depending on the results of the election, the new ANC leadership will play a significant role in setting the direction for the energy industry and holding state owned enterprises like Eskom accountable to keep future commitments and policy set by government,” he says.

PPAs – will they ever be signed?

There is also the problem that 27 large-scale solar projects are awaiting PPA signing under the country’s Renewable Energy Independent Power Producer Procurement Program (REIPPPP).

On September 1, the government said it would sign the outstanding PPAs from round 3.5 and round 4 of the REIPPPP by the end of October, at lower-than-agreed tariffs (770 rand ($54) per MWh).

At the time, South African consultant and PV expert Chris Ahlfeldt said solar may be the technology that is least affected by the renegotiation of the PPAs, and that a workable solution for all of the 12 related solar projects is possible.

In its 4Q 2017 Global PV Market Outlook, BNEF wrote of the issue, “Interested parties have questioned the lawfulness of the renegotiation of already-agreed PPA prices. The extent to which independent power producers (IPPs) are willing to negotiate will probably depend on how quickly they intend to close these projects.”

The October deadline was missed, and another, for November 20, was set. This also passed, with no news. Ahlfeldt says, however, that new South African Energy Minister, David Mahlobo spoke of the issue at the Energy Indaba event, suggesting that Eskom would sign the PPAs this week.

“… but it sounds like the price cap was not strictly enforced and IPPs were able to negotiate other parts of the PPA like enterprise development payment terms to compensate for higher prices,” continues Ahlfeldt.

He adds, “Despite challenges and delays with the REI4P, IPPs have a responsibility to maintain the renewable energy industry’s reputation. PPA terms that exceed the price cap and/or their market value raise expectations on IPPs to successfully deliver on enterprise development goals.

BNEF said that all other future rounds of the REIPPP have been put on hold until the government completes necessary planning. “Due to the further delays in the utility-scale projects, we have reduced our 2018 forecast to 82-229MW as it is now unlikely that the Round 4 projects will reach commercial operation in 2018, bar perhaps one or two of the smaller-sized ones. The commercial and residential markets are unaffected and continue to grow.”

Clear support

SAPVIA is also looking to support the creation of Independent Power Producers (IPPs) and Small and Medium Enterprises (SMEs); create 55,000 local jobs in the industry by 2025; and deploy PV in Renewable Energy Development Zones and Special Economic Zones.

Finally, it aims to launch its Solar Industry Development Plan and Energy Transition Programme within the next six months.

To achieve this, SAPVIA is calling on the South African government to roll out consistent and strong renewable energy policies, and to actively partner with the solar sector.

“There are just under 1500 MW of small and medium-sized PV projects developed and awaiting permissioning sic. It is clear that this sector is ready for immediate roll-out and can drive much-needed industrialization, job creation and economic growth,” said Chown.

Distributed generation

Commenting on the biggest solar opportunities in South Africa, Ahlfeldt says, “Significant opportunity in the solar industry for local jobs and economic growth exists in the distributed generation sector.

“This market has seen considerable growth on roof-top installations for commercial buildings and upper income residential homes over the past few years, but consistent support from government is needed to sustain and accelerate growth for all customers.

“A streamlined wheeling approval process and recently implemented national embedded generation regulations are a start, but industry needs to have confidence in the government’s long-term commitment to allow solar projects to compete on a level playing field with other power projects before they make long-term investments in South Africa.”

Last week, a new study conducted by Jonas Hörsch, a researcher from Germany’s Frankfurt Institute for Advanced Studies at the Goethe-University Frankfurt found that a mix of solar and wind may be over 10% cheaper than power generation from new coal and nuclear plants in South Africa, even if the cost of renewables and batteries will see no further reduction from today until 2050.