MechChem Africa

Peter Middleton looks at current progress being made towards grid parity from independent renewable power projects, including those listed in the delayed Bid Window 4, and questions the reluctance of Eskom to champion and expand the REIPPP Programme.

Peter pic latestAn article by LeeAnne Graves published in UAE’s The National reports that the Abu Dhabi Water and Electricity Company has signed a 25-year power purchase agreement with Japan’s Marubeni and Jinko Solar for a 1.17 GW PV solar power plant.

The plant’s weighted Bid price was 2.42 US-cents per kWh, just under R0.32/kWh at an exchange rate of R13/$.

Bloomberg New Energy Finance (BNEF) estimates that the current local (UAE) price of power from combined cycle natural gas plants in the Middle East is at least 3.0 US cents (R0.39/kWh), which, with adjustments for inflation, puts the price of solar PV from this plant at between 2.0% and 19% cheaper than new-build gas plants.

The article also notes that solar PV panel prices have fallen by 80% since 2009, according to the Abu Dhabi-based International Renewable Energy Agency. IRP 2010 was published shortly after this date, so the renewable energy and other energy mix recommendations were based around much higher renewable energy tariffs.

Despite the recent spat between Eskom’s ex- acting CEO Koko and, well, everyone else, South Africa’s renewables story is “truly inspirational”, said Max Thabiso Edkins, from the World Bank’s Connect4Climate programme, speaking earlier this year at an Energy21 Exchange Hub meeting. One of his main messages about renewable energy: it is no longer as expensive as people think.

To date, the REIPPPP has facilitated nearly R200- billion worth of investment across projects with a combined capacity of over 6 000 MW. The 26 delayed projects procured under the fourth Bid window and its expansion are said to have a combined additional investment value of R50-billion.

From a price perspective, average wind prices in South Africa went down from R1.51/kWh in 2011’s Bid Window 1 to the current R0.62/kWh. Average solar PV prices went down from R3.65/kWh in Bid Window 1 to the current R0.62/kWh. For Bid Window 4, Koko was prepared to sign all 13 IPP Bids at R0.62/kWh or below, but not for the others, which are all below R0.72/kWh: a deal breaker?

It is hard to understand why there appears to be so much resistance to expanding the renewable programme and a contrasting determination to go full steam ahead with the nuclear programme. On the renewable side, Eskom says that we do not need the additional capacity at the moment and signing the

Bid Window 4 PPAs will “negatively affect the utility financially”. But a 9.6 GW nuclear build programme won’t?

One of the key strengths of the REIPPPP is that it is based on long-term power-purchase agreements (PPAs) and that the developer invests the capital required to build the plant. The utility buys the power, which it immediately sells on to the consumer.

For renewable plant, therefore, Eskom does not have to secure billions of rands of funding from lending agencies with associated Government guarantees. Varying lending agency interest rates need not be factored into the annual tariffs and all operational, breakdown and maintenance costs are borne by the IPP. The only commitment the state and/or the utility makes is to purchase the power produced.

As a consumer of Joburg Electricity, I am already paying R 1.08/kWh on the minimum (Step 1) tariff: this before network charges and demand side management additions. I understand that distribution also costs money and that the utility cannot depend on PV or wind generated power alone, but the IPP model and the costs of the renewable energy generated by these technologies can surely no longer be rejected because they are too expensive.

Relating to energy issues this month, we report on: Gas Africa 2017, which adopted the theme, ‘Southern Africa is now proven to have huge natural gas deposits. How will this major clean power source affect South Africa and the region’; the gas pipeline being built in Tanzania to give 2 000 MW of new gas-fired electricity generation by 2018; Aurecon Hydro and REH’s small hydro successes; and the increasing use of aluminium and dry-type cast-resin transformers for renewable and industrial plants.

Across Africa and in South Africa, we are blessed with multiple energy options. We have coal, gas and uranium to fuel thermal power plant. Around our coast- line, we have abundance of wind energy resources; inland, we have some of the best solar irradiation levels in the world; and north of our borders, hydro-resources in abundance.

We should be looking to use them all. But for the new IRP, as per the circulating draft, it has got to be sensible to maximise our dependence on renewables – 13.5% PV, 29% wind and 2.0 % hydro from Inga is being proposed; while using more gas (10% OCGT and 17% CCGT is being suggested) to accommodate weather fluctuations. Nuclear, along with coal, will remain essential for base load generation, but shouldn’t we be introducing these on a minimum possible basis?

BANNER 8

Contact MechChem Africa

Title: Editor
Name: Peter Middleton
Email: mechchemafrica@crown.co.za or peterm@crown.co.za
Phone: +27 11 622 4770
Fax: +27 11 615 6108

Title: Editor
Name: Glynnis Koch
Email: mechchemafrica@crown.co.za
Phone: +27 11 622 4770
Fax: +27 11 615 6108

Title: Advertising Manager
Name: Brenda Karathanasis
Email: brendak@crown.co.za
Phone: +27 11 622-4770
Fax: +27 11 615-6108

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