The Zuma government’s determination to see through a nuclear power programme for decades in South Africa makes no sense, especially when all the evidence points to renewable energy being not only cheaper to build and maintain but also being more environmentally friendly. It is also good for the economy and has socio-economic benefits – creating jobs and uplifting previously disadvantaged communities through ownership and equity ownership of renewable energy projects.

Renewable energy

While the 2010–11 Plan was rapidly going out of date and stakeholders debated what South African renewable electricity might cost, South Africa’s DoE launched a bold experiment to substitute market data for speculationⁱ. By end-2017 its pioneering auctions or open-tenders had resulted in the selection of 6.3 GW of renewable energy projects of which 3.2 GW had been constructed and connected to the grid (with average lead times of 1.6 years, one-sixth nuclear power’s norm)ⁱⁱ. In January to June 2015 alone, that new renewable capacity saved R4-billion more – in fuel and in avoided load-shedding – than it costⁱⁱⁱ. Despite Eskom’s delay in signing contracts with winning bidders in the most recent auction^iv, it may fairly be said that South Africa has been a world pioneer in the transparent competitive procurement and market development of renewable electricity, alongside such other emerging economies as Brazil, Mexico, Chile, and lately India^v, which (like China) is adding modern renewable generation faster than nuclear power did in its fastest global growth decade.

Renewable investment and price results have been impressive. South Africa’s transparent auctions have already cut solar PV electricity prices by close to 80% and wind energy by nearly 50%^vi, with further price drops in the latest, so-called expedited, auction for both wind and PV power to about 4.7 US¢ per kilowatt-hour (kWh). Renewable costs in South Africa are now near the lower end of world market prices^vii: unsubsidised PV and onshore wind in the world market today sell at a levelised real price at or below 3–5 US¢/kWh^viii, while the latest renewable auction prices in emerging economies have fallen below 2 US¢/kWh^ix. Thus, modern renewables are up to seven-fold cheaper than new nuclear power, which sells in the world market for between 9 and 15+ US¢/kWh^x,xi,xii – eg, 12.4¢ for a Turkish nuclear plant planned by Russia (repeatedly delayed^xiii, unable to attract private financing^xiv, suspended^xv,xvi for a time, but resumed in 2017^xvii).

Renewables everywhere thrive on the fair and open competition that no new nuclear plant has achieved anywhere. Nuclear costs are murky, rising, and augmented by the long-term burdens of decommissioning the radioactive plants^xviii,xix and storing their wastes for millennia. In contrast, renewable energy costs are transparent and falling. Wind power and PV have no costly long-term obligations, consequential wastes, climate burdens, or risks, use virtually no water^xx, and have almost no operating costs: they burn no fuel, and the wind and sun are free.

This renewable revolution is global^xxi. From Chile and Mexico to India and the Middle East, renewables sweep unsubsidised auctions. Worldwide, they dominate new capacity^xxii, and are expected by Bloomberg New Energy Finance (based on the world’s most detailed transaction-tracking and market analytics) to capture 72% of global power generation investment to 2040 as levelised costs plummet by another 66% for PV, 47% for onshore wind, and 71% for inshore wind^xxiii. Even the conservative International Energy Agency forecasters, who had raised by one-third their solar growth forecasts (already 19 times those they made in 2000), expected renewables’ lower cost to drive 35-fold greater global capacity additions in 2017 to 2040 from renewables than from nuclear power^xxiv. There is no reason to expect SA relative prices to drive the opposite conclusion. Consistent with these expectations, 2016 new capital commitments worldwide were eight to 23 times larger for modern renewables than for nuclear power^xxv, and of 162 nations’ Paris pledges (INDCs), only five proposed climate mitigation by expanding nuclear power, vs 111 with renewable plans or targets.

China has generated more wind power than nuclear electricity since 2012. In 2013, it added more PV than the US had added cumulatively since developing it in 1954; in 2014 it invested nine times more in renewables than nuclear; in 2015 it added 46 GW of wind and solar power (more than South Africa’s 2010 total generating capacity); and in 2016, it built three football pitches’ solar installations per hour, including 11.3 GW of solar capacity in the month of June alone. China is building two-fifths of the world’s new nuclear reactors (albeit with rising delays, costs^xxvi, and economic doubts^xxvii), but invested ninefold more in renewables in 2014, and in 2015, boosted its 2020 wind-and-PV target to 450 GW while its nuclear efforts lagged^xxviii. By then the immediate past Chairman of China’s State Grid was predicting ^xxix that in 2050, global electricity will come from 14% hydro, 73% other renewables (six times their current market share), 7% gas, 3% coal, and just 3% nuclear (less than one-third its current market share).

India has quadrupled its renewables target. It is planning 100 GW of solar power (now cheaper than coal power) by 2022^xxx and can electrify households cheaper and faster from decentralised solar power than from the grid. In the past few years, India’s wind power, like China’s, has outproduced its nuclear stations^xxxi,xxxii.

Over 3-billion people now get more non-hydro renewable than nuclear electricity, in three of the world’s four top economies (China, Germany, Japan) and in Brazil, India, Mexico, Holland, Spain, and the United Kingdom^xxxiii. From 2000 to 2016, wind power added 11 times nuclear’s added capacity and PV seven times^xxxiv. Measured in increases of generated output, wind outpaced nuclear 29-fold, and PV 10-fold. In each year from 2010 to 2015, nuclear power added fewer than 6 GW, virtually all financed by conscripted capital, while modern renewables added over 80 GW and got more than a quarter-trillion dollars’ voluntary private investment.

This revolution has come to Africa. African heads of state now back the continent-wide African Renewable Energy Initiative, which plans – emphasizing small-scale “virtual power stations” – to develop at least 10 GW of new renewable capacity by 2020 and at least 300 GW by 2030, “potentially making the continent‘s electricity supply the cleanest in the world.” This $500+billion effort, led by such nations as Kenya and Rwanda, is backed by the African Development Bank, World Bank, and private investors^xxxv. With the lowest-cost African solar microgrids now costing half the average, and the best designs (validated elsewhere) able to cut Africa’s lowest cost by another half^xxxvi, Africa’s solar revolution is rapidly accelerating. There is no corresponding evidence that the African continent’s “huge appetite for nuclear energy” claimed by nuclear advocates and referenced at the start of this paper is financeable or indeed more than rhetorical.

Social and economic benefits of renewable energy in South Africa

Importantly, most of South Africa’s R193-billion in renewable projects were financed by banks and private investors, including R53-billion from abroad^xxxvii. It’s not hard to see why: a solar plant built in sunny South Africa pays for itself twice as fast as one in Italy^xxxviii. And while big renewable projects are very fast, small-scale renewable projects, such as solar power for a home or a village, can be up and running within weeks.

The International Renewable Energy Agency (IRENA) found that worldwide, doubling renewables’ energy share by 2030 (to 36%) could raise global GDP up to 1.1%, improve welfare up to 3.7%, and support over 24-million renewable-energy jobs^xxxix. These benefits are fractal, demonstrated by renewable initiatives’ already bringing important economic benefits to South Africans^xl.

A unique feature of South Africa’s renewable energy IPP programme has been its promotion of social and economic benefits. Bids were evaluated on a 70/30 split between price and a basket of economic development (ED) criteria divided among seven broad categories: job creation, local content, management control, preferential procurement, enterprise development, and socio-economic development. Table 1 shows the weighting given to each of these categories as well as threshold levels that had to be reached for bids to be compliant and target levels to increase bid scores^xli.

Table 1: Economic Development Criteria Thresholds, Targets and Achievements in the REIPPPPP

*Depending on technology. 45% for solar PV, 40% for all other technologies.

**As percentage of total procurement spend.

***As a percentage of Revenue

Table 2: REIPPPP Job Creation Commitments for Auctions 1 – 4 (1 job = 1 job year)

Source: Authors’ calculations from DOE Project IPP data

Successful bidders are required to report on each of these commitments on a quarterly basis, and a specific provision in the Government Support Agreement between the bidders and the DoE allows for fines or the cancelling of the Power Purchase Agreement if a project underperforms on these commitments. According to reports from the DoE’s IPP Office, completed projects have been meeting or exceeding their economic development commitments for all the above categories^xlii.

Job creation accounts for 25% of the ED points available and comprises five sub-elements, as elucidated in Table 2. A total of 32,532 job years have been created through the programme to date for South African citizens, with construction phase employment being significantly higher than planned. The 57 projects that have successfully completed construction and moved into operation planned to deliver 20,689 job years during the construction phase, but achieved 29,046 job years. The number of people from local communities employed during construction was more than double that stated in project bids, and the number of black South African citizens employed during construction also exceeded the planned numbers by 83%^xliii. While the majority of jobs created appear to be unskilled^xliv, the share of skilled black citizens as a percentage of skilled employees also appears to show significant results, for both construction (67%) and operations (77%), substantially exceeding both the threshold (18%) and target (30%) for this element.

Equipment local content requirements also account for 25% of the total ED score, with the objective of creating jobs through increased local manufacturing. This criterion, assessed by the value of local content expenditure in relation to all expenditure for the construction of the project, has undergone several changes as the renewable energy auctions progressed. A stricter definition of what constituted ‘local content’ was enforced in the second auction, with further refinements to the definition and required disclosures in the third auction. Local content thresholds and targets were also increased for almost all technologies across the subsequent renewable energy auctions – and consistently exceeded (Figure 1). While there have been questions raised about the manner in which some of these requirements have been met and the actual long-term impacts of these commitments^xlv, the programme’s local content requirements have led several technology and component manufacturers to establish local manufacturing facilities. Current local content commitments by IPPs amount to R67,1-billion, equivalent to about 45% of total equipment value. Actual local content expenditure of projects that have started and completed construction exceeds this level and is now about 50% of total project value^xlvi.

Figure 1: Local Content Tracking – Actual % vs. targets (active projects)^xlvii

The South African renewable energy auctions also aim to direct development to previously marginalised and disadvantaged groups and communities. Black South Africans own, on average, 31% of projects that have reached financial close (the threshold requirement was 30%). Black local communities further own on average 11% of the equity of projects (the target was 5%). An average of 18% shareholding by black people in construction (EPC) contractors has been achieved – against a threshold level of 8% and a target of 20%. The shareholding of black South Africans in O&M companies is 19% for the 56 projects in operation, against a threshold level of 8% and a target of 20%^xlviii.

Targets for enterprise development and procurement from designated groups were also exceeded. Winning bidders were further required to invest a minimum of 1% of revenue in socio-economic development projects among local communities. Bidders have committed 2.2% of all project revenue in five broad categories: education and skills development (40%); social welfare (22%); health care (4%); general administration (10%); and enterprise development (24%)^xlix.

Some problems and challenges have emerged around these investments in local community projects including: co-ordination and alignment with other energy projects in the area, as well as broader government development strategies; the lack of experience and capacity of energy projects in community upliftment initiatives; and the ability of recipient communities to absorb these contributions. Furthermore, the equity dividend benefits that might accrue to local communities will only be fully realised after the loans that financed local equity have been servicedⁱ. DM

In Part 3 we explore the problem with nuclear

Photo: A general view at dawn of the Jeffreys Bay Wind Farm in South Africa 08 July 2016. EPA/NIC BOTHMA

Physicist Amory Lovins is widely considered one of the world’s leading energy experts. A former Oxford don, honorary US architect, Swedish engineering academician, adviser to business and government leaders for 44 years in over 65 countries including South Africa, he has won many of the world’s top energy and environment awards, received 12 honorary doctorates, taught at 10 universities, and written 31 books and over 625 papers. Time named him one of the world’s 100 most influential people; Foreign Policy, one of the 100 top global thinkers

Anton Eberhard was inspired to undertake his PhD in the field of energy and development in 1979 after reading Amory Lovins’ seminal publications on renewable energy and energy efficiency. He has recently been elected to the rank of Emeritus Professor and Senior Scholar at the University of Cape Town after 35 years of research, teaching and policy advocacy in energy and sustainable development in Africa.