Opinionista Saliem Fakir & Manisha Gulati 23 October 2014

Renewables – the viable way forward

The Rosatom deal for nuclear power promises to provide power in the next ten years. It also promises to show how policy making is far removed from reality. The reality is that the country is running short of electricity now. The nuclear programme will not save us, nor the economy, in the short-term. We have to find quicker solutions to meet the shortfall in electricity.

The solution we find to the energy problem certainly cannot be more diesel-peaking plants. These plants are not only expensive but are also contributing to the demand-supply imbalance of liquid fuels. So where will the electricity come from? A pragmatic view on renewables within our very one-sided and coal-dependent energy system is therefore a serious consideration.

When renewables first came into the South African scene they were viewed as a ‘bunny hugging’ pursuit. People who believe this were not rooted in reality, nor could they foresee recent developments in renewables in South Africa and globally. Sure, there were, and are still, at times, outlandish comments made about the promise of renewables that are hard to align with certain realities. The point is that both proponents and opponents each knew no better than the other how this would unfold and what we could and could not do.

At least what is known is that today we have more reality than fiction. South Africa has gone through three rounds of bids for renewables, and a fourth is imminent. If all were to come online by 2016, we would have just over 6,000MW on our grid dispersed over a very wide geography in a very large country. Many companies are also investing in renewables to manage costs and ensure future security of supply.

Taking capacity factors into account for the renewables independent power producers programme (REIPPP), the 6,000MW of name-plate generation potential is lower. Close to a third of the capacity is actually produced due to the variability of wind and solar sources. Irrespective, what is important is at what cost per kilo-watt hour (kWh), wind and solar electricity is generated or what is technically called the levelised cost of energy compared to coal and other sources of power.

The installed and generation capacity for renewables can be more ambitious. Based on our technical work and depending on the GDP growth rate, we think a low scenario will entail 11% of renewables capacity on grid, in terms of units of electricity generated, and a high growth scenario of about 35GW is feasible for close to 19% of generated electricity. This is much higher than that included in the country’s new build programme as proposed in the IRP, where renewables on grid will be around 19GW by 2030, depending on future electricity demand, representing only 9% of the electricity generation capacity.

From a grid perspective it is feasible to dispatch higher quantities of renewables so long as there is flexibility within the system to balance power supply with changing demand and designing a more strategic way of locating renewables along the grid system that takes into account balancing and grid stability needs. As more global experience is being gained with the integration of renewables into the grid system, thresholds of integration are improving and theoretical limits now exceed 15% with little need for grid enhancement – possibly up to 30%, provided balancing and offsetting measures are available.

Not surprising then that some countries, like Germany, Denmark, China and others, are now targeting a larger renewable energy share into the grid above 20% generation thresholds for renewables. These ambitious figures were unheard of just five years ago. For South Africa, experts in Eskom suggest that the theoretical threshold for the country could be at around 15%.

Greater thresholds of renewables will require better grid capacity. This is not only true for renewables but for all technologies under the new build programme. Eskom is already working on a transmission and distribution plan. Enhancement of this transmission capacity could be constrained by financing. The costs of such network investment will need to be recovered, either by way of tariff hikes or by way of some other dispensation. Whatever the mechanisms, it needs to be understood that without augmenting grid capacity, the additional 40,000 MW of generation capacity envisaged in the IRP will not address the energy shortage.

The debate on renewables and distributed power solutions is shifting from the archaic base-load model to a more dynamic reserve margin approach. What the system needs is just-in-time data and information of electricity generation availability and capacity to manage a variety of sources. To the credit of Eskom’s National Control Centre, these systems are slowly being introduced and tested.

If the winds blows less one day it does not imply that this cannot be offset by other renewables within the same system, especially if they are well dispersed geographically and have design features explicitly there to deal with grid stability and balancing issues. It means that in new rounds of the IPP process for renewables, the bidding process has to give closer attention to these issues than was given in earlier rounds.

Coming to the cost effectiveness of renewables, the REIPPP provides evidence that renewables do not cost money and don’t need to be subsidised. In the third round of the IPP bid process the average tariff for wind and solar PV came at R0.66/kWh and R0.88/kWh respectively, while cost estimates for Medupi and Kusile are estimated to come in at around R1.05/kwh.

Some estimates suggest that these costs for coal generation are conservative estimates, as some costs may be hidden, like the health impacts of air pollution and damage to roads from the ever-increasing hauling of coal as cases in point. Coal may have been cheap, but it comes with other costs that are often not reflected in the price of electricity generation as these costs are often absorbed elsewhere in the economic system.

More renewables at faster pace can not only reduce the cost of unserved power, but also the cost of having to use more diesel, as mentioned before, which is coming at staggering annual cost of R11 billion – based on national treasury figures for diesel electricity generation cost last year. In the future, the cost of externalities such as coal emissions and carbon intensity will be priced in the generation costs of Eskom and these benefits, in terms of reduction in air pollution and carbon dioxide, will also have to be taken into account.

Moreover, in the case of wind, the first tier wind sites, with the best wind resource and connection points show capacity factors at much higher than originally anticipated. While on average capacity factors for wind-power hover around 20-25%, some projects are looking at 35-41% capacity factors. They can as a result generate more power at lower cost more information will emerge as more wind and solar projects get onto the grid. There will be real time data to work from for the systems operator. Improvements in technology learning rates and provision of cost effective capital would only enhance the competitiveness further.

Finally, as experience with Medupi and Kusile has shown, large plants, be it coal, nuclear or a large-scale roll-out of gas, take a long time to integrate in the system and do not solve the power crisis of today. Renewables, with their shorter lead times, provide an optimum solution for the present crisis and are the best bet under current circumstances to deal with shortage of supply. DM

More information on the authors’ work on renewables can be found here.


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