The Story of South Africa’s Global Energy Coup
“The Story of South Africa’s Global Energy Coup” – that is the title of the introduction to the special supplement in South Africa’s leading financial publication, the Business Day of 31 October 2016, which provides extensive detailing and commemoration of 5 years of South Africa’s Renewable Energy Independent Power Producer (REIPP) procurement programme. REIPP has procured 6,800 MW of renewable energy generation, with roughly 40% of that already generating electricity. The introduction reflects on “the miracle of South Africa’s renewable energy programme over the past five years” noting that “the scale of what has been achieved in South Africa’s renewable energy programme is simply mind-blowing”.
One of the more interesting points noted how globally the South Africa program is considered not just a success but an example for other nations to follow. Yet this revolution has largely gone unrecognised.
The supplement puts it this way, “Imagine 200 hectares covered in photovoltaic solar panels. That’s about 400 football fields…. There is now not just a few, but 25 projects of that size or bigger already built or being built across South Africa, and many smaller ones. Then there is the wind energy farms. Most wind turbines are around 100m high, the same height as London’s Big Ben, with blades that each span more than 40m. There are more than 1,500 such windmills already erected or being erected across the country. Then there are the spectacular concentrated solar plants that direct the sun’s rays either on to a tube in a curved mirror, or towards a tall tower in the centre of a field of mirrors …So far R194m has been invested by both the private and public sectors to make it happen, a large chunk of that has come in the form of foreign direct investment…Using an approach inspired by South Africa’s, last month Abu Dhabi announced a new world record low price for a photovoltaic solar plant of 2.42 US cents/kw equivalent to 34 South African cents. The new Medupi and Kusile coal-powered stations, when they come fully online, are forecast to cost between 100 and 120c/kWh.”
A key take-away is this: renewable energy is here in a large way and it is not simply a dream inspired by concerns for climate change but has compelling economic proposition too. Add energy storage and you remove the remaining constraints of intermittency and grid capacity to ensure that renewable power can be delivered 24 hours a day to the entire country.
Overall, the Business Day report is well done, full of facts and presented in an accessible manner. The only major flaw noted was that batteries were not included in REIPP because they “are prohibitively expensive for utility scale deployment,” although no data was offered to support this (a stark contrast to the rest of the piece). In reality, though:
- Battery energy storage is not in REIPP because any battery technology has been excluded from its approved technologies list. In contrast, REIPP has permitted Concentrated Solar Power (CSP) plants with thermal storage, despite them being extremely expensive;
- Cost-wise, batteries, when powered by solar photovoltaic (PV) or wind, are cheaper than CSP with molten salt storage. A vanadium redox flow battery (VRFB) coupled with PV will be at least 25% cheaper than CSP with storage;
- South Africa, despite the support from REIPP, has failed to become an exporter of CSP products (with local content only ~40% on CSP plants); however, on batteries, especially VRFBs, SA does have an opportunity to localise 60-80% of the energy storage value chain and become a regional exporter.
Notwithstanding its impressive success, two significant drawbacks are that REIPP
- Has not developed a globally competitive, domestic industry in South Africa. The one exception is the success of SA renewable energy developers, who are now venturing into Africa in search of new opportunities. Yet, that is it. There has not been any benefit to mining (SA’s historical strength), any notable manufacturing, or other services industries’ development. For R194 billion, that is a very small return.
- Is not encouraging the inevitable evolution of the SA power sector. Globally, we are witnessing redefinition of the power utility’s role and shifting dynamics in the power sector overall. This includes advent of distributed generation models (which collocate the power provider and user), growth of microgrids (including energy sharing or what some dub the “new energy economy”), slower or declining demand growth (due to energy efficiency and alternative electricity sources), unbundling of energy services, etc.. As the standard bearer for “South Africa’s power transformation,” REIPP has not facilitated this evolution in South Africa, even while allowing for private sector participation. More progressive steps could feature putting more power into the hands of the municipalities, supporting direct private to private sector energy contracts or procuring not just generated energy but other power services (as is done in other markets).
Still the REIPP was an excellent step forward, and we expect it to expand and include energy storage in the near future. With a grid capacity of roughly 45,000 MW, South Africa has by far the largest grid on the continent, and accounts for ~40% of the total grid capacity of Africa. That is why it is an important market for grid-based energy storage opportunities. This is not far-fetched: South Africa already has ~2,700 MW capacity installed energy storage capacity mainly in the form of pumped hydro energy. More recently the country has committed to not less than 400MW of concentrated solar power which generates power through solar panels and stores in the form of molten salt. South Africa’s enthusiastic embrace of renewable power bodes well for an energy storage revolution much similar to the renewable power revolution