How much money are renewable technologies saving South Africa?

Despite independent power remaining a very small part of South Africa’s energy mix, solar and wind projects have generated a R8.3-billion benefit in just the first six months of the year.

This is according to a recent report by the Council for Scientific and Industrial Research (CSIR) which attempted to calculate how much money renewable technologies are saving South Africa.

From January to June this year, the collective contribution of wind energy and solar power (photovoltaic) projects to the economy exceeded their tariff (of R4.3-billion) by R4-billion. Wind energy produced the most net savings of R1.8-billion, the CSIR report said.

This is significantly more than last year’s findings where, in the CSIR report for 2014, renewables brought net savings of R800-million over the entire year.

“The latest figures demonstrate clearly that the benefits renewables bring to South Africa are increasing all the time as more developments connect to the grid – now bringing 10 times more financial benefit than last year,” said the South African Wind and Energy Association (Sawea).

Dual savings

The benefits of renewables for the electricity market are calculated by the CSIR in two ways.

Firstly, diesel and coal fuel cost savings, totalling R3.6-billion, created by solar and wind energy that replaced what would otherwise have been fossil fuel-generated power. Secondly, the saving to the economy through avoiding “unserved energy” (load-shedding).

The report showed load shedding occurred during 82 days, out of 181 days, in the first half of 2015. In these days load shedding occurred for approximately 709 hours accounting for 1 095 GWh of unserved energy.

Over and above this the research identified a further 203 hours in which consumers’ energy would have been curtailed had wind and solar energy not been providing power to the grid. These macroeconomic benefits are calculated at R4.6-billion.

Tobias Bischof-Niemz, who heads up the CSIR’s Energy Centre which produced the report said the centre had developed a methodology to determine whether at any given hour of the year, renewables have replaced coal or diesel generators, or whether they have even prevented “unserved energy’”

The cost of unserved energy is a macroeconomic cost per kWh to the entire South African economy of not being able to serve customers’ electricity demand. In the Department of Energy’s Integrated Resource Plan (IRP) this cost is assumed to be R90 per kWh in April 2015. This was the number used in the study to calculate the economic value renewables have contributed.

CSIR noted Eskom had presented a study with a slightly lower number, but the research opted not to use it as it was still in the consultation process.

Energy procurement

The department of energy is procuring new generation capacity and has already allocated a total of 8.1 GW of renewables (mainly wind & PV) for procurement from Independent Power Producers

In May, an additional 6 300 MW of renewable energy would be procured; over and above the existing 5 243 MW’s already awarded under the renewable energy independent power producer procurement (REIPPP) programme.

The CSIR research outcomes were based on projects commissioned through the earlier biding windows.

New wind and PV projects have become significantly cheaper in recent years.  “The cost of wind energy is now between 60-70 cents per kilowatt hour (KWh) with solar managing to get close to 80 cents. Wind energy is now close to 50% cheaper than the predicted costs of new build coal powered stations Medupi and Kusile,” Sawea said.

This article is published in collaboration with Mail & Guardian Africa. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Lisa Steyn is a business reporter at the Mail & Guardian.

Image: Eskom’s electric pylons are pictured in Soweto, southwest of Johannesburg. REUTERS/Siphiwe Sibeko.