Celebrating a renewable success

November 18th, 2013, Published in Articles: Energize

by Davin Chown, SAPVIA

It’s time for South Africa to celebrate a major win. With the announcement of the successful bidders in bid window 3 of the REIPPP behind us, we should reflect on what the renewable energy industry has achieved over the last two to three years through the REIPPP process.

With close to R150-billion worth of projects either under construction or soon to be when the projects of round three reach financial close, there is no doubt that we have an industry that’s delivering significant benefits to South Africa and its people. Its abundantly clear that its now cheaper to build renewable energy than to build coal, or for that matter gas projects. It is also clear that this is a major infrastructure programme that the Presidential Infrastructure Coordinating Committee (PICC) and the government team behind Strategic Integrated Projects (SIP) 8 can say it is delivering. This is an achievement deserving of a hearty celebration by all social partners who played a major role in enabling this success.

Its been a long haul for renewables in South Africa. When the industry first started talking about renewable energy (RE) with the government in the mid-1990s some of the replies it received indicated that it would be a long and arduous battle to change perceptions regarding this “new” form of energy. “Surely”, I was told, “this on-off stuff can’t really be taken seriously. It can’t power large industrial economies”. History has answered that as we watch billions of rand of investment flowing into the sector, hundreds of thousands of jobs being created and the many GW of projects being installed worldwide. And it’s growing. South Africa has one of the most successful RE programmes ever, with the country becoming a sought-after energy investment destination.

Since those early days we’ve seen the signing of the Green Economy Accord which has signalled a change of direction in the economy; the launching of forward thinking provincial and local government energy strategies that entrench a shift toward renewable energy; the rapid increase in SMEs focusing on renewable energy; the influx of large scale energy project developers from many parts of the world, followed by a range of local and overseas investors keen to shape a new investment frontier; not to mention the construction of the country’s first large scale commercially driven renewable energy projects.

South Africa is now firmly entrenched as part of this new “green industrialisation” that the government has made firm commitments to roll out. A key part of this process has been to see if renewable energy can be delivered to the grid on time, on budget and at a reasonable cost to the country, with multiple benefits that address our socio-economic challenges. We’re also keen to see whether all the benefits promised as part of the REIPPP’s commitments will indeed make a significant contribution to local manufacturing, supplier development and the delivery of a range of benefits in the vicinity of the projects via local employment, skills development and social infrastructure development.

Some projects are well ahead of their commercial operation dates, which is wonderful. Some connections to the grid have been completed, which proves that the process is workable as plant now comes on line and we see the MWhs flow. Prices have plummeted from R2,65/kWh on average in round 1 to as low as R0,86/kWh for solar in this last round. Wind is lower than that. There couldn’t be a more compelling reason for us to roll out more renewables at these kinds of prices. In fact, we’d be really foolish not to. It’s delivery time and industry is doing what it does best – delivering as efficiently as possible at affordable prices. So why aren’t we rolling out more of these necessary MWs? We have the capacity, construction teams are mobilised, and the benefits are flowing to South Africa. I’ll say what I have said to all our colleagues in the DoE, Treasury, the DTI and elsewhere: with a success of this scale and nature, how can we afford not to roll out more?

We’re in the midst of what some people call a “renewables policy shower”. Planning is critical – look where a revised IRP got us – R150-billion of critical investment, and it’s clear that we need more of this.

In fact, we can deliver double that in no time, if only we’d be allowed to. The important part is that we now have a sound base to work from. No more crusty and lopsided theoretical studies. With more plant on line generating power, there will be no doubt that the industry will be able to prove it has delivered on its promises.

What kind of industry do we want going into the future? Is what we have now achieved, sustainable? At the kinds of prices we’re seeing, with these kinds of efficiencies, why are we not be doing more of this? There are many GW of projects under development and we would be making a serious mistake if we were not to grab this opportunity to help the country with its re-industrialisation programme. We know that in our economic climate more MW means more investment, more manufacturing, more jobs, more income to struggling families as well as meeting various policy objectives.

But there are the sceptics. Some are arguing that soon we’ll be a sector dominated by a handful of companies with large balance sheets who are playing Russian roulette with our economy and the sector, chasing prices down to unsustainable levels and promising benefits that will never be delivered, side-lining local manufacturers, forcing smaller developers and operators out, and ultimately holding the country’s energy sector and economy to ransom. As one sceptic said to me this week, “We’re creating more jobs in foreign countries than we are in South Africa even with all this local content stuff. Our manufacturing sector is going to lose out badly and we’ll be retrenching people if this is the trend”. Luckily not all of us are sceptics but I recall the words of a wise person who once told me, “Always heed barking dogs in the night”.

There is much to be said for the success of the REIPPP. All credit to the architects and engineers. Rolling out a well-considered and planned process in which the country is the real winner has to now be the priority. And in fact, I would argue we are a cat’s whisker away from achieving this, but we need government to walk with us on this bold path. It’s a path of lesser risks for the economy, generating more energy, with more stringent local manufacturing targets, and ultimately a range of real, tangible benefits for South Africa. And we need it now.

Contact Davin Chown, SAPVIA, Tel 021 657-4042, davin.chown@mainstreamrp.com

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