Installing renewable energy is not an indulgence, it is the right thing to do

July 14th, 2015, Published in Articles: Energize

 

The Renewable Energy Independent Power Producers Procurement Programme (REIPPPP), which was established by the South African government’s department of energy in 2011, is widely accepted as one of the best programmes this country has implemented.

Roger Lilley

Roger Lilley

Prior to 2011, the electricity supply industry consisted of one major electricity generator, Eskom, and some power was imported from neighbouring countries. As a result of delays in building additional power stations, the power utility found that it was unable to meet demand and the country has experienced various levels of loadshedding in recent years.

Although new coal-fired power stations were planned and are under construction, the late start and various technical and other problems have resulted in the completion date of these new power stations being postponed by a number of years.

As the country’s economy desperately needs power now and, in light of the international drive to reduce CO2 emissions, the South African government decided to invite the private sector to become involved in the generation of electricity by introducing the renewable energy independent power producers procurement programme (REIPPPP).

The result has been a spectacular success with more than 1500 MW of electricity generated by means of solar and wind farms.

Initially, it was believed that renewable energy was promoted because of its inherent clean process – i.e. it generates no CO2 or any other greenhouse gas emissions – and because these power plants can be built relatively quickly. The initial cost per kWh was relatively high, certainly higher than the cost of electricity from Eskom’s existing fleet of coal-fired power stations, but that was considered to be of less concern than having an ongoing shortage of electricity.

Since the implementation of the REIPPPP, a number of bidding rounds were conducted and the cost per kWh has fallen significantly.

Eddie O’Connor, the CEO of Mainstream Power – a company which has built 230 MW of wind and solar plants in South Africa, and has been awarded a further 355 MW – recently said that the cost for new build solar PV is now in the region of 75c/kWh, and wind is about 65c/kWh, compared to the latest predictions that the Medupi new build is likely to cost as much as 128c/kWh.

This differential shows that using renewable energy sources is not only good from an environmental perspective but makes economic sense too.

It is expected that the cost of electricity from coal-fired power stations will remain fairly low for the foreseeable future because of existing coal-fired stations which have been paid for already. Nonetheless, many of these older power stations will need to be overhauled and have expensive scrubbing systems installed to comply with new emission regulations, or even mothballed and replaced with new power stations. These interventions will increase the cost of electricity from coal-fired power stations while the cost of wind turbines and PV panels continues to fall, according to O’Connor, at a rate of about 11% per annum. It is therefore only a matter of time before coal-fired power stations literally price themselves out of the market.

The use of renewable energy to supply base load is still a concern. Sufficient storage will be required to make this possible, which adds to the overall cost of renewable energy. But again, the cost of storage is decreasing and future storage technologies may yet appear which will increase capacity without increasing cost. Battery technology has already developed significantly as can be seen in the case of electric cars and other rechargeable battery-driven applications.

Although it is generally accepted that large centralised coal-fired or nuclear-driven power stations will exist for another few decades, one wonders how long it will take for the economic benefits of renewable energy plants to make fossil-fuelled power stations obsolete.

Send your comments to: energize@ee.co.za

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