What Is the Challenge?

In 2003 the Government set a target of 10,000 GWh of energy to be produced from renewable energy sources by 2013. At that time the strategy expected the energies to be biomass, wind, solar and small-scale hydro.

Very little progress has been made on reaching this goal although six of the 10 years have already passed.

The initial response of industry was to focus on biodiesel from sunflower and soya and ethanol from maize and sugar, because the market was well defined within the controlled liquid fuel system in South Africa. Several large projects were designed but the investors found the risk too high as government provided no guarantees and only a small financial incentive amounting to R 0.65 per litre (US$ 0.41 per gallon) for biodiesel.

What Was The Constraint?

The other renewable energies were blocked by the lack of a market for any renewable energy produced. Eskom is the only distributor of electricity in South Africa and is characterised by very low prices. Electricity cost only 0.160 R/kWh (0.018 US$/kWh) in 2004 and even after electricity shortages and significant increases the expected cost over the next year is only R 0.400 R/kWh (0.044 US$ /kWh). Eskom had little interest in buying electricity as they saw other generators as potential competitors.

The government has never put any system of subsidy in place to make the production of renewable energy financially sustainable but somehow expected industry to invest in RE generating capacity.

Now There Is a Significant Change

On 30 March, after an in initial hiccough where very low tariffs were proposed, The National Energy Regulator of South Africa (NERSA) announced it had set four Renewable Energy Feed-In Tariffs (REFIT) and would consider tariffs for other RE technologies over the next six months.

The feed-in tariffs are Wind, 1.25 R/kWh (0.138 US$/kWh); Small Hydro, 0.94 R/kWh (0.104 US$/kWh); Landfill Gas, 0.90 R/kWh (0.100 US$/kWh) and, Concentrated Solar 2.10 R/kWh (0.232 US$/kWh).

The term of the REFIT Power Purchase Agreement is twenty years, with anual reviews for the first five-years and every three years thereafter. The system will initially be managed by a Renewable Energy Power Purchase Agency (REPA) to be housed in Eskom’s Single Buyers Office, which will also be responsible for monitoring and evaluation.

The tariffs are comparable with feed-in tariffs from around the world, for instance
Michigan’s feed-in tariffs range from 0.065 to 0.250 US$/kW for the same technologies. The graph indicates that the feed-in-tariffs are of the correct magnitude when compared to South Africa’s electricity cost and as final confirmation, Industry have generally found the tariffs to be generous.

What Can South Africa Expect Now?

South Africa can therefore expect a real boost in the development of the renewable energy industry using wind, concentrated solar, hydro and landfill gas technologies. This is in fact critical to South Africa moving away from its position as a major greenhouse gas producers.

Source : Go Media - Photo Credit: Composite by Dave Harcourt using open source images by Martin Pettitt in Flickr and Vortexrealm, afloresm & U.S. Army Corps of Engineers in Wikimedia Commons.

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