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Renewable energy ‘generating net financial benefit for South Africa’, says study


Renewable energy from South Africa’s first wind and solar plants generated a “net financial benefit” of around 8 million rand (ZAR) ($702,000) for the country in 2014, according to a new survey.

The study by the South African government-owned Council for Scientific and Industrial Research (CSIR) was conducted as the Department of Energy continued with a procurement programme to expand the nation’s electricity generating capacity.

CSIR chief engineer Tobias Bischof-Niemz said: “Our study shows that in 2014, renewable energy provided a net financial benefit to the country. Without the first solar and wind projects, we would have spent significant additional amounts on diesel, and energy would have had to be ‘unserved’ during approximately 120 additional hours in 2014.”

Unserved energy is the expected amount of energy that would fail to be supplied owing to generating capacity deficiencies or shortages in basic energy supplies.

Bischof-Niemz said: “What is more, the cost per kWh of renewable energy for new projects is now well below ZAR 1 ($0.08) for solar photovoltaic (PV) and between 60 and 80 cents for wind projects. That will keep the net financial benefits of renewables positive, even in a future with a less constrained power system.”

Bischof-Niemz said: “We’ve developed a methodology at the CSIR energy centre to determine whether at any given hour of the year renewables have replaced coal or diesel generators, or whether they have even prevented so-called ‘unserved energy’.”

“The benefits earned were two-fold,” Bischof-Niemz said. “The first benefit, derived from diesel and coal fuel cost savings, is pinned at ZAR 3.7 billion ($325m). This is because 2.2 terawatt-hours of wind and solar energy replaced the electricity that would have otherwise been generated from diesel and coal.”

The CSIR said the second benefit of ZAR 1.6bn ($140m) was a saving to the economy derived from almost 120 hours of so-called ‘unserved’ energy that were avoided thanks to the contribution of the wind and solar projects. “During these hours the supply situation was so tight that some customers’ energy supply would have had to be curtailed (unserved) if it had not been for the renewables.”

“Therefore, renewables contributed benefits of ZAR 5.3bn ($465m) in total, or ZAR 2.42 ($0.21) per kWh of renewable energy, while the tariff payments to independent power producers of the first wind and PV projects were only ZAR 4.5bn ($395m), or ZAR 2.08 ($0.18) per kWh of renewable energy, leaving a net benefit of ZAR 8m ($702,000),” the CSIR said.

The CSIR said its methodology was based on cost assumptions from publicly available sources, such as national power utility Eskom’s interim financial results for coal and diesel costs in 2014, Department of Energy data on average tariffs of the country’s first renewables projects, or South Africa’s Integrated Resource Plan (114-page / 10.3 MB PDF) on the cost of unserved energy.

A 2003 White Paper on Renewable Energy in South Africa set a target of 10,000 gigawatt hours (GWh) of power to be produced by 2013 from renewable, mainly from biomass, wind, solar and small-scale hydropower. This is equivalent to about 5% of current overall domestic electricity generation, which is also equivalent to replacing two 660-megawatt generating units at Eskom’s combined coal-fired power stations. Eskom generates about 95% of electricity used in South Africa and some 45% of the electricity used in Africa.

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