By Dominic Goncalves, Frost & Sullivan Africa
South Africa’s 20 year master energy plan, the IRP, was finalized in March, 2011, after much public comment and debate. The distinct winner for the plan is solar PV. The IRP allocates a staggering 8,400MW of solar PV to be built by 2030, rolling out 300MW a year of large scale PV from 2012 onwards. “This renders South Africa as a potential solar goldmine, at a timely stage when solar PV’s two biggest markets, Spain and Germany, are currently oversaturated and floundering,” states Frost & Sullivan Energy and Power Research Analyst Dominic Goncalves.
Initially, much hype surrounded the audacious Upington Solar Park concept, a proposed 5,000MW cluster of solar farms to be developed like an IDZ on a corridor of available land in the Northern Cape. This region has the highest levels of solar radiation in the world, comparable only to the Atacama Desert of Chile. The plan was met with scepticism initially, due to the massive scope of the project, and the fact that it was not mentioned in the draft form of the IRP. The new Policy Adjusted IRP however, allows for 9.4GW of solar energy, more than encompassing the Upington Solar Park concept.
Currently, PV in South Africa is limited to off-grid usages, such as telecommunications, game farms and isolated lodges, rural applications, navigational buoys, and other such applications. More recently, companies have been using PV as a marketing tool to showcase their clean energy trends, and several municipalities have been experimenting with using PV for road signage, street lights and billboard illumination. The off-grid market potential for PV however, is limited, and has been growing at a natural, organic rate for years, both globally and in South Africa.
Globally, installed capacity of PV has exceeded 21GW, the majority of which is connected to the grid. The largest of these solar parks is 97MW; the Sarnia PV facility located in Canada takes up the land equivalent of approximately 470 soccer fields.
The question is, is solar PV the right choice for South Africa? Global PV project developers are actively in pursuit of achieving an installed cost of $1 a watt. Although prices are decreasing rapidly, due to learning rates, technology advances and a drop in silicon prices, at about $3.80 a watt currently, there is still a way to go.
To ascertain solar PV’s justification as a technology of choice in South Africa’s energy mix, several questions have to be answered.
Land Availability and Solar Resource
Firstly, do we have enough land? Comparative land usage for PV indicates that 1,000MW of PV generation will require 11,000 acres of land. South Africa’s plan of installing 8,400MW of PV over the next 20 years will thus result in the allocation of 92,400 acres of land. Luckily, large tracts of land in the Northern Cape will be available to develop most of this land; this is also an area of great solar radiation.
The plan to create an area large enough for 46,300 soccer fields will be the largest cluster of solar farms in the world to date, and will be visible from space. The construction of these projects over the next 20 years will no doubt create a significant number of jobs. The Spanish PV market created 28,000 jobs between 2001 and 2010, to account for slightly more than 3,000MW of PV. For the South African market, this will be far exceeded. 8,400MW of PV, together with another 1,000MW of concentrated solar power (CSP) technology, theoretically will provide in excess of 60,000 jobs. However, it is the spinoff aspect that is interesting. To create a cluster of solar parks in the Northern Cape will require infrastructure – roads and rail infrastructure, water, transmission grid access, and civil works construction. The spinoff will likely result in indirect job creation for the influx of employees, and will contribute significantly to development in the region. 9,400MW of solar (PV and CSP) technology could create up to 100,000 jobs.
The solar PV market in Spain has revealed that 37.6% of PV jobs were attributed to component manufacturing, followed by project development and services (18.3%), construction and installation (16.9%), O&M ( 12%), and distribution and sales (10.3%). Global and local PV manufacturers alike are exploring component manufacturing possibilities in the South African market. Manufacturing facilities within the framework of the supported Solar Park Authority (SPA) zone will have scale and logistical benefits, and could be developed into a component manufacturing hub.
South Africa is in a prime position to become a key global player in the solar PV market, amidst rapidly decreasing prices of this technology. Perhaps it is better that we are slightly behind more mature markets such as Spain and Germany – we can learn from their examples. Currently, the policy framework in South Africa has been slow to get off the ground, frustrating industry players and investors by delaying timelines. Although the 8,400MW allocation have been decided, market players are still waiting for the final REFIT to be decided, as costs have changed since first proposed in 2009. Once the first PPAs are signed however, the market will flood with activity. Although not as cheap as wind, PV has an advantage over other renewable technology in that it is modular, and thus relatively quick to install (approx. 8 months for an 80MW facility, after permitting).
The question we need to ask ourselves is what will the cost burden be to consumers? Can South African consumers and industry afford such an investment?
South Africa’s Energy Conundrum
“South Africa’s energy crisis places us in a situation where we are forced to navigate a tight course between an increasing electricity tariff and shortage of supply on the one side, compounded by a need to diversify into cleaner energy sources, both for the sake of the environment and impending carbon tax implication, on the other,” proclaims Energy and Power Research Analyst Dominic Goncalves.
Our immediate future will be to pursue coal as base-load power, to provide security of supply and curtail increasing tariff hikes. If renewables are put up too rapidly, the expense will contribute to a tariff hike that is already concerning economists, as South Africa’s competitive advantage has traditionally been based on a cheap electricity tariff to support mining and heavy industry. If renewables are not deployed fast enough however, South Africa as the world’s thirteenth largest polluter, will bear the consequences by way of carbon taxes, not to mention damage to the environment.
This trade-off between economic and environmental well-being will be explored every two years in the IRP, the living document planning the nation’s 20 year energy mix. One aspect is for certain though – renewables are set to be installed en masse across the landscape, and will be here to stay. While the economic well-being of the country should be monitored to avoid generous over-incubatory measures, the benefits of PV are set to provide the nation with clean electricity, and the creation of direct and indirect jobs. The first PPAs are scheduled to be signed before the COP17 in Durban in October, 2011.
Once the legislative policy around IPP’s and the Independent Systems and Market Operator is finalised, solar PV industry players can start the process of rolling out 300MW a year from 2012, and the solar gold rush, which has burnt through Spain and Germany as well as the deserts of California and Nevada, will head to South Africa.