The long-awaited integrated resource plan 20 10 (IRP20 10) sets out the government’s energy plans for the next 25 years, with the first renewable energy producers to be signed up in early 20 11.
As South Africa moves towards finalising its renewable energy procurement policies and energy growth path during the next two months, the question is: Have we priced renewable energy correctly, or are we making it needlessly uncompetitive against coal-fired energy?
Renewable energy will cost between two and three times more than power utility Eskom currently pays for fossil fuel-fired energy, according to the National Energy Regulator of South Africa’s (Nersa’s) renewable energy feed-in tariffs (Refits).
The energy regulator published its Refits in two phases last year. The two biggest likely sources of renewable energy in the future — wind and solar — were set at R1,25/kWh for offshore wind and between R2,10 and R3,94/kWh for concentrated solar, depending on the methods of storage used.
Although the price of renewable energy will make the electricity buyer (likely to be a subsidiary of Eskom) baulk, some analysts say it is necessary to incentivise the development of renewable energy given the high cost of the technology.
“The high costs of producing renewable energy — sometimes up to 10 times what it costs to use fossil fuels — make Nersa’s feed-in tariffs necessary,” said an industry insider at the Industrial Development Corporation (IDC).
“The tariffs are like an initial subsidy — a stimulus, if you like. It’s a difficult thing — price renewables too low, and you don’t get any takers; too high, and suddenly there’s too much interest.”
Indeed, an indicator of the high levels of interest in Nersa’s Refits can be gauged from the fact that Eskom has received 156 applications from renewable energy project developers to connect to the national power grid. The developers have applied in anticipation of being selected as renewable energy suppliers by the government.
The department of energy’s first integrated resources plan (IRP1) identified a need for 1 025MW of renewable energy from the private sector by 20 13. But, according to Riaan Smit, Eskom’s planning chief engineer, quoted in Engineering News Online last month, the 156 applications represent a combined potential energy-generating capacity of 15 154MW — nearly 15 times the government target.