State signs on 17 renewable energy projects

The Department of Energy signed contracts with the private sector to build 17 renewable energy projects worth R44.4 billion, department officials told MPs this week. These were the companies that had successfully bid to build a total of 1 456 megawatts of renewable energy plants, mainly from solar and wind, in the third round of bidding since the government had launched its renewable energy programme in 2011. And the response from the private sector was so huge, and the price so competitive, that the department was considering appointing further companies from those that were not selected last week. Maduna Ngobeni from the Department of Energy told MPs in the energy committee that it received 93 bids for this round to build a total of 6 023MW.

This represents more than the Medupi coal plant under construction, which is 4 800MW. Prices bid by the private sector to build solar photovoltaic power plants had decreased from R3.09 a kilowatt-hour (kWh) in 2011, when the first round of bids were submitted, to 99c this month. Wind had come down from R1.28 to 73c, Ngobeni said. Angelique Kilian, the director of the department’s energy programme, told MPs that all the projects selected in the previous two rounds of bidding were running according to schedule, and some were ahead of schedule. The renewable energy industry attributes the decline in the cost of wind and solar energy to a change in the way projects are financed, with many of the renewable energy companies paying the capital costs of the projects off their balance sheets.

Johan van den Berg, the chief executive of the SA Wind Energy Association, said the latest round of renewable energy bids represented a saving over R15bn over the next 20 years, compared to what would have been spent on building the equivalent power from coal-fired plants. “The carbon emissions saved would be in the order of 50 million tons over 20 years. If we conservatively assume one fifth of the wind power displaces peaking power plants, which run at R4.50/kWh, the saving for the country escalates to about R35bn.

“If we forget about the peaking angle and say one quarter of all power produced serves South Africa’s unmet electricity demand – because we can bank one quarter of all wind power always being available – and if we accept (the) National Energy Regulator of South Africa’s figure of the cost of unmet electricity demand being R75/kWh, and we assume a power shortage in South Africa for just four of those 20 years, the saving becomes greater than R750bn,” Van den Berg said. Eskom said on Wednesday it would establish what the cost was, but had not replied at the time of going to press.