In a recent announcement by Futuregrowth Asset Management, the company revealed that it would be suspending funding to South Africa’s coal industry until it develops environmentally sustainable methods of operating. This coupled with the continuation of escalating construction costs of the Medupi and Kusile coal-fired plants, which are between five and ten years behind schedule, brings to the fore the need to concentrate on the provision of clean green renewable energy rather than traditional ‘dirty’ energy options.
This is according to Paschal Phelan, Chairman of Solar Capital, who says that he is confident of South Africa’s ability to provide its 2030 renewable energy targets through the Department of Energy’s (DoE) Renewable Energy Independent Power Producer Procurement (REIPPP) Programme.
The highly successful programme was recently lauded in an open letter written by Western Cape Premier, Hellen Zille, for attracting R194bn in investment and procuring more than 6000MW.
Phelan says that South Africa’s 2010 Integrated Resource Plan called for 17,800 MW of renewable energy to be generated by 2030. “The REIPPP Programme overview published in March this year showed that 93% of REIPPPs scheduled to be operational had already started commercial operations. Additionally, the average lead time for all 43 projects involved was only 1.8 years.”
Apart from the speedy construction of these renewable energy facilities, Phelan believes that the success of the REIPPP Programme is a shining example of South Africa’s ability to undertake large infrastructure programmes to boost the local economy – despite the current period of slow growth internationally. “This Public-Private Partnership programme has allowed for energy growth and successful private investment, which contrasts with a number of other international renewable energy programmes that have faced difficulties and setbacks.”
According to the March 2016 REIPPP Programme overview, it stated that R53.4 billion in foreign investment and financing (27% of total investment and financing shares) was attracted in the six bid windows. Phelan explains that, not only will this allow for further energy creation, but the associated influx of foreign investment and funding is of further importance to the economy in South Africa.
There has been much debate lately about the cost of renewables. Explaining his position, Phelan says that renewable energy “is definitely the way forward”.
As a way of measuring and comparing costs of various energy sources, the energy industry uses a standard called the Levelised Cost of Electricity – in which the measurement uses the current cost of producing one kilowatt-hour of electricity from a specific energy source.
Based on this measurement tool, energy analyst Chris Yelland calculated the current Levelised Cost of Electricity in South Africa to be R1.52 per kilowatt-hour (kWh) for nuclear, R1.19 kWh for coal, R0.69 kWh for wind, and R0.87 kWh for solar PV.
Phelan says that costs of renewables, solar energy in particular, are constantly falling.
As an example of the falling solar energy costs, Solar Capital’s parent company, Phelan Energy Group, formed a consortium with Malaysian energy utility company Tenaga Nasional Berhad and submitted a bid early last week that came in with the 3rd lowest solar tariff in the world ever. This Abu Dhabi bid saw the Phelan Tenaga Consortium bid come in at 2.598 US cents (approximately R0.36) per kWh.
Phelan points out that the arrival of low cost solar power has taken many governments by surprise. “However, with the enacting of carbon tax legislation, under their COP commitments, they will soon realise that solar energy makes sense and is the most plausible solution. In addition to this, the cost of battery storage for solar energy is on a similar downward trajectory and is now market competitive.”
He adds that solar power is cheap and safe with no ongoing carbon footprint. “Renewable energy is the energy of now and the future.”
Solar Capital is shareholder, developer, project manager and joint O&M contractor of the largest solar farm in the Southern Hemisphere based in De Aar, Northern Cape