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News 2018-03-26 South Africa’s Electricity Choice (Part 2): Renewable Energy is a win-win South Africa’s Electricity Choice (Part 2): Renewable Energy is a win-winRenewables everywhere thrive on the fair and open competition that no new nuclear plant has achieved anywhere. Nuclear costs are murky, rising, and augmented by the long-term burdens of decommissioning the radioactive plants and storing their wastes for millennia. In contrast, renewable energy costs are transparent and falling. By ANTON EBERHARD and AMORY LOVINS.
The Zuma government’s determination to see through a nuclear power programme for decades in South Africa makes no sense, especially when all the evidence points to renewable energy Renewable energy While the 2010–11 Plan was rapidly going out of date and stakeholders debated what South African renewable electricity might cost, South Africa’s DoE launched a bold experiment to substitute market data for Renewable investment and price results have been impressive. South Africa’s transparent auctions have already cut solar PV electricity prices by close to 80% and wind energy by nearly 50%vi, with further price drops in the latest, so-called expedited, auction for both wind and PV power to about 4.7 US¢ per kilowatt-hour (kWh). Renewable costs in South Africa are now near the lower end of world market Renewables everywhere thrive on the fair and open competition that no new nuclear plant has achieved anywhere. Nuclear costs are murky, rising, and augmented by the long-term burdens of decommissioning the radioactive This renewable revolution is China has generated more wind power than nuclear electricity since 2012. In 2013, it added more PV than the US had added cumulatively since developing it in 1954; in 2014 it invested nine times more in renewables than nuclear; in 2015 it added 46 GW of wind and solar power (more than South Africa’s 2010 total generating capacity); and in 2016, it built three football pitches’ solar installations per hour, including 11.3 GW of solar capacity in the month of June alone. China is building two-fifths of the world’s new nuclear reactors (albeit with rising delays, India has quadrupled its renewables target. It is planning 100 GW of solar power (now cheaper than coal power) by 2022xxx and can electrify households cheaper and faster from decentralised solar power than from the grid. In the past few years, India’s wind power, like China’s, has outproduced its nuclear Over 3-billion people now get more non-hydro renewable than nuclear electricity, in three of the world’s four top economies (China, Germany, Japan) and in Brazil, India, Mexico, Holland, Spain, and the United Kingdomxxxiii. From 2000 to 2016, wind power added 11 times nuclear’s added capacity and PV seven This revolution has come to Africa. African heads of state now back the continent-wide African Renewable Energy Initiative, which plans – emphasizing small-scale “virtual power stations” – to develop at least 10 GW of new renewable capacity by 2020 and at least 300 GW by 2030, “potentially making the continent‘s electricity supply the cleanest in the world.” This $500+billion effort, led by such nations as Kenya and Rwanda, is backed by the African Development Bank, World Bank, and private Social and economic benefits of renewable energy in South Africa Importantly, most of South Africa’s R193-billion in renewable projects were financed by banks and private investors, including R53-billion from The International Renewable Energy Agency (IRENA) found that worldwide, doubling renewables’ energy share by 2030 (to 36%) could raise global GDP up to 1.1%, improve welfare up to 3.7%, and support over 24-million renewable-energy A unique feature of South Africa’s renewable energy IPP programme has been its promotion of social and economic benefits. Bids were evaluated on a 70/30 split between price and a basket of economic development (ED) criteria divided among seven broad categories: job creation, local content, management control, preferential procurement, enterprise development, and socio-economic development. Table 1 shows the weighting given to each of these categories as well as threshold levels that had to be reached for bids to be compliant and target levels to increase bid Table 1: Economic Development Criteria Thresholds, Targets and Achievements in the REIPPPPP
*Depending on technology. 45% for solar PV, 40% for all other technologies. **As percentage of total procurement spend. ***As a percentage of Revenue Table 2: REIPPPP Job Creation Commitments for Auctions 1 – 4 (1 job = 1 job year)
Source: Authors’ calculations from DOE Project IPP data Successful bidders are required to report on each of these commitments on a quarterly basis, and a specific provision in the Government Support Agreement between the bidders and the DoE allows for fines or the cancelling of the Power Purchase Agreement if a project underperforms on these commitments. According to reports from the DoE’s IPP Office, completed projects have been meeting or exceeding their economic development commitments for all the above Job creation accounts for 25% of the ED points available and comprises five sub-elements, as elucidated in Table 2. A total of 32,532 job years have been created through the programme to date for South African citizens, with construction phase employment being significantly higher than planned. The 57 projects that have successfully completed construction and moved into operation planned to deliver 20,689 Equipment local content requirements also account for 25% of the total ED score, with the objective of creating jobs through increased local manufacturing. This criterion, assessed by the value of local content expenditure in relation to all expenditure for the construction of the project, has undergone several changes as the renewable energy auctions progressed. A stricter definition of what constituted 'local content' was enforced in the second auction, with further refinements to the definition and required disclosures in the third auction. Local content thresholds and targets were also increased for almost all technologies across the subsequent renewable energy auctions – and consistently exceeded (Figure 1). While there have been questions raised about the manner in which some of these requirements have been met and the actual long-term impacts of Figure 1: Local Content Tracking - Actual % vs. targets (active projects)xlvii The South African renewable energy auctions also aim to direct development to previously marginalised and disadvantaged groups and communities. Black South Africans own, on average, 31% of projects that have reached financial close (the threshold requirement was 30%). Black local communities further own on average 11% of the equity of projects (the target was 5%). An average of 18% shareholding by black people in construction (EPC) contractors has been achieved – against a threshold level of 8% and a target of 20%. The shareholding of black South Africans in O&M companies is 19% Targets for enterprise development and procurement from designated groups were also exceeded. Winning bidders were further required to invest a minimum of 1% of revenue in socio-economic development projects among local communities. Bidders have committed 2.2% of all Some problems and challenges have emerged around these investments in local community projects
In Part 3 we explore the problem with nuclear Photo: A general view at dawn of the Jeffreys Bay Wind Farm in South Africa 08 July 2016. EPA/NIC BOTHMA Physicist Amory Lovins is widely considered one of the world’s leading energy experts. A former Oxford don, honorary US architect, Swedish engineering academician, adviser to business and government leaders for 44 years in over 65 countries including South Africa, he has won many of the world’s top energy and environment awards, received 12 honorary doctorates, taught at 10 universities, and written 31 books and over 625 papers. Time named him one of the world’s 100 most influential people; Foreign Policy, one of the 100 top global thinkers Anton Eberhard was inspired to undertake his PhD in the field of energy and development in 1979 after reading Amory Lovins' seminal publications on renewable energy and energy efficiency. He has recently been elected to the rank of Emeritus Professor and Senior Scholar at the University of Cape Town Graduate School of Business after 35 years of research, teaching and policy advocacy in energy and sustainable development in Africa. 1As per the Government Gazette No. 36928 General Notice 1019 to the Broad-Based Black Economic Empowerment Act (53/2003) on the issue of Codes of Good Practice. The fundamental objective of the Act is to advance economic transformation and enhance the economic participation of black people in the South African economy. Companies are scored on a BBBEE scorecard and assigned a corresponding BBBEE level. The elements that make up this score are: preferential procurement (20%); ownership (20%); enterprise development (15%); skills development (15%); employment equity (15%); management (10%); and socio-economic development (5%).
2Qualifying Small Enterprises.
3Small and Medium Enterprises
i Baker, L. Linnea Wlokas, H. South Africa’s renewable energy procurement: A new frontier? Energy Research Centre, University of Cape Town. 2015.
ii Eberhard, A. & Naude, R. The South African Renewable Energy IPP Procurement Programme: Review, Lessons Learned & Proposals to Reduce Transaction Costs. 2016.
iii Department of Energy, Republic of South Africa. Independent Power Producers Procurement Programme (IPPPP): An Overview. December 2016.
iv Yelland, C. No end in sight to Eskom delays in signing renewable energy PPAs. Moneyweb. 7 August 2017.
v Ref. 37
vi Ref. 42.
vii Ref. 66.
viii Ref. 63.
ix Ref. 38, 66.
x Lazard, Levelized Cost of Energy Analysis—Version 11.0, Nov 2017.
xi Ref. 14.
xii Ref. 25.
xiii Yurman, D. Mideast nuclear projects report a mix of progress and perils. Neutronbytes. 29 March 2015.
xiv Peach, G. Newbuild: Rosatom’s Akkuyu Project Undeterred by Economic Slump. Nuclear Intelligence Weekly. 19 June 2015.
xvi Akkuyu in Jeopardy After Downed Russian Fighter Jet. Nuclear Intelligence Weekly. 30 November 2016.
xvii Reuters. Turkey gives Rosatom
xviii Koomey, J., Hultman, N.E. & Grubler, A. A reply to “historical costs of global nuclear power reactors”, Energy Policy (102).March 2017.
xix Thomas, S. Funding Nuclear Decommissioning: Lessons for South Africa. University of Greenwich. July 2014.
xx Sparks, D., Madhlopa, A., Keen, S., Moorlach, M., Dane, A., Krog, P. & Dlamini, T. Renewable energy choices and their water requirements in South Africa. Journal of Energy in Southern Africa. November 2014.
xxii Ref. 44.
xxv Comparing 2016’s $227bn of modern renewable investments with the ~$30bn of nuclear capital expenditures (not commensurate), from ref. 44; the estimated nuclear capital commitments in 2016 were ~$10bn (ref. 25)
xxvii Yu, C.F. China: Beijing Rethinks Nuclear’s Role in Energy Mix. Nuclear Intelligence Weekly, 8 December 2017.
xxviii Buckley, T. & Nicholas, S. China’s global renewable energy expansion: how the world’s second-biggest national economy is positioned to lead the world in clean-power investment. Institute for energy economics and financial analysis. January 2017.
xxx Tweed, K. India issues annual targets for 100-Gigawatt Solar Mission. Greentech Media. 14 August 2015.
xxxi Chandari, A. Cheaper renewable energy soars past nuclear power in India. IndiaSpend. 18 March 2016.
xxxii Sushma, U.N. Like solar, wind power is now cheaper than coal-based electricity in India. Quartz India. 12 October 2017.
xxxiii Ref. 86
xxxiv Goldfield, E. & Laemel, R. Micropower database. August 2017..
xxxv AfDB. The African Development Bank Group approves Africa Renewable Energy Initiative (AREI). 16 December 2016.
xxxvii Ref 55.
xxxix IRENA. Renewable Energy Benefits: Measuring the Economics. 2016.
xl Ref. 55. Department of Energy, Republic of South Africa. Independent Power Producers Procurement Programme (IPPPP): An Overview.
xli Ref. 55.
xlii Ref. 56
xliii Ref. 56
xliv Ref. 56
xlv Baker, L. & Sovacool, B. K. The political economy of technological capabilities and global production networks in South Africa ’ s wind and solar photovoltaic (PV) industries. Polit. Geogr. 60, 1–12 (2017)
xlvi Ref. 56, 55
xlvii Ref. 56, 55
xlviii Ref. 56
xlix Ref. 56,
l Refs. 56, 55
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