Aleph Capital | Renewable energy shines for economy
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Renewable energy shines for economy

[Source: Business Day BD Live | 22nd June 2015 by Linda Ensor. Images: Business Day]

ENERGY from renewable projects generated last year had a net benefit of R800m to the economy.

This is according to the manager of the Council for Scientific and Industrial Research’s energy centre, Tobias Bischof-Niemz.

The benefit was calculated by taking into account coal (R400m) and diesel (R3.3bn) consumption Eskom saved by having the renewable energy on the grid. The macro-economic benefit of R1.7bn, which Eskom accrued by avoiding load shedding for 117 hours last year, was also factored in.

From this total financial benefit of R5.3bn, R4.5bn in tariffs was paid to independent power producers in the renewable sector.

The net financial benefit was generated despite these solar and wind projects being the most expensive ones from the first bid window of the government’s renewable energy programme, Prof Bischof-Niemz said in a presentation to Parliament’s standing committee on appropriations, on the Eskom Special Appropriation Bill and the Eskom Subordinated Loan Special Appropriation Amendment Bill.

The bills will convert previous government loans to Eskom into equity and provide the utility with R23bn that will be funded by the sale of nonstrategic state assets.

The net benefit was mainly due to the saving on diesel consumption and would be much higher if the tariffs for wind and solar in the latest bid windows had been used in the calculation.

The professor, who was part of the team that worked on the 2010 Integrated Resource Plan, said solar and wind projects produced about 350GW-400GWh per year, or 2% of consumption. Wind generates about 600MW of electricity and solar projects 1,000MW. Prof Bischof-Niemz stressed the importance of balancing investment in new generating capacity with transmission infrastructure — which was essential to connect independent power producers and new customers to the grid, and maintain overall network security.

“Without appropriate spending on the grid infrastructure, total costs of the power system will increase. As important as the new build programme is, spending on grid infrastructure must not be de-prioritised,” he said.

It would be realistic for wind and solar energy to generate 40% of total electricity by 2030, compared with the 14% provided for in the Integrated Resource Plan. This would require the procurement of between 1.5GW and 2GW of wind and solar energy each year.

Hilton Trollip of the University of Cape Town’s Energy Research Centre said the extension of loans to Eskom and conversion of loans into equity undermined the system of independent regulation, as well as tariff setting for the utility by the National Energy Regulator of SA.

The tariff process had become so disorganised that in January Eskom was in urgent need of additional funds. “The system is not working,” Mr Trollip said.

He opposed using taxpayers’ money to finance subsidised electricity to energy-intensive industry. While he recognised the necessity of funding Eskom to prevent its bankruptcy, he suggested conditions be imposed on the funds, including a premium placed on the low-cost tariff charged on energy-intensive users to ensure they no longer benefited from cheap electricity, and the strengthening of the regulatory system.