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Prices for renewable energy likely to drop further, suggests energy expert

7th November 2018 BY: Kim Cloete
Creamer Media Correspondent

Prices for renewable energy are likely to continue to drop, while the next utility-scale renewable energy procurements will probably come sooner rather than later, suggests energy expert, Professor Anton Eberhard.

“I have no doubt that we will see prices coming down further,” Eberhard told delegates attending the Windaba, in Cape Town, on Wednesday.

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He said South Africa’s renewable energy auctions are now delivering prices that are cheaper than Eskom’s average costs of supply.

“Even with conservative pricing, all the models, not only from the Department of Energy and the Integrated Resource Plan (IRP) but also the Council for Scientific and Industrial Research and Energy Research Centre at the University of Cape Town (UCT) have all come to the same conclusion . . . that the least-cost mix doesn’t include new coal or new nuclear.”

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Globally solar photovoltaic has come down 87%, with wind dropping 50%.

Renewable energy is beginning to reach more areas in South Africa, with 92 renewable energy plants signed in the Renewable Energy Independent Power Producer Procurement Programme. Eberhard said this was apart from hundreds of rooftop developments as well as homes generating their own power, mainly through solar power.

Eberhard, who is the head of the Department of Managing Infrastructure Investment, Reform and Regulation in Africa (MIRA) at UCT’s Graduate School of Business, said while the IRP 2018 could be improved, it was "a vast improvement" compared to the IRP 2010.

Currently around 87% of South Africa’s electricity is produced by coal, but this would change as ageing coal plants reached the end of their lives, suggested Eberhard, who lamented the new coal power build in an age of renewable energy.

“Just as the transition was taking off, we decided to build among the world’s largest and most expensive power stations – Medupi and Kusile. These will end up as stranded assets.”

Eberhard sketched a worrying picture of Eskom. He said the State-owned utility was selling less electricity today than it sold ten years ago. “Revenue has increased four-fold. Coal purchases are the same, but coal costs have gone up five-fold.” He said employee costs had more than tripled, while debt was the biggest problem – rising from just over R40-billion in 2007 to around R335-billion in 2017.

“Eskom is in deep and very serious trouble. It is facing a classic utility death spiral and cannot trade its way out of its financial difficulties,” said Eberhard.

He suggested that Eskom generation and transmission would need to be unbundled to enable an independent grid. “We have to protect the heart of the system.”

He said a transition from coal would be difficult but not insurmountable. He said countries like Spain, where workers and unions had fought tooth and nail to protect their jobs, are now reskilling. A transition would need to be carefully managed.

“We can have a managed transition or a chaotic disruption. In a chaotic disruption, people get hurt, whether they are consumers, employees or Prime Ministers. We can’t predict the future, but we can put in place a framework for proactive policy, regulatory market and institution reforms that are robust.”

Eberhard said world energy was changing profoundly and rapidly, with solar and wind energy replacing traditional energy sources such as nuclear.

He said nuclear’s share of global electricity production peaked in 1996 at 17.5%, but was now down to about 10%.

Eberhard said that, in future, people would increasingly choose how to control their energy use. Smart meters would be complemented with smart devices and controls, machine learning and artificial intelligence. 

EDITED BY: Creamer Media Reporter
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