By Dominic Goncalves, decarbonisation advisor at Cresco Project Finance
SOUTH Africa has installed more rooftop and on-site solar contracted to private consumers in the last year and a half than in the last ten years under government programs. For industry experts, this is a staggering figure – what took almost 10 years under public programs, took little over a year once regulations were lifted and loadshedding incentivised the private residential, commercial, industrial and agricultural sectors to build their own resilience and get off the grid.
Renewable energy initiatives
In 2010, South Africa set up the Renewable Energy Independent Power Producer Procurement Programme (REIPPP) which at the time was one of the most highly regarded, ‘best practice’ ways of implementing renewable energy globally. I was involved in three of these projects at the beginning of the programme, Khi, Kaxu and Xina Solar One, which produce about 250 MW of solar power into the grid in the Northern Cape. Ninety-two of these projects were installed during the period 2011-2016, some 6,300 MW of solar and wind – before they came to a grinding halt as Eskom and government forces put a stop to the programme, arguably to force through a nuclear deal with Russia instead.
After a three-year hiatus, this programme was continued again, and the current installed base is 3,442.6 MW of wind and 2,287.1 MW of solar as of late August 2023. But the loadshedding deterioration that occurred from mid-2022 onward has caused nearly every progressive-thinking South African to explore ways to get off Eskom’s grid and have their electricity supply as much ‘in their own hands’ as possible. Diesel generators are expensive – more than Eskom’s power – but solar power has become cheaper than Eskom, in almost every application. Although it only works roughly 30% of the year (when the sun is shining) during this 30% – it’s possible to have your own power at a cheaper rate than Eskom’s charges when there’s no loadshedding and in off-peak hours.
The Solar boom
In the space of little over a year, the installed base of solar ‘not contracted to Eskom or government programmes has leapt from 981 MW in March 2022 to 4,740 MW by August 2023. What took 10 years to achieve in these highly applauded government programmes took less than one year once regulations were opened up to allow for residents and businesses to do the same.
Three main factors contributed to the explosion in domestic and commercial solar installations:
- The price of solar decreased more than 90% from 2008-2023. Solar is cheaper than Eskom power, meaning one can achieve savings on installing a system vs. not. There is an increasingly lower payback period and the business case makes sense
- Regulations prevented private consumers from installing projects above 1 MW until 2021. Once permitted, a flurry of demand from mines, smelters, industrial facilities, data centres, hospitals, shopping malls and other larger loads all began developing solar projects – ideally on their roofs and on-site if enough space – otherwise, ‘wheeled’ from other parts of the country, using Eskom’s grid to transport this power.
- Increased loadshedding. Diesel is approx. 8-10x the cost of solar power. Diesel works all of the time, solar works 30% of the time. The best way to get diesel costs down is to install solar to offset diesel when the solar is operating.
Eskom’s winter outlook and factors contributing to reduced national demand
In May 2023 Eskom published its winter outlook. It looked bleak. Power plants were continuing to break down and those under maintenance were delayed from coming back online. Eskom assumed that demand on the grid would be similar to last year – around 34 GW. To some fortunate surprise, demand this winter was only 31 GW – which is 3,000 MW less than expected and roughly the same amount as the new solar energy installed that is not connected to Eskom’s grid.
Still, to unpack and examine this in detail, one cannot attribute this to solar power taking consumers off the grid as being the sole cause of this reduction in national demand. But it is one of the main ones. Here are some of the factors that caused this drop in national demand:
- Increased Wind generation in the first weeks of winter.
- Increased commercial, industrial and agricultural usage of on-site Solar PV and BESS systems, the rapid adoption of which is driven by resilience to the high levels of current and future forecasted loadshedding.
- High winter prices for Eskom Megaflex tariff starting June 1, 2023, for industrial, mining and energy-intensive industries, on top of the high Eskom average electricity price increase on April 1, 2023. This ‘double tariff increase’ caused some smelters and heavy operations to reduce their loads.
- Weak economy and low business confidence.
- Energy switching to gas for domestic heating and cooking.
In late August 2023, the national demand figures were revised further downward: it seems that moving into the summer months, demand has further decreased, from 34 GW to 31 GW to 28.5 GW. Some 328 MW of solar was reported installed between June and August 2023.
Challenges and benefits of solar power
Eskom considers solar ‘a double-edged sword’. As do most utilities globally, and any operation that requires ‘24/7 power’. Solar is variable: it’s great when it’s producing. But even with batteries, it cannot store power for long periods. This means that during winter months when there are extended periods of no sun, all that fleet of gigawatts of solar power – for a week at a time for example – can be of no use at all. It is during these times when the power is often needed the most. Still, this can be factored in.