• Leonie Joubert for Old Mutual MindSpace

Is Covid-19 our chance to fast-track renewable energy in SA?

Many are calling on South Africa’s government to use its coronavirus economic-stimulus package to boost renewable-energy rollout in South Africa. However, leading energy experts say that in order to accelerate its renewable-energy targets, the country needs political will and policy to boost private-sector confidence and investment. Ten years from now, Eskom will have to begin retiring most of its ageing coal-fired power stations. South Africa’s Department of Energy’s 2019 Integrated Resource Plan (IRP-2019), the blueprint for how the government will develop the national grid, has a target of replacing them with an initial 26.5% of installed wind and solar power by 2030. International movement 350.org and Amnesty International South Africa are among the activist organisations that have called on government to use its coronavirus stimulus package, which will be the equivalent of 10% of the country’s gross domestic product (GDP), to accelerate the scheduled rollout of renewable energy. According to energy experts, though, the private sector is ready to meet even greater potential demand than this target, and merely requires the state to remove barriers preventing corporates from scaling up their investments in renewable energy. Renewable energy can be a cornerstone of post-coronavirus economic recovery, according to Emerson Clarke, director of growth and partnerships at the Global Wind Energy Council. Speaking during an online webinar in June, hosted by the annual wind energy conference WINDABA, Clarke said that the renewable energy sector was not ‘asking for bailouts’ from governments now, but for evidence-based decision-making in a context where the industry is up against ‘fossil fuel lobbying and donations that dwarf the lobbying capacity of the renewable energy sector’.

Renewable energy is already cheaper than coal, but policy bottlenecks remain

Renewable energy will be key to the country’s future development path, according to energy consultant Dr Grové Steyn, and economic conditions are already suited for increasing the IRP’s ambition on renewable energy investment, with wind and solar power the cheapest form of energy on the market. Steyn, the managing director of Meridian Economics, has consulted extensively with government on its energy policy, and worked with the SA Council for Scientific Research to model the country’s electricity needs and renewable energy potential.

‘These wind farms are expected to create almost 17 500 jobs in construction and 7 000 jobs in operations.’

The average cost of electricity produced by Eskom’s coal generation units now sits at 37 cents per kilowatt hour (kWh), while wind and solar are approaching 40 to 60 cents per kWh. Once the carbon dioxide costs are added to the national utility’s coal electricity price, at an estimated R120 per ton, together with the environmental levies attached, the cost of burning coal in South Africa is already higher than building a new wind farm. But the current policy landscape does not allow for the kind of economic stimulus that could come from the private sector, Steyn says, with ongoing policy uncertainty and a lack of political commitment remaining as key bottlenecks. He believes that South Africa needs to reduce the role of central planning, regulation and delivery, to enable thousands of (private sector) agents to respond nimbly to investment opportunities in a competitive market. The recommendation is for the South African government to resolve regulatory dysfunction that has so far held back renewable energy investment, and to introduce measures that improve independence, capacity, governance and accountability. Steyn has also called on the state to resolve the conflicts of interest in energy governance.

The power of wind: electricity and green exports

In the wind sector alone, the IRP allows for 1.6 gigawatts (GW) of installed wind power a year by 2030. This will bring the total investment to between R300 and R400 billion in the next decade, according to energy consultant Dr Tobias Bischof-Niemz from ENERTRAG AG, who was formerly with the CSIR. These wind farms are expected to create almost 17 500 jobs in construction and 7 000 jobs in operations. If the state doubled this target to 3 GW of new-build wind capacity per year until 2030, the investment could total R800 million, while creating 35 000 construction jobs and 14 000 permanent operational positions. These new jobs would be similar to the number of jobs currently offered by Eskom, which employs about 40 000 people. To meet the country’s energy needs by 2050, wind capacity has to grow to 100 GW by mid-century. If it doubles this capacity, it could allow for the wind sector to beneficiate its outputs, and produce green export products such as low-carbon hydrogen, aviation fuel, ammonia, and steel. There is an estimated R20 to R30 billion export opportunity in green industrial products. Boosting grid capacity to 200 GW of wind power by 2050 would need 10 GW of wind infrastructure to be built per year, according to Bischof-Niemz’s calculations, the foundation of which could be laid down now and should be linked with a coronavirus stimulus response.