Wednesday, August 29, 2012

Law stands between SA and cheap solar energy

Law stands between SA and cheap solar energy

August 29 2012

by Londiwe Buthelezi

The price of energy from solar photovoltaic (PV) cells has fallen 10
percent annually and will be at grid parity with Eskom by 2015. With
Eskom�s tariff set to double to 97.51c a kilowatt-hour by 2017, PV
energy is expected to be cheaper than Eskom�s coal-generated
electricity by 2017.

This is according to calculations by David Lipschitz, an energy expert
at energy company My Power Station.

PV energy is created by panels using solar radiation.

Lipschitz said at the Solar Power Africa conference in Cape Town
yesterday that the cost of PV energy was sliding on excess supply of
panels. �We could reach grid parity with Eskom even before [2015].�

However, this excess supply was not making its way to the national
grid because electricity regulations in the country prevented those
independent power producers (IPPs) not taking part in government
procurement programmes from connecting to the grid.

Rules governing the country�s electricity industry include the 1998
white paper on energy, the Electricity Regulation Act and its two
amendments, as well as the Independent Systems Market Operator Bill.

Doug Kuni, the managing director of the SA Independent Power Producers
Association, said the current laws caused uncertainty as they
contradicted each other and this uncertainty jeopardised the financing
of projects.

For instance, while the Electricity Regulation Act of 2006 allowed a
willing-buyer willing-seller principle for electricity, the first
amendment to the act excluded it. The latter also barred independent
producers from selling power from private installations without
ministerial approval.

�We need to make the environment easy for investors to come and we
need certainty to achieve that,� Kuni said.

Kuni said because so much uncertainty had been introduced, the only
IPPs left in the market would be those that were part of the
government�s procurement programmes.

In the second window of the renewable energy procurement plan, the
Department of Energy received 79 bids, of which 51 met the
qualification criteria. But due to the limited capacity provided for
this window, only 19 bid proposals were selected as preferred bidders.

Kuni said this was a clear indication that fewer IPPs could take part
in the government�s procurement programmes and therefore they wanted
to be able to produce and sell the electricity privately, allowing
customers a choice in supply.

With South Africa�s power deficit estimated at between 5 gigawatts and
30 gigawatts a year, the IPPs said the government should allow
independent players to cover this shortage because it was causing
massive damage to the economy.

The challenges faced by local businesses, where they had to shut
operations when Eskom was battling with household demand, were
unnecessary and it was the reason the country was growing at a slower
pace than other African countries.

�I don�t see what�s stopping the government and policymakers from
saying �we�ll open the [bidding] windows until we�ve met the deficit
when there are willing IPPs�,� said Kuni.

Thembakazi Mali, a clean energy solutions manager at the SA National
Energy Development Institute, said it would soon be cheaper to develop
energy using solar radiation than fossil fuels because of Africa�s sun
exposure. If the continent took full advantage of this available
resource, it could generate 80 times more energy than it needed.

But she said the market needed certainty on what was going to happen
after window 5 of the renewable energy procurement programme for
multinational companies to invest in local manufacturing.

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