By: Saliem Fakir and Tjasa Rentel-Bole

It is unfortunate that, instead of focusing on practical and immediate solutions to gaping energy crisis South Africa is facing, the debate on the country’s energy future is plagued by misinformation, simplifications and outdated arguments against renewable energy that do not stand up to closer scrutiny. The contribution by Rob Jeffrey, of Econometrix, made during the Southern African Energy Efficiency Convention, in Johannesburg, is such an example of misleading rhetoric.

At the other end of the objectivity spectrum, independent academic research and the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) offer ample impartial and up-to-date information not only on the state of play but also how far the experience with renewables has advanced in this country. This article is an attempt to ‘set the record straight’ on some of the perceived fundamental weaknesses of renewables cited by Jeffrey.

First of all, even if carbon costs (in the form of the forthcoming carbon tax) are excluded, several renewables technology options already match the cost of, or are considerably cheaper than, new coal. The average levellised cost of electricity (LCOE) of wind, solar photovoltaic and landfill waste-to-energy (WtE) projects is already below R1/kWh, which is reflected in the electricity sales prices stipulated in the power purchase agreements of REIPPPP preferred bidders for the third round. New wind projects, in particular, promise to deliver electricity almost 30% cheaper than new coal projects, with average tariffs of R0.74 /kWh, compared with the R1/kWh expected for electricity from Medupi and even well above that for electricity from Kusile.

On the other hand, it is true that fossil-based baseload capacity cannot be replaced by renewable energy capacity on a 1:1 basis. So, for a completely fair comparison, total system costs should be considered. There has been surprisingly little systems modelling done on this, including by the Integrated Resource Plan process, which is the most obvious forum for exploring the various possible energy scenarios for the country. A relevant piece of work recently completed by the University of Cape Town’s Energy Research Centre (ERC), however, indicates that achieving 40% electricity production from renewable sources by 2040 would increase the total installed capacity in the country by about 20% and the average electricity price by about 10%, compared with a situation where renewable sources played only a marginal role.

Again, this is in case the carbon tax is not considered. If this carbon reduction policy instrument is implemented as planned, the difference in the electricity price between the two scenarios practically disappears. The catastrophic effects on electricity prices invoked by the fossil fuel lobby are either uninformed guesses or simply a campaign of misinformation. New advances in grid and storage technology will also shape future costs and systems integration features of renewables, which are more likely to get better than worse.

The argument that major growth in renewables would drive up energy prices, which, in turn, would stifle the local manufacturing base and reduce the country’s overall competitiveness, misses at least two crucial points. Firstly, electricity price increases are already occurring, and are likely to continue for the foreseeable future. This is not because of the growing renewable-energy sector in South Africa, which accounts for a small proportion of the yearly increases agreed under the third multiyear price determination period, or MYPD 3, but because Eskom is attempting to plug its financial hole, which risks sinking the whole economy. Secondly, South Africa is hardly the only country introducing more renewables into its mix. Investment in renewables is growing worldwide; in 2013, renewables accounted for more than 56% of net additions to global power capacity, much of it in the developing world. Even if Jeffrey’s argument were correct, which it is not, all the other Brics (Brazil, Russia, India, China and South Africa) countries, to which this country would presumably lose its competitiveness, are investing heavily in renewables. Extrapolating his logic would mean they are also digging their own competitiveness hole.

Far from seeing renewables as a source of concern, major industrial and commercial customers worldwide are turning to them to manage and even reduce their energy costs, while improving the reliability of their energy supply. This is also happening in South Africa. A look at the list of existing embedded generators in the country shows that not only the ‘wealthy’ service sector, but also retailers, farms, food-processing companies and even clothing manufacturers are increasingly turning to renewables (mainly solar photovoltaic), for exactly the same reasons their competitors across the globe are doing so. An additional advantage of many commercial and industrial users is that their load curve does coincide with a period of sunshine during the day. In addition, it is now cheaper to supplement grid electricity use with a photovoltaic panel than a diesel generator. Quite contrary to what Jeffrey thinks, embedded renewable generation is not only a niche market in the residential sector, but is also becoming increasingly important in the commercial and industrial sectors – simply because it makes good financial sense.

Finally, it seems that Jeffrey fails to see the urgency with which South Africa needs to increase its power generation capacity. New coal (and this does not refer to what is already under construction), nuclear and shale gas are all at least another decade away and will do nothing to alleviate the current energy emergency (said to continue after Medupi comes on line), except divert attention and scarce human and capital resources from renewable solutions that are available here and now and just need to be given the green light. At this point, any additional power producers should be welcome, and ‘output variability’ cannot not be used as an argument against them, especially since this ‘variability’ has been blown out of proportion. Variations in wind and solar farm output are barely noticeable, over and above the normal fluctuation seen in supply and demand. In addition, the variation in renewable-energy output is further reduced in significance when spread geographically across the country.

Finally, the costs of ‘unserved energy’ to the economy, which are a direct consequence of delaying investment in renewable energy options with short lead times, are enormous and should weigh heavily on the conscience of any economist.

Rentel-Bole is an economist at Wildlife Fund South Africa (WWF-SA) and has several years' experience in international renewable-energy research. Fakir is the head of the Living Planet Unit at WWF-SA. The unit's work is focused on identifying ways to manage a transition to a low-carbon economy.