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, says 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, last week.
He said South Africa’s renewable-energy auctions were now delivering prices that were 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 from the Council for Scientific and Industrial Research and the 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.”
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 at UCT’s Graduate School of Business, said, while the IRP 2018 could be improved, it was “a vast improvement”, compared with the IRP 2010.
Currently, about 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 fourfold. Coal purchases are the same, but coal costs have gone up fivefold.” He said employee costs had more than tripled, while debt was the biggest problem – rising from just over R40-billion in 2007 to about R335-billion in 2017.
“Eskom is in deep, 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 transition from coal would be difficult but not insurmountable and that countries like Spain, where workers and unions had fought tooth and nail to protect their jobs, were now reskilling.
“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 institutional 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.