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A more ambitious renewables roll-out would have major benefits for South Africa, new study shows

Meridian Economics CEO Grove Steyn

Meridian Economics CEO Grove Steyn

16th July 2020

By: Terence Creamer

Creamer Media Editor

     

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A more ambitious renewable-energy build programme than the one outlined in the Integrated Resource Plan 2019 (IRP 2019), which already has a large renewables component, will greatly benefit South Africa and should begin immediately, a new study asserts.

Produced jointly by Meridian Economics and the Council for Scientific and Industrial Research Energy Centre, the study reaffirms that South Africa’s “cost-optimal” future power supply should be based on wind, solar, storage and peaker plants, given that new coal, nuclear and hydro are no longer economically competitive.

It also confirms that the cost of introducing an even lower emissions scenario is no longer significantly more expensive than a pure least-cost scenario and could be funded through a transaction with climate funders and development finance institutions.

Such a transaction, Meridian Economics CEO Grove Steyn asserts, could contribute to resolving Eskom’s financing crisis and provide support for a just transition for affected communities in key coal regions.

Accelerating a more ambitious renewables roll-out will deliver a large green stimulus that will attract job-generating investment in new generation facilities and associated value chains, Steyn, who is also a member of the Presidential Economic Advisory Council, adds.

“Over the next ten years alone, a more ambitious renewables pathways could attract in the region of R200-billion more, at about R500-billion, in capital investments over and above the IRP 2019, whilst not relying on the fiscus.”

Investment at such a scale, he adds, presents an enormous opportunity for a much-needed economic stimulus, particularly post Covid-19.

“It creates the opportunity for value chain localisation, reindustrialisation, and large-scale job creation in manufacturing, associated services, construction, operations and maintenance,” Steyn says, arguing that some 50 000 jobs would be created by 2030, which is larger than the 43 000 jobs currently generated at Eskom.

He also  argues that “a strategically managed, ambitious renewables roll-out will provide substantial new opportunities for broader economic participation and inclusive ownership, especially for South Africans from previously disadvantaged groups.”

The study’s authors, therefore, conclude that the IRP 2019 should be reviewed urgently with updated renewables cost assumptions.

Such a revision would yield a more ambitious renewables build programme that would be able to deliver a large green stimulus along with material value-chain localisation opportunities.

The IRP 2019 envisages the introduction of at least 6 000 MW of additional solar photovoltaic (PV) capacity by 2030, before taking into account distributed solar PV installations. It also assumes the introduction of 14 400 MW of new onshore wind capacity by that date, as well as 5 000 MW of storage.

The study has stress tested various, more ambitious, deployment scenarios for the period to 2050, during which it has been deemed realistic to introduce new variable renewable energy capacity at yearly rates of between 4 000 MW and 6 000 MW.

An ambitious renewable-energy pathway, the study concludes, would increase the overall system cost by little more than 1% relative to the policy trajectory outlined in the IRP 2019, but remove more than 25% of emissions, a reduction of 1 000 Mt. If their conservative cost assumptions are relaxed this might come at a saving to the IRP 2019 trajectory.

In all of the study’s realistic mitigation scenarios, the majority of new build capacity is wind and solar PV, with gas and battery storage acting as flexible reserve capacity as coal retires. The IRP 2019 has allocated 3 000 MW for gas to power.

The ‘ambitious pathway’ outlined also creates options to achieve future mitigation milestones, which could allow South Africa to delay major gas decisions for at least 15 years.

“Gas is only required in volume in the late 2030s,” the study asserts, adding that gas infrastructure for power generation, should it be required, could be coast-located, avoiding a necessity for long pipeline lead-times.

The study argued that the major constraints to a more ambitious renewables roll-out is currently related to policy uncertainty and regulatory restrictions, which can be addressed through political commitment and sector reforms.

“We know that the renewables build must be immediate and ambitious. A slow start means we are highly unlikely to achieve Paris-alignment and economic competitiveness in the low-carbon global future,” the authors state.

Emissions over the long term are most easily and cost-effectively achieved by initiating a coal phase down immediately, and allowing it to proceed steadily, the study adds. It notes, too, that a more ambitious renewables roll-out will enable Eskom to avoid potentially costly life extensions.

“For a similar level of costs, a more ambitious renewables build pathway delivers valuable options for more rapid future decarbonisation if required, and scaling up of the associated economic stimulus and socioeconomic benefits (especially in areas which will be most impacted by reduced coal-burn), in a rapidly changing world.”

Steyn argues that the opportunity “is real and immediate” and that South Africa should, thus, seek to grasp it.

Edited by Creamer Media Reporter

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