Blog entry by Sohasini Sudtharalingam and Simbisai Zhanje

Access to energy in rural areas and the prohibitive cost of windpower in South Africa were among issues discussed at the 2012 Clean Power Africa Conference in Cape Town. Renewable energy experts from around the world gethered to focus on new opportunities in Africa, particularly in the hydropower and solar energy industries. The conference primarily focused on hydro power, but the exhibitions showcased solar and wind technologies. Here we share a selection of the most interesting findings.

The issue of access to modern energy services in rural areas was central to one of the presentations. Given that rural areas are often far from the nearest grid point, a decentralised generation system can be beneficial. The first casestudy was an 18kW micro-hydro system in Kenya, used to power enterprises such as a barber shop, battery charging centre and welding shops. This system is successfully operating and people are benefitting from the renewable source of electricity.

The other casestudy presented by the speaker was a mini-grid comprised of solar panels and wind turbines in the Eastern Cape of South Africa. This facility no longer operates as the villagers vandalised the area. They felt that the electricity generated was of an “inferior quality”, preferring “good quality” electricity provided by ESKOM, the power utility in South Africa. It was particularly interesting that they did not appreciate having electricity but were picky about the source of the power.

This is a key learning outcome. As we know from our work at CDKN, it is important to work alongside service recipients to achieve the desired objectives rather than prescribing what they need in isolation. This helps to gain sufficient buy-in and to instil a sense of responsibility in communities to ensure that they are comfortable with the system and can continue to operate it after installation.

A presentation given by a PhD student from the University of Cape Town compared the financial cost of wind power in South Africa to the more developed market of Germany. South Africa has less than 10MW of installed wind power capacity compared to more than 29GW of installed capacity in Germany. The immature market and insecurity of income from wind generation in South Africa makes it a more risky investment.

Investors require about three times more return on equity when investing in wind power in South Africa compared to Germany. To recoup their costs and make a good return on their investment, they need to make a substantial profit. However, the unit price (1kWh) for electricity in South Africa, mostly coming from coal-based power plants, is half that of the cost to produce a kWh of electricity from wind. This makes it almost impossible to break even, let alone make any profits, without supporting incentives.

The only viable method to encourage investment in wind power, therefore, will be to introduce an incentive system. According to the research carried out, an annual contribution of around EUR 117/kW of installed wind capacity is needed annually to make wind power a viable investment in South Africa. What was not explored in the presentation was how this translates into cents per kWh as the capacity factor changes over time. This is important as installed capacity is by no way a reflection of how many units of electricity will be produced by the wind turbines annually.

In conclusion, the South African electricity system is faced with a trillema: how to generate sufficient electricity to meet the growing demand; how to ensure that people can afford electricity to meet their basic needs and avoid fuel poverty (in the UK, fuel poverty refers to households spending more than 10% of their income towards their energy bill but this threshold might differ for other countries); and how the grid can be decarbonised.

Greenhouse gas emissions from the grid are curently high due to the large proportion of coal in the generation mix. If the government is thinking of building new power plants to meet the increasing demand, they should consider investing in renewable energy systems. In rural areas, especially, this would serve the dual purpose of increasing the percentage of renewable energy in the national energy mix and extending electrification to areas that are not currently connected to the grid.

Despite all the talk about decarbonising the grid and improving electrification across the nation, the government has many other priorities to allocate its finite resources to. These include reducing poverty and improving the education system. Faced with such competition for funds, the renewable energy agenda needs a strong buy-in from top stakeholders so it is taken forward in a long-term plan with a robust investment strategy.