The local PV industry is set for growth. With the government making it clear that they are striving to transition into a low-carbon economy, renewable energy like the photovoltaic (PV) technologies will get the chance to feature in the country’s energy mix. Opportunities to explore and utilise PV technologies are on the horizon.
Roth Watson, country manager in South Africa for SolarTotal, a SESSA member, identified five major trends in the local photovoltaic industry. “The major market trends for PV in South Africa are currently for off-grid settlements, game lodges, utility-scale projects, commercial and residential,” he says.
The utility-scale market has been flooded with international players coming to South Africa in order to develop large-scale solar fields under the REBID process. The European market has become saturated and very competitive, as well as price-dependant, thus driving down project margins. This has fast-tracked project developers to look at other countries that show greater financial rewards, like South Africa.
In the rural application, South Africa has a population of 50-million people of which 10-million have no access to any energy. There is a huge demand for small systems that can run basic appliances such as lights, a fridge or radio. Most game lodges use diesel generators for power. The cost of diesel and the running costs of a generator are extremely expensive and are moving to hybrid PV systems whereby they use solar, batteries and the previous generator as a back-up source of power.
The South African Revenue Service has introduced an accelerated depreciation allowance for renewable energy projects for companies who want to roll out commercial and industrial scale projects under 1MW within their organisations. Companies can write off their system in three years at a rate of 50%, 30% and 20%. “This has definitely resulted in an uptake of larger rooftop or ground-mounted projects. Companies who invest in PV plants also feel that PV is a great way to show that they are environmentally-conscious and sensitive about their carbon footprint,” says Watson.
In the case of residential applications, the market has shown a lot of interest in smaller net-metering sized solutions. The challenge at a residential level is the initial investment that needs to be made. For example, a competitively priced 1,1KWp grid-tied system costs about R33 000. The system should produce about 6KWh per day with a payback period of seven years, which includes the forecasted energy-price escalations from Eskom. So far, the residential PV market is more geared for new housing developments as the homeowner can load the PV system onto his bond.
The South African market is in its absolute infancy compared to Europe. Last year 26,5GW of PV was installed in Europe in one year. South Africa as a whole does not have more than 5MW of small decentralised PV plants installed throughout the country. The reason why PV has been a slow starter in the local market is due to the relatively cheap energy that people have grown accustomed to. This, however, is changing quickly as the cost of technology becomes drastically cheaper, energy prices are escalating and the efficiency of systems are improving, as well as the South African market becoming desperate to find a solution to its power shortages. “The above being said, the South African market holds immense potential for PV. We have on average twice the amount of sunlight hours of Europe and the financial decision to invest in PV today makes sense without a kilowatt-hour subsidy like that of Europe,” says Watson.
Watson believes the future of PV lies in the residential rooftop and commercial rooftop market, as well as areas which utilise a lot of diesel for power generation. Unlike large utility-scale solar fields, there is a reduced need for substation upgrades, extension of distribution and transmission lines as well as limited environmental complications. “Generally the off-taker of the energy is directly under the roof and no massive investments are needed by the state to route power from areas without any economic activity to areas with a lot of economic activity. Europe has moved from a large-scale utility industry to a rooftop industry. Some people will argue that this is due to land constraints – however, if one looks at the American market where land is generally not a constraint, a large part of the market is rooftop-orientated. Google and Solar City are offering rooftop finance mechanisms for homeowners to participate in. These models work on the basis of the homeowner buying the solar power generated from the PV system on their roof that Google or Solar City has financed. This is at a discounted rate to that of the local utility power,” he says.
Businesses or communities that utilise diesel generators for power generation will in the future move to hybrid systems that utilise PV, solar batteries and possibly small-scale wind as a form of additional renewable energy. As the price of fuel increases, the cost of solar technology decreases and more efficient forms of energy-storage technologies become available, which means the cost benefit will become more and more apparent for communities or businesses that have no energy.
Bruce Conné, technical manager at Romano Sustainable Engineering, agrees that the potential for the PV industry is enormous as every kWh of PV power which is fed onto the grid is one more kWh that Eskom does not have to build. “Some of these cost benefits should be used to stimulate the local industry and the sooner an objective academic study is commissioned to investigate this, the better for the industry,” he says.
Chris Haw, chairperson of the South African Photovoltaic Industry Association (SAPVIA), says over 630MW of PV has been awarded preferred bidder status. “All these projects will be moving towards commencing construction by July 2012 and will be trying to find a balance between maximising local content and sourcing well priced and technically proven compenents.” According to him, for these first projects, major equipment such as panels and inverters have already been decided on, but of the balance of system components and installation services could still be required for some projects and this would create an increase in demand for providers of such services. “Eskom price increases will further support the business case for rooftop, residential or commercial installations able to offset electricity for end users.”
Safety issues around PV
Haw says PV products are clean, simple, long-lasting and can be integrated with existing buildings. “It is also affordable and cost-effective,” he adds. He believes that when customers decide to go with PV products, they should choose modules and components with a track record of successful operation and beware of poor quality equipment without the necessary local and international quality approval standards.
According to Watson, one of the advantages of PV technology is that it is a fairly straightforward and safe technology to install, provided the systems are installed by qualified technicians. The National Energy Regulator of South Africa (NERSA) has provided strict guidelines on how embedded generators should be installed in order for grid-tied systems to safely interact with the national and local utility grid. “As long as the site where the PV system is installed is in line with the health and safety guidelines of the National Home Builders Registration Council (NHBRC), as well as a certified PV technician, the installation should be completely safe.”
More growth opportunities
Gareth Blanckenberg, an energy and power research analyst at Frost and Sullivan, says both PV and concentrated solar power (CSP) boast various benefits and have specific technologies that have been employed worldwide. “PV is cheaper and faster to install, while CSP has the advantage of producing power for longer, including having storage options and thus being able to cover peak evening demand,” he says.
Blanckenberg states that South Africa has set generation targets for both technologies of 8 400MW of PV and 1 000MW of CSP as laid out in the 2010 Integrated Resource Plan (IRP). Currently 632MW of PV and 150MW of CSP have already been procured in the first round of the Department of Energy’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). The total amount of power that is being bid for under the REIPPPP is 1 450MW of PV and 200MW of CSP. The second-round bids were due for submission at the beginning of March. As is the case with almost all large infrastructure projects undertaken within South Africa, the REIPPPP includes economic development targets as part of the procurement process in an effort to stimulate local industry and job creation.
“So far solar power generation is not yet financially competitive with conventional power generation, so its development is reliant on the provision of incentives for the provision of electricity. Given the large solar-generation targets laid out in the IRP 2010, there has been a significant amount of interest in solar project development from local as well as international consortiums,” he concludes.
It seems that all the local factors are geared for future growth in the solar and PV industries in South Africa and the outlook for both markets are only set to become rosier as the search for renewable energy sources continues.
Haw believes that the PV industry can lobby with Eskom and municipal electricity distributors for tariff structures and regulations that allow for bi-directional metering and the removal of administrative costs being charged separate from energy costs. “We can lobby government to provide incentives to Eskom and municipal providers to purchase solar-generated energy,” he concludes.
Full acknowledgement and thanks are given to Roth Watson from SolarTotal, Bruce Conné from Romano Sustainable Engineering and Gareth Blanckenberg from Frost and Sullivan, as well as Chris Haw from SAPVIA, for the information used in this article.