The true cost of renewables in SA
|Published
Eskom and the Office of the Minister of Electricity recently announced that the power utility would be spending an estimated R210 billion to build transmission lines, which will connect the remote power-generating solar plants and wind farms located in parts of the Northern and Western Cape. This is a huge cost simply to connect renewables.The price tag is not to generate electricity, which highlights the real cost of renewables to the South African economy.
At the outset, I have to mention that I, together with many of my colleagues who share the opinions contained herein, are not climate denialists. Neither are we anti-renewables. On the contrary, we always welcome the use of new viable technologies because we are engineers. We are trained to think this way. We are also technology neutral.
Our principle is that policies and solutions to our energy problems have to make technical, economic, social and environmental sense. Renewable energy technologies have their place and appropriate application in South Africa’s energy mix. However, they are currently being deployed far too aggressively and irresponsibly in South Africa. This will have major repercussions for our country, as demonstrated below.
One can build two conventional six-pack power stations with R210bn if one plans and executes those projects efficiently. But instead of building power generation capacity, we are building costly transmission lines. Right now, our country needs electricity, megawatts, not transmission lines.
What’s worse is that government wants to build these transmission lines to connect solar and wind plants that have capacity factors that range from 25% to 32%. A capacity factor is the ratio of the energy that was actually produced by a solar or wind plant to the amount of energy that plant could have produced in a specified time period given the plant’s rated output power. It is often measured over a period of one year. 25% and 30% are indeed very low capacity factors, sadly.
The financial equivalent of a capacity factor is asset utilisation. And as we know, a low asset utilisation factor means a low return on investment. It makes absolutely no sense for the government and Eskom to spend R210bn on transmission lines that will be used only 25% of the time.
It’s also a waste of much-needed financial resources that could be used to create jobs, facilitate the establishment of real businesses that will contribute towards growing the economy, etc. Our policymakers are so deep into this renewables gospel that they can’t even see (or perhaps they do see but ignore) the glaringly obvious paradoxes of their own policies.
R210bn is a lot of money. For the government and Eskom to waste it in this manner is a tragedy. Sadly, the cost of this wastage will be borne by ordinary South African households and businesses. This will have the effect of raising electricity prices yet again and unnecessarily so.
An increase in electricity prices raises inflation, leading to higher food prices and higher costs of producing goods and services. The resultant high food prices will plunge the poorest amongst us into even deeper levels of poverty. The increased costs of production will render South African companies' prices uncompetitive in their markets. This inability to compete will mean that they will lose customers and whole markets in certain regions, which will compel them to reduce production.
Production curtailment in any factory means fewer workers are needed, which leads to retrenchments and higher levels of unemployment. We all know that our society already faces unprecedented unemployment levels. The last thing we need is more retrenchments of workers.
The other major socio-economic costs of renewables that fall into this category are related to the closing down of coal-fired power stations related to the so-called Just Energy Transition Investment Plan (JET IP.) In the upcoming articles, I will write in more detail about what exactly this JET IP means for our country.
Staying with the techno-economic costs of renewables, it’s important to highlight the fact that increased penetration of renewables reduces the stability and reliability of the grid. In extreme cases, this leads to grid collapse.
Electricity Minister Kgosientsho Ramokgopa mentioned that in his recent visit to Vietnam, he learnt that the aggressive push to build utility-scale renewable plants in that country has led to exactly these stability problems. Well, the Minister didn’t have to go to Vietnam to learn this. Many of us have been cautioning about this risk for quite some time now, right here in South Africa. The weakness of the grid due to the increased penetration of renewables is due to the loss of system inertia.
Conventional power plants have massive rotating turbines and generator stators. This rotational inertia makes the grid robust and less susceptible to network faults and other power system disturbances. The result is a more stable and reliable grip, with fewer operational headaches and costs. When renewables replace conventional power plants, system inertia is lost, leading to an unstable and less reliable grid.
A less reliable grid is obviously a serious risk and a threat to the country. And in order to mitigate this loss of inertia, more costs have to be incurred in installing synchronous condensers and other spinning reserves at various points / locations on the grid in order to add back some of that lost system inertia. These costs can be significant, depending on the extent of the penetration of renewables.
The loss of system inertia, together with the transmission costs of connecting low-capacity factor intermittent renewables, are just but two of the many hidden technical costs of renewables. These technical costs have to be borne directly by the utility, in our case, Eskom. But as demonstrated above, they also have major concomitant socio-economic costs.
The above is a Systems Thinking approach to analysing the likely impacts of policy decisions. It is one of the best ways of evaluating governments’ policy decisions. It is inconceivable that our politicians do not see these potentially disastrous consequences of their policy decisions.
And even if they didn’t think about them initially, these risks, many of which will definitely materialise, have been highlighted to them enough times for them to re-think their policies, strategies and plans. But they are proceeding down the renewables path regardless, and at full speed, for that matter. The question is, “WHY?”.
Mthunzi A Luthuli, the CEO of Economic Interventions Forum of South Africa (EIFSA).
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