As the deadline approaches for the ‘financial close’ phase of the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), it is clear that renewable energy technologies have caught up with their fossil fuel competitors – which is good news for South Africa’s sustainability aspirations.
The awarding of preferential bidder status to eight companies earlier this year demonstrated what could be regarded as something of a turning point in perceptions about renewables. The RMIPPPP had called for bids to supply 2,000 MW to meet the immediate electricity supply gap, and another 11,813 MW from various energy sources.
The bids came from private producers who planned to use energy sources ranging from liquified natural gas (LNG) and diesel (mainly as back-up) to solar photovoltaic (PV) technology and battery energy storage systems (BESS). This provided a useful opportunity to gauge how the cost differential had closed between renewable energy generation and storage on the one hand, and fossil fuel options on the other.
Of course, it needs to be remembered that the final awarding of the bids will be based on value-for-money propositions, which can only be finalised at financial close. However, it is clear that technology improvement in renewable power generation and battery storage is continuously driving down its cost. This can be clearly seen in the cost comparison between the preferred bidders, as outlined by the Department of Mineral Resources and Energy (DMRE).
In its announcement, the DMRE noted that the prices for the proposed solutions ranged from R1,468 per megawatt hour (MWh) to R1,885 per MWh – with a weighted average price of R1,575 per MWh. This indicates that there is no longer much difference in the comparison, especially when factoring in the externalised costs of burning fossil fuels. While the US Energy Information Administration puts the carbon dioxide emissions of LNG at almost half that of bituminous coal, there are growing arguments against South Africa becoming over-reliant on LNG. Such arguments and others against the use of fossil fuels have as much to do with the country’s general air quality as with our climate change commitments in terms of the Paris Agreement. According to the World Health Organisation, we are rated 30th in the world in terms of polluted air –
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