Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Small-scale customers in residential and commercial segments, as
well as industrial consumers and municipalities, are exerting
pressure on South Africa's government to review the options for
enabling independent power generation, particularly from renewable
sources.
Rising electricity tariffs amid high risks of discontinued power
supply from the main grid have spurred a number of private
consumers to look for self-consumption alternatives and enhance
their power security at times when the utility is unable to provide
this service.
Over the past year, small steps have been taken to complete the
regulatory framework for Small-Scale Embedded Generation (SSEG) of
up to 10 MW, as well as the regulatory framework governing
non-utilty procurement of larger projects. Changes are enabling
participation beyond the Renewable Energy Independent Power
Producer Procurement Programme (REIPPPP), but implementation of
larger self-generation systems is still challenging, particularly
among industrial customers.
Solar PV, in particular offers the most attractive option as its
costs have declined steadily and small PV systems have been the
preferred option for self-consumption among residential and
commercial consumers, as well as for larger systems meeting
industrial demand, such as mining. However, the economic recession
caused by the COVID-19 pandemic will likely delay the ramp-up of
distributed systems in the near term.
Declining technology cost drives attractiveness of PV
solutions
IHS Markit simulated the cost of transitioning to a PV system
for a high-income residential customer and a large commercial
customer in Cape Town, one of the municipalities in Western Cape
that allows SSEG and has distinct embedded tariffs.
Under the Cape Town embedded generation regime, a hybrid
customer pays higher network charges than if supplied by the grid
only. However, being partially supplied by the PV system, a hybrid
household customer's monthly consumption level is very likely to
sit at the low-consumption band, thus paying a lower energy tariff
per unit. This result suggests that reduced dependence on grid
power in the context of declining PV costs could make the PV-based
self-consumption option increasingly attractive.
The economics improve when the end customer is a commercial
player such as a shopping mall. In this case, the hybrid option is
below grid parity owing to cost benefits of economies of scale and
more attractive financing options for the investor.
Consumers still prefer the security of grid connection and are
likely to remain on the central network despite the inherent fixed
grid charges that vary according to customer class. Battery storage
could increase reliability, but costs are still prohibitive for an
average South African resident.
Large industrial consumers also claim the right to
produce their power
Self-generation assets are deemed essential for local industrial
producers whose operations were heavily affected by load shedding
before COVID-19. Industrial and mining companies are more keen to
develop utility-scale projects (above 5 MW) owing to higher power
needs' and thus, the ability to benefit from economies of scale,
particularly when leveraging capital from their balance sheet.
The latest IHS Markit forecast estimated that this system
category is projected to amount to net capacity additions of almost
3 GW of PV and about 5 GW of onshore wind through 2030, as well as
an additional 11 GW of utility PV and more than 15 GW of wind
capacity between 2030 and 2050. Although the engine of these new
additions will continue to be the REIPPPP, if a regulation that
enables direct PPA sales is implemented, initiatives by commercial
and industrial clients as well as municipalities could facilitate
faster implementation of renewable projects.
