The book of Joel counsels us: “Beat your ploughshares into swords, and your pruning hooks into spears – let the weak say, ‘I am strong’.” If South Africa is to ensure that it has a strong energy economy, it may need a similar transformation – turning from Hummers to heliostats. What is needed is a Solar Industry Development Programme (SIDP).
Concentrating solar power (CSP) offers huge potential: a renewable-energy resource that dwarfs anything else, including coal, the potential to create jobs in much greater numbers than that of traditional systems, and the opportunity to reduce greenhouse-gas emissions dramatically.
The Motor Industry Develop- ment Programme (MIDP) is one of the successes of South Africa’s trade and investment policy. The MIDP saw a rapid expansion in exports, initially of components, but later also of vehicles. Produc- tivity improved rapidly and there is substantial evidence of improvement in efficiency. The automotive sector received considerable foreign investment, including fixed investment in assembly plants. Interestingly, several of these deve- lopments took place during a downturn in demand in the sector.
An SIDP could, similarly, help turn the effects of the current global recession into an opportunity for development. What might an SIDP – led by the Department of Trade and Industry or, perhaps, coordinated by the new National Planning Commission – need to tackle?
One major element is, effec- tively, in place – stable and credible incentives. The National Energy Regulator of South Africa, or Nersa, announced renewable- energy feed-in tariffs (Refits) at the end of March this year. CSP gets a tariff of R2,10/kWh, four or five times higher than the estimated ‘levelised’ cost of a new coal-fired plant. The term of Refit power purchase agreements will be 20 years. So, why are CSP plants not being stamped out of the ground? Well, it is early days, and project developers are busy. But a large-scale industry will need to start swiftly, with smallish steps but with a clear line of sight to a larger programme.
In technology terms, an SIDP might go down two tracks. Among CSP technologies, parabolic troughs are currently closest to being commercially viable. Some 600 MWe of capacity has been installed across the world. These might be the first plants, but, in the longer term, there are significant advantages to central receivers. With molten salt storage built in, these plants have at least twice the availability factor of troughs and other CSP technolo- gies. With these factors, central receivers could become a viable alternative to baseload coal.
The few hours’ storage can be crucial – generating electricity when the sun is at its peak and storing it for use, even a few hours later, during the afternoon peak. This is important in the context of the electricity crisis – which is only on hold, and has not gone away.
Might it just be that the storage component could be a component for export? Both export and local markets should be part of an SIDP.
Components are one aspect, but, for our own electricity needs, we will need whole plants. The demonstration effect was important in the MIDP, encouraging initial investment and pulling in further developments. For CSP, too, it would be important to have plants where one can ‘kick the tyres’ or, rather, touch the mirrors.
With financing for climate change likely to scale up, South Africa could at least share the risk on initial demonstration plants. But a single plant does not make an industry. An SIDP must provide the perspective that this will be done at the gigawatt scale, not just at the megawatt scale. South Africa’s long-term mitigation sce- narios showed that ambitious renewables scenarios (50% of elec- tricity by 2050) could reduce, on average, 68-million tons of carbon dioxide equivalent each year between 2003 and 2050, with CSP being the biggest part of that wedge, ramping up to 30 GW by 2045.
At such scale, the investments could swing towards a new indus- try. The existence of an SIDP could attract invest- ment to South Africa, when international firms might have a choice. It would make the creation of supporting industries and suppliers worthwhile. And it is in the creation of a network of suppliers, assembly plants and component manufacturers that the potential for employment creation is likely to be greatest. Creating jobs in new local industries should be a central aim of an SIDP.
The motor industry itself, hard-hit by the global downturn, might apply its skills to CSP. The automotive industry already deals with glass and steel, to name just two materials. It has experience in automating systems and combin- ing the supply of multiple components. The analogy can only be taken so far, but the motor indus- try itself might become a stakeholder in an SIDP.
An SIDP would need to tackle some issues specific to CSP. Infra- structure is one of them. Ensuring nondiscriminatory access to the grid would be a key issue. For small individual CSP plants, this may be difficult to negotiate with Eskom’s transmission division, particularly given that Eskom itself is still making noises about investing in CSP. For an emerging industry, a deal should be negotiated with an inde- pendent system operator or, if Eskom is to operate the transmis- sion system, with independent oversight and fair rules for all. This might also include plans to use CSP for small town or regional electrication, particularly in areas that are far away from the grid.
Entry into wider value chains often needs intermediary forms of organisation and coordination. Independent power producers would play a crucial role in this regard. However, for some time, Eskom would be the most likely entity to take CSP to scale. The SIDP should be a public–private partnership, initiated by government and integrated into the national planning framework.
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