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Finance Minister’s budget speech caps an important week for solar PV in South Africa

In his first full budget speech, Finance Minister Nhlanhla Nene referred to the government’s 9 strategic priorities, which we first at the state of the nation address (SONA) on 12 February 2015. The solar PV sector has already been hard at work, in partnership with the government, contributing towards most of these priorities. Examples include:

  • Resolving energy challenges: According to a recent report by the Council for Scientific and Industrial Research (CSIR), wind and solar PV projects forming part of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) resulted in a reduction in the consumption of coal and diesel, as well as the curtailment of load-shedding. In the process, the new wind and PV power stations – delivered on time and within budget – resulted in net savings to the South African economy of some R800 million in 2014;

Explains SAPVIA’s CEO, Moeketsi Thobela, “solar PV generating plant that became operational between late-2013 and early-2015 as a result of the REIPPPP, increased their peak hourly production from 673MWh on 17 October 2014, to 909MWh on 17 January 2015. This represents an increase of 35 percent in only three months”.

The profile for 17 January 2015 is illustrated in Figure 1.

Figure 1: Generation of electricity from REIPPPP PV plants (17 January 2015)

PV Generation 17012015

SAPVIA welcomes the Finance Minister’s drive to make PV investments even more viable, by considering “accelerated depreciation for solar photovoltaic renewable energy”. This will support the large-scale roll-out of PV solutions, noting that this technology can be deployed across various market segments (e.g. utility-scale, mid-scale segment of 5 – 50MW, and rooftop systems). As a result of this flexibility, it will be possible to roll-out at least 2000MW per annum over 5 years, across these market segments.

  • Encouragement of private investment: 1484MW of utility-scale solar PV projects have been awarded in the first 3 REIPPPP bidding windows, resulting in investments amounting to more than R40 billion. SAPVIA notes the intention expressed by the Finance Minister to introduce a carbon tax in 2016, following further public consultations in 2015. SAPVIA will contribute actively to the consultation process, noting the ability of its members to offer a viable alternative to electricity consumers wishing to move away from carbon-intensive energy sources. Our proven record in reducing coal and diesel supplies in 2014, as revealed by the CSIR, stands as testimony to this capability.
  • Unlocking the potential of small enterprises: SAPVIA has undertaken a diagnostic study on progress related to the socio-economic development and enterprise development (SED-ED) initiatives that form part of the REIPPPP. In March 2015, SAPVIA will launch an internal structure that will allow members to coordinate their efforts on SED-ED matters, working in conjunction with stakeholders, including the IPP Office, relevant spheres of government, development finance institutions (DFIs), communities and overseas donor agencies.

 

In addition, SAPVIA is involved in efforts to improve standards in the installation of rooftop (or embedded) PV systems. This will support SAPVIA’s intention to promote the national roll-out of 500MW per annum of embedded PV, as both an energy security measure and catalyst for economic development, over the next 5 years. Support for the development of small enterprises in this sector will be a crucial aspect of the approach.

 

SAPVIA welcomes the Finance Minister’s announcement that DFIs, including the Development Bank of Southern Africa (DBSA) and Industrial Development Corporation (IDC), will expand their debt facilities by 33% to facilitate substantial investments in areas that include renewable energy. Our hope is that, due to their developmental nature, such facilities will be made available at more competitive rates than are offered by commercial finance institutions (CFIs).

SAPVIA also welcomes related developments from earlier this week:

  • the commitment by the Gauteng Premier, Mr David Makhura, during his State of the Province Address (SOPA) that the provincial government plans to “generate 300 – 500 megawatts of electricity” from roof-top solar panels on its buildings.
  • the commitment by the Minister of Energy, Ms Tina Joemat-Pettersson, as reported in Engineering News on 24 February 2015, that the announcement of preferred bidders for Round 4 of REIPPPP is “imminent”. We urge the Department of Energy (DoE) to proceed expeditiously towards this long overdue milestone. Coupled with the commencement of Round 5 bidding and incorporating an increased allocation of capacity towards the various renewable energy technologies, this will go a long way towards addressing South Africa’s energy supply deficit in the shortest time possible. The increased level of certainty will also support further investments in the sector, including those geared towards the local production of PV components.

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