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ENERGY: South African Government Edging Towards Renewable Sources

Stephanie Nieuwoudt

CAPE TOWN, Jun 1 2009 (IPS) - South Africa is slowly moving towards exploring renewable energy sources, having set itself a target of three percent of energy being generated from renewable sources by 2013.

At an international conference on utilities held in May in Cape Town, newly appointed energy minister Dipuo Peters committed herself to the development and promotion of a renewable energy strategy.

In a speech read by the spokesperson of the department of energy affairs, Bheki Khumalo, Peters emphasised the need for renewable energy sources, saying that both developing and developed countries had to find ways to address the global warming crisis. She said South Africa had huge untapped potential for energy generation through renewable energy resources.

These energy development projects should also benefit the poor and ensure universal power access.

Cornelis van der Waal, the energy industry manager at Frost & Sullivan, an international business research and consulting firm, told IPS that the minister’s speech sent out a positive signal to private investors in renewable energy who are keen to come on board.

The renewable energy sector received a blow at the end of 2007 when government excluded maize from the renewable energy programme amidst indications that bio-fuel production contributes to food insecurity by pushing up prices of basic food crops. Some farmers had already invested in maize as a potential renewable energy crop.

Recenty the National Energy Regulator of South Africa (NERSA) published proposed Renewable Energy Feed-in Tariffs for four sources of renewable energy.

If accepted, Escom would buy concentrated solar power at 22 dollar cents per kilowatt hour (kWh); wind power at around 17 dollar cents per kWh; small-scale hydro output at around 11,5 dollar cents per kWh; and gas from landfill sites at around 11 dollar cents per Kwh.

This could potentially open up the renewable energy sector to private producers. Eskom currently sells more traditional forms of power – generated by coal — at around three dollar cents per kWh.

‘‘The minister emphasised solar energy as a renewable source of energy. This is one resource that South Africa and the rest of the continent have in abundance,’’ Professor Wikus van Heerden of the University of Stellenbosch’s Centre for Renewable and Sustainable Energy Studies told IPS.

The renewable energy industry is more labour intensive than the coal-based industries, which means that more people can be employed.

‘‘However,’’ said van Heerden, ‘‘the technology for concentrated solar power is very expensive. Technical skills and technology would have to be imported, and this drives up the price.’’

All forms of renewable energy are expensive, and most African and other countries in the developing world are unable to tap into these resources without help from outside sources. South Africa is no exception.

One of the country’s first renewable energy projects, a wind farm in Darling, a tiny town near the country’s western coastline, is an example of a public-private enterprise. At the end of 2008 this wind farm became the first independent generating plant in South Africa connected to the national grid.

The farm is a joint project by the national department of energy, the Central Energy Fund, the Darling Independent Power Producers and the Danish Government’s International Development Assistance Programme.

The conference took place during African Utility Week against the backdrop of a proposed electricity tariff increase of around 34 percent by the national power supplier Eskom. This announcement was for the most part welcomed by analysts at the conference who believe that South Africa’s low tariff structure is unsustainable.

Some even called for a series of increases to bring the total increase to 90%.

However, the proposed increase has been severely criticised in certain quarters. The Congress of South African Trade Unions (COSATU), the biggest trade union federation in South Africa, threatened with a strike if the increase was accepted by the government.

The federation claims that increases will force struggling businesses to close, lead to job losses and put more pressure on already besieged consumers at a time when the country has slipped into a recession for the first time in 17 years.

‘‘Workers have the right to go to the streets to protest tariff hikes. But the proposed increase of 34 percent will barely cover Eskom’s operating costs,’’ Mark Pickering, the regional director for South Africa of Empower, a UK-based company which owns and operates modular power generation plants, told IPS at the conference.

‘‘Eskom also has to pay the debts it has incurred to build new power plants.’’

According to Eskom’s annual report last year, the supplier will need 43 billion dollars over the next five years to cover expansion projects. Eskom has been beset by a range of problems, including financial woes, old and ineffective power generating plants and a lack of reserve capacity.

Currently the supplier has a reserve capacity of only 13,5 percent, compared to the ideal of 15 percent. Lack of reserve capacity in 2008 led to rolling power blackouts that affected all economic sectors and drained the country of billions of dollars in lost revenue.

This is why the captains of trade and industry for the most part welcome the proposed tariff increase. If the increases are to ensure continuous power supply, it is far preferable than the paralysing effect of blackouts.

Addressing the fear that consumers at the bottom of the economy would suffer if the proposed tariff hikes were accepted, Pickering said that there were different levels of cross-subsidisation to help poorer communities. In certain areas, power supply is free.

In others prices are kept low because the tariff structure in more affluent areas are calculated and taxed in a way that amounts to a system where the rich subsidise the poor.

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