SA 'far' off from going green

2008-06-26 11:28

Nigole Rego

Johannesburg - Compared to the developed world, South Africa is "very far" off from going green, or becoming environmentally aware, when it comes to energy consumption and renewable energy methods, according to an expert.

Investec Capital Markets head of project and infrastructure finance, Mike Meeser, told Fin24.com that currently "there has been no framework in terms of soliciting offers or compelling Eskom re supply, despite having a Renewable Energy White paper for 5 years".

"That said, in an energy sense, one of the best ways to go green is on the demand side - i.e. use less," he said.

The electricity crisis in SA is helping achieve that, according to Meeser, who explained that the demand side management (DSM) measures introduced like geyser blankets and solar water heaters actually reduce consumption of electricity, and so reduce production of electricity.

To "go green", South Africa needs a means of price support in one of the many forms possible, that facilitates the production or stimulates demand for green energy, he said.

Also, a change in building standards will need to be implemented so that all the new buildings meet some minimum criteria in terms of energy efficiency and, combined with better control of emissions of all vehicles and industries, SA will be closer to becoming environmentally aware.

Currently, South Africa uses coal-fired plants to generate energy as the country has an abundance of coal, which is therefore a cheap primary energy source. But the result of burning coal is carbon emissions, which damages the environment and causes climate change.

Not feasible in SA

As a result, climate change threatens the stability of the world's climate, economy and population.

According to a UK department of trade and industry report published in May last year, more than two thirds of the world's carbon dioxide emissions come from the way energy is produced and used, so energy policy has to play a major part in reducing climate change globally.

The International Energy Agency (IEA) forecasts that $20 trillion of investment will be needed to meet these challenges by 2030.

"We need to manage the environmental impact of coal power better, and introduce alternates through incentives," said Meeser.

He said that currently, renewable energy using wind is the cheapest to produce. Even though it has a high capital expenditure, it comes with low running costs, but it is not feasible in SA without further incentives.

Other alternatives of renewable energy are solar, wave or tidal and nuclear sources.

"As a result [of using renewable energy], there will be reduced environmental damage or emissions," he said, adding that there would also be a reduced national exposure to gas and oil costs, as primary energy (like wind or sunlight) is generally free.

Many skills available

Meeser said he "believes that SA can currently afford a renewable energy source" like a wind farm.

"The costs for a 100MW (megawatt) wind farm will have a very small tariff impact compared to Eskom's 42 000MW [plant]. As Eskom adds new plants, the average cost will increase, and the size of the grid will increase," he said.

However, the process may be a long one. Eskom would have to select site, acquire permits - which include a generation licence and environmental impact assessment (EIA) - and then it will have to secure the financing, equipment and sales contract.

Once that is complete, it will then build the wind farm, operate it and maintain it.

He said that there are many skills available locally that would have to be put together to build such a farm, but noted that initially, some skills peculiar to these technologies would be imported, before technology can be transferred.

However, The American Wind Energy Association said since wind speed is not constant, a wind farm's annual energy production is is limited by the inherent properties of wind.

According to a 2007 Stanford University study published in the Journal of Applied Meteorology and Climatology, interconnecting ten or more wind farms allows 33% to 47% of the total energy produced to be used as reliable, baseload electric power, as long as minimum criteria are met for wind speed and turbine height

'Clean' electricity

Nuclear plants achieve a 90% capacity factor, according to The American Wind Energy Association.

SA has already embarked on a R70mn pilot commercial wind energy project. It set up a wind farm north-west of Cape Town in Darling last year.

News site southafrica.info said that the farm uses four giant wind turbines to generate an estimated 13.2 gigawatt-hours per year of "clean" electricity.

Looking ahead, Meeser said that once SA starts using renewable energy sources, it would continue using coal plants.

"Investec believe that renewable energy has a role to play in SA. We are hoping to bring to bear our experiences gained internationally to develop the local market," he said.

As electricity prices increase to reflect the cost of new generation the price difference between fossil fuel generated power and renewable energy will reduce, making renewable more affordable and viable, he said.

"The private sector we believe are keen to participate in the sector, however the regulatory framework curently been worked on will need to be finalised before we see significant investment in the sector," said Meeser.

- Fin24.com

- Finance24