The idea that renewable energy could ultimately be more cost-efficient than conventional energy is gaining momentum.

South Africa’s call to global investors to assist its renewable energy programme – which is trailing the rest of the world – is yielding results. International players are teaming up with local companies in investments worth billions of rands.

Companies from India, China and the EU, among other places, already have an active presence in South Africa.

Renewable energy sources are making inroads as high input costs beset conventional power generation.

Eskom’s target is not to regulate the coal price but it appears that the electricity parastatal would like some regulation on increases, to bring coal price rises back below 10% a year .

Figures between 2009 and 2011 show that coal prices surged by about 25%. Coal accounts for 20%-30% of the kilowatt per hour (kWh) cost of electricity generation.

There is the secondary issue of transporting coal from mine to power plant, which is affected by volatile international oil prices.

The independent power producer (IPP) programme, launched last year with 1725MW, shows signs of progress.

The IPP process will be moving to the third round of bidding next year. Tariffs were high in the first round but have since fallen.

There was a tariff decrease of 40% for solar photovoltaic powerfrom round one to round two, and for wind energy a 21% decrease. There is an expectation that during the third round there will be a further double-digit percentage decrease.

“We have seen the cost curve moving downwards,” said Rajen Ranchhoojee, a director at Routledge Modise Incorporated. “In terms of this programme [the IPP] there is tangible evidence of decreases already aggregating around 30% across the technologies. If we look at international markets, the trend is no different.”

He said SA could not presently move away from reliance on coal as an energy source, but did have to start becoming less reliant.

In a surprise move, Eskom this week called for a “country pact” with coal miners to avoid tariff increases. Many big industries have expressed anger at Eskom’s request for a 16% tariff increase for the next five years.

Ranchhoojee said coal costs were going to increase, but it was difficult to say by how much.

This was worrying because nobody knows what the costs of transport are going to be in the next three years, he said. “I f there is an oil price spike because of whatever happens in the US we are going to feel the brunt because it is going to increase the costs of coal from source to plant and that will filter through to electricity prices .”

Ranchhoojee said the renewable energy space was not developed enough to sustain all the energy needs.

To reach grid parity, South Africa had to move towards a balance between renewable and conventional energy.

But South Africa did not have a choice because it is dependent on donor funding from institutions such as the World Bank, which have green economy commitments. ” Any sensible investor acknowledges that we have to be responsible and sustainable, ” he said.

http://www.bdlive.co.za/businesstimes/2012/12/02/investors-back-south-africa-s-green-plans