Establishing an integrated PV industry in SA

 Establishing an integrated PV industry in SA

Tyren van der Spuy 

In recent years, the adoption of renewable energy has grown steadily, both globally and in South Africa. However, as a nation we still rely heavily on fossil fuels. That translates into great potential for the renewable energy industry to expand, which will benefit society hugely in the process.

Among the options in the renewable energy market solar PV is a good candidate because of South Africa’s geographical location offering yields above the global average, and because the cost of PV panels has been reduced significantly in recent years. Therefore, it is worthwhile exploring the impact that an integrated PV industry would have in South Africa if it could support the grid and reduce reliance on fossil fuels.

The South African National Energy Association (SANEA) released their South African Energy Risk Report 2020 on 30 June. They argue that transitioning from coal to renewable energy sources would improve economic growth and create jobs. The transition is likened to a gold rush that could stimulate the economic recovery from Covid-19, but only if regulation were more supportive of developing infrastructure during these financially pressing times. Should the PV industry develop to the point that it could support the grid effectively, load shedding would be reduced. This would relieve the current throttling impact of load shedding on economic growth, which economists at Efficient Group have estimated at -0,3% for 2019. A growing PV industry could also ease Eskom’s burden of meeting current demand while attempting to implement their own maintenance schedule effectively.

An integrated PV industry involves the manufacturing of panels, designing and installation of systems, post-installation monitoring, operations, and maintenance, as well as supplementary work supporting these activities. Thus, expanding the solar PV industry in South Africa could create employment opportunities at various skills levels. This would be incredibly valuable, since the lockdown regulations have compounded already high unemployment rates, which the International Monetary Fund (IMF) has forecasted to reach 35,31% in December 2020.

The reduced use of fossil fuels that would result from an expanded PV industry would, of course, also benefit the environment and the wellbeing of people living near power generation facilities. The approval of the Integrated Resource Plan (IRP2019) in October 2019 was a step in the right direction. The IRP aims to reduce the role of coal while increasing the adoption of renewable energy and gas. However, the report Still Digging: G20 Governments Continue to Finance the Climate Crisis indicates that South Africa, along with numerous other G20 countries, still allocate public funds to the ailing fossil fuel industry. In fact, this had increased from R792 million a year in 2013 to 2015, to R2,1 billion a year in 2016 to 2018. The phased approach set out in the IRP means that we will still rely significantly on coal by 2050, even though compliance with the Paris Agreement requires that coal be phased out by 2040. Therefore, more pressure is to be exerted on government to stay on track for the set targets. The proposed decommissioning of 35 GW of coal power capacity by 2050, along with the carbon tax implemented in June of 2019, should pave the way for an increased demand for solar PV over the next decade.

The commercial sector is seeing an increase in the use of solar power. As of June 2019, Pick ’n Pay had reduced its energy intensity per square meter by 36,9% through behavioural changes and technological improvements, while expanding its solar installations. Generous tax write-offs for businesses, which equate to a 28% reduction in the cost of the installed system, as well as the positive publicity should motivate the commercial sector to get on board. Nonetheless, some pressure from the public could provide further encouragement.

The industrial sectors related to the design, installation and maintenance of solar PV in South Africa are clearly growing and should receive continued support. Ideally, regulations should be eased to maximise the potential of these activities. That would, in turn, foster the manufacturing of modules, which will protect the industry against weakening of the rand on account of the government’s lockdown and Moody’s recent investment grade rating.

Currently there is no import tax on solar panels, and local manufacturers struggle to compete with cheaper Chinese imports. An integrated local PV industry would be able to meet a greater portion of the demand, which will create jobs and increase domestic revenue. As other African countries develop their solar industries, South Africa could position itself as an exporter of solar PV panels. In 2019 the South African panel manufacturer ARTsolar filed a petition to impose import tariffs on PV modules with a view to protect local manufacturers. Although that would have protected local jobs, it was argued that the concomitant cost increase would be transferred to the customer, which might ultimately suppress the demand for PV. Such decreased demand would, furthermore, have the undesired effect of strengthening Eskom’s monopoly on power generation. A superior alternative may be to support the South African PV manufacturing industry directly.

Many municipalities now allow for power feedback into the grid through small-scale embedded generation (SSEG) of renewable power under 1 MW at residential, commercial and industrial sites. The other municipalities should be supported in implementing appropriate tariffs and approving the regulations required to follow suit as soon as possible.

Finally, continued research development is required regarding energy storage. Improved battery technology and new developments in thermal-energy storage both present promising options for storing energy for use outside the peak generation hours for solar power.

The benefits of a strong, integrated PV industry are quite clear, but the path of developing one requires more aggressive action from the public sector. Economic stimulus should be directed towards the long-term benefits of supporting the industry. Furthermore, collaboration is required between government and private business, and among South African citizens, to foster a stronger manufacturing industry for PV modules. The heightened sense of solidarity among South Africans in the wake of Covid-19 could aid in this endeavour, allowing the solar industry to drive economic recovery.

Tyren van der Spuy

http://www.nmonline.co.za