CSIR study update – benefits of renewable energy to the South African economy

Last year the CSIR released a report which investigated the total cost or benefit that renewables had had on the South African economy in 2014.  This was conducted in light of a) a number of REIPPP Round 1 projects coming online in 2014 and being in operation for the first time and b) capacity constraints currently being experienced in SA (aka load shedding).

The study has been widely referenced by the renewables industry, because of its findings, as it calculated that the presence of renewables had benefitted the economy to the tune of around R800m.  I went to a talk given by CSIR, hosted by SANEA, earlier this year where Dr Tobias Bischof-Niemz from the CSIR described the methodology, the assumptions and the resulting findings from this 2014 report.

In short (very short), the study considers three main inputs:

  1. the cost of fuel avoided by renewables replacing traditional generation sources
  2. the cost payable to renewable IPP’s for electricity exported to the grid
  3. the effective burden that would have been felt by the economy during constrained intervals, where, if not for the presence of the renewables projects, Eskom would have been unable to meet demand (unserved energy)

The picture below shows how these three inputs were added together (or subtracted…) to determine the total benefit to the economy.

CSIR_costs

 

Some things to note:

  1. the cost of unserved energy was based on the DoE’s IRP
  2. projects online were mostly for Round 1 – where tariffs were a lot higher than in subsequent rounds (see previous post on this here)
  3. projects came online throughout 2014, and were gradually commissioned throughout the year

At the time this report was issued, South Africa was aware that it was heading into an extended period of loadshedding and I know that load shedding intervals and levels have increased since I’ve been away.  With this in mind, and considering that 30% of the cost savings to the economy realised by renewables was as a result of RE projects being able to assist with capacity constraints, there was a lot of interest in continuing with this study into 2015.

Yesterday, the CSIR released a press statement indicating that the study has been updated for the first half of 2015.  I found this on the SAWEA site, which you can download here.  The same methodology was used, and some of the finding announced include:

  1. Fuel savings realised from renewables offsetting coal and diesel amount to around R3.6billion
  2. cash spent on renewables for the period comes to R4.3billion
  3. 203 hours of ‘unserved energy’ avoided equates to a benefit to the economy of R4.6billion.

The total benefit to the economy resulting from renewables is therefore around R4billion (R3.6b+R4.6b-R4.3b).

This is fantastic news for the renewables industry in South Africa.  A very positive message to come out of years of hard work and perseverance by all involved.

It is simultaneously a very sad indicator of the extent of load shedding being experienced that the value of renewables in avoiding unserved energy is now nearly 60% of the total benefit; double that from 2014.