There is a revolution in our midst. The revolution is helping companies cut their energy costs, with progressively greater returns on investment in the years to come; it is also helping some companies secure their electricity supply and protect themselves against the rising cost of electricity. This revolution is reducing the amount of greenhouse gases emitted to the atmosphere, thus mitigating climate change and improving a company’s public image by becoming more environmentally responsible. It is the Rooftop Revolution, and is one of the fastest growing industries in both South Africa and the world: solar photovoltaic, or solar PV.
Solar PV is the fastest growing power-generating technology in the world. The PV market is said to be growing globally at an annual rate of 35 to 40%. This is a pace so rapid that it has quadrupled America’s solar capacity in the past four years alone, from 2 326 MW in 2010 to 12 057 MW in February 2014, a remarkable 418% increase. According to the Global Solar Power Market report published in June 2014 by Frost and Sullivan, global revenues from solar operations are predicted to more than double from $59.84 billion in 2013 to $137 billion in 2020. According to the same report, Africa, which has benefited greatly from a radical decrease in the cost of installed solar PV, has seen significantly increased investment in renewable-energy projects, especially Solar PV. In South Africa, over the past two years, Terra Firma Solutions engineers have installed over 1.56 MW of solar PV, further illustrating the increasing national demand. South African investments in renewable energy reached $5.5 billion in 2012, $4.3 billion of which (80%) went to the solar sector. Although most of this was invested in ground mounted solar PV systems the rooftop solar PV market is accelerating fast. Total investment in renewable-energy in South Africa increased to $5.7 billion by 2014 and is expected to continue along this upward trend in the coming years.
South Africa is currently ready to install between 3 000 to 4 000 MW of bid-compliant utility-scale solar PV projects, through the country’s Renewable Energy Independent Power Producer Programme (REIPPP). Although the exact criteria for what makes a utility-scale solar PV plant may vary, it is agreed that a Solar PV facility whose electricity is used to feed the national electricity grid, thus supplying the utility, is considered a utility-scale plant. The solar PV industry, therefore, consists of both utility-scale plants and rooftop solar-energy systems for private individual power users who want increased energy independence from the national grid and control of rising costs of electricity. The growth of this industry, in utility-scale and rooftop-solar plants alike, illustrates South Africa’s growing potential to harness enormous amounts solar energy that can make important contributions to the energy sector, businesses, society and the economy.
Prompting the incredible growth in rooftop solar PV in South Africa, is a combination of various conditions (economic and physical) that have made the transition to rooftop solar PV extremely timely and favourable.
Economically, South Africa has historically had one of the lowest electricity prices in the world. Over the years, however, particularly since 2008, demand for electricity has outstripped supply, forcing prices to increase to all-time highs. With Eskom’s latest multi-year price determination (MYPD3), already-high electricity prices will continue to increase year-on-year by at least 8% for the next five years, followed by even higher annual percentage increases until 2020. These alarming increases mean that companies’ energy costs are expected to more than double in the next five years, and quadruple in the next decade. In addition, Eskom has recently asked large power consumers to either reduce their consumption during peak hours by at least 10% or shut down operations altogether for up to 3 months (as it requested of ferrochrome smelters last year). The limited excess capacity of Eskom is preventing growth in the South African economy, a top emerging market, because reduced production has inverse effects of national GDP.
It is clear that Eskom’s limited capacity not only has negative implications on the price of electricity but also inhibits the growth of businesses and, ultimately, the economy. Large corporates, and players in the mining, steel, automotive and manufacturing industry, are now increasingly turning to solar to protect themselves from these rising tariffs and from other restrictions associated with Eskom’s limited supply. Capital investments in solar can often be paid back within five years, and show lucrative Net Present Values of the 20 -25 year project life of the PV system.
Geographically, South Africa possesses one of the most abundant solar resources in the world, with an average of 2 500 hours of sunshine per year, and with average solar-radiation levels ranging from 4.5 to 6.5 kWh/m2. This means that millions of rooftops in South Africa are exposed to high levels of valuable solar radiation that can be harnessed in a significantly more direct, cost-effective and efficient way compared to the country’s current sources of energy. As Danny Kennedy, the author of Rooftop Revolution puts it, “we already get our energy from the sun; we just do it in the most laughably inefficient way imaginable”—namely, fossil fuels. Linked to the extraction of fossil fuels are also the vast environmental impacts that an over-reliance on inefficient and harmful fossil fuels has caused.
A final important factor that has fuelled the solar fire of the rooftop revolution involves the drastically decreased price of the technology in recent years. Solar PV technology is already a mature technology, yet it is still experiencing further technological improvements and cost reductions. It is reported that, between 2007 and 2012, solar-manufacturing costs dropped an estimated 70 to 80%.
In 2013, these price reductions continued: SunPower, the second largest solar PV manufacturer in the US, reported that it reduced its manufacturing costs by 20% during 2013 alone. Similarly, the solar PV industry has also begun to mature in South Africa. This has lowered costs—and will continue to reduce costs—upon increased capacity. In fact, it is expected that solar PV will be the cheapest energy-generating technology in South Africa by 2020, after reaching price parity with coal in 2018.
It is undeniably clear that now is the opportune time for small, medium and large power users in South Africa to truly empower themselves: to benefit from invaluable business-solar solutions, to start saving, to own a solar PV plant and to join the Rooftop Revolution. With financing options available, and no capital-investment needed, there really are no obstacles to getting involved. Victor Hugo put it best when he said that “all the forces in the world are not so powerful as an idea whose time has come”.
Cash Flow for a 130kW Solar PV System