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Lessons from China’s solar surge

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Lessons from China’s solar surge

20th October 2017

By: Terence Creamer
Creamer Media Editor

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Last year, when Eskom illegally put the brakes on the country’s hitherto successful renewables roll-out, new solar photovoltaic (PV) capacity around the world grew by 50%, reaching over 74 GW.

The International Energy Agency’s (IEA’s) ‘Renewables 2017’ report indicates that the record year for renewables in 2016 is largely attributable to “booming” solar PV deployments. These were especially strong in China, which accounted for almost half the expansion. For the first time, solar PV additions rose faster than any other fuel, surpassing the net growth in coal.

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In addition, the solar PV rise was accompanied by record-low auction prices, some as low as $30/MWh, the IEA report shows. In other words, solar PV has breached the cost-competitiveness tipping point and the auction model – which South Africa was largely responsible for pioneering through the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) – has been instrumental in helping transition the technology away from a reliance on subsidies.

That’s not to say that the subsidies are no longer being felt; they are, and will continue being felt until the subsidised solar PV and wind projects come to the end of their contractual lives.

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Even in South Africa, which is a relatively recent renewables adopter, there is evidence of the pre- and postsubsidy era. The first two bid windows of the REIPPPP reflect the tail end of subsidised renewables. Solar PV projects contracted in Bid Window 1 were R3.65/kWh, while those for wind were R1.51/kWh.

However, tariffs bid during the so-called expedited round (designed to mop up all competitive renewables projects ahead of a major redesign of the REIPPPP framework) fell to 62c/KWh for both technologies. Ironically, South Africa never procured this capacity, even though it came in around 40% cheaper than tariffs bid by the first two coal baseload independent power producers, which could be officially procured in 2018.

What’s more, ‘sunny South Africa’ has all but extricated itself from the global trend towards solar PV, which is by no means limited to China. In 2016, the US remained the second-largest growth market for renewables, while India is expected to more than double its current renewable electricity capacity by 2022.

Nevertheless, China’s solar surge is not only impressive, but arguably also holds important lessons for South Africa. Indeed, China’s approach to solar PV is a case study in energy and industrial policy success. The country manufactured and exported solar panels when costs were high, and is now consuming those panels as prices plunge.

Sadly, South Africa’s approach has been to build at a time when costs were only just starting to fall, only to halt the programme just as the twin benefits of localisation and cheap electricity were about to be realised. It’s a sorry tale, but one that can be swiftly reversed with decisive leader- ship and some clear-sighted policymaking.

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