South Africans built a Medupi – all by themselves

In South Africa, building enough electricity generation to power two million homes is the sort of thing that can undermine the entire state.

Since work began in 2007, the Medupi and Kusile coal power stations — at 4.8GW each, some of the largest generators ever conceived — have become emblems for the chronic problems plaguing sub-Saharan Africa’s most developed economy.

Nearly a decade late and billions over budget, the R300-billion plants are mired in a welter of alleged corruption and mismanagement, will never turn an economic profit, and still haven’t been finished. Their parlous state, and the impact on crumbling state-owned utility Eskom, is one of the many reasons why credit ratings companies downgraded the country’s debt to junk status six years ago(1).

Imagine, then, if you could build the same capacity of new electricity generation without spending a cent of public money in the space of little more than a year(2). That’s what’s happened since looser regulations and hundreds of days of rolling power cuts driven by Eskom’s collapse opened the floodgates to a new wave of household solar.

South Africa was for many years a laggard on renewable generation. It still gets about 84% of its electricity from coal, by some margin the highest level among major economies. A thicket of red tape has until recently protected Eskom, requiring that all solar panels be made locally (a near-impossible task given the state of the manufacturing sector) and allowing the utility a veto on all but the smallest grid-connected renewable plants(3).

Coal has deep political roots, too: President Cyril Ramaphosa began his political career running a union for black mineworkers in the struggle against apartheid. Mining unions remain central to the ANC’s coalition, and about a fifth of pit workers dig for coal.

Medupi-sized 4.7GW

That makes the revolution of the past two years all the more remarkable. Nearly R50-billion of solar equipment has been brought in during the first half of this year, equivalent to the combined total in the previous two years, according to Gaylor Montmasson-Clair, an economist at think tank Trade & Industrial Policy Strategies.

As a result, the estimated capacity of solar panels on rooftops has risen from 983MW in March 2022 to a Medupi- or Kusile-sized 4.7GW last month, according to Eskom. BloombergNEF estimates that home systems will account for the majority of a further 3.2GW of panels that will be connected this year.

It’s not just individuals getting involved, either. Units of Daimler Truck and Toyota this year announced major solar installations to help power their operations. Another started last October at a Heineken brewery, while Sibanye Stillwater and Anglo American are partnering with renewable developers to provide electricity for their mines.

Read: How to claim from South Africa’s solar tax subsidy

European logistics and engineering companies have lodged bids for a R50-billion project to export green hydrogen from the arid northwest, while a unit of Shell and Norwegian renewables developer Scatec are targeting customers seeking to escape the tyranny of Eskom’s rickety grid.

If only politicians in South Africa and beyond could grasp the potential of this transformation. The country’s electricity minister is planning to strike a major deal with China during the Brics summit in Johannesburg this week to ensure a better supply of solar equipment. That sounds promising until you consider that he’s not looking to buy panels, but equipment for manufacturing them locally.

That’s a quixotic and counterproductive ambition. South Africa’s manufacturing activity is still running at pre-pandemic levels — thanks, not least, to those power shortages that make it costly and unpredictable to churn out the simplest products, let alone cutting-edge semiconductors. Meanwhile, the vast supply chain that’s been built in China drove the price of modules to a record low of $0.171c/W in July, according to BloombergNEF’s Jenny Chase. That’s pushed her estimate for worldwide installations in 2023 up by 43GW in the space of a month, to 389GW. South Africa would be far better off further reducing impediments to solar imports and installations, instead of embarking on a doomed quest to become a panel manufacturing hub.

Political leaders in rich countries are little better. The US department of commerce last week announced that it would impose punitive tariffs on solar panels made by Chinese companies operating in Southeast Asia from 2024, overturning an exemption introduced by US President Joe Biden last year.

That’s an unreasonable constraint on products essential for the energy transition. China’s solar industry is cheaper not because it’s cheating but because its scale, sophistication and complexity is vastly ahead of the competition everywhere else in the world. By effectively banishing Chinese solar equipment from the US market, Washington will only succeed in raising costs for local consumers and protecting an uncompetitive coterie of local manufacturers.

Read: R4.7-billion funding sought for Kariba solar project

South Africa’s example shows the potential and the risk of the shift to zero emissions. Where governments and local monopolies get out of the way and let individuals and businesses find the cheapest sources of energy, the world can decarbonise at a dazzling pace. Where they use their influence to coddle incumbents, however, they can still smother the transition in its crib. Those watching the wreck of South Africa’s once-envied power sector shouldn’t look to emulate it.  — David Fickling, (c) 2023 Bloomberg LP

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Footnotes: (1) South Africa’s peak electricity demand is about 30GW, so a 4.8GW generator would be sufficient to supply about one sixth of peak loads. South Africa has about 18 million households, so that would be sufficient for two million households. (2) There will eventually be a small fiscal cost. Tax incentive programmes for renewables introduced in this year’s budget and applying for 12 months from March will cost about R9-billion, according to the government. (3) Across both peak and non-peak periods, rooftop solar generates at only about 15% of the output implied by its gigawatt capacity, compared to a 45% rate for South African coal generators.