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Increased Investment in Solar Energy in South Africa

Kevin James from GCX Africa joined CNBC Africa for a look at investment in Solar Energy.

Lyndsay: Jinko Solar, a Chinese company listed on the New York stock exchange, has invested eighty million US dollars in a solar energy panel production plant in Cape Town to produce 120 megawatts per annum. South Africa’s department of trade and industry has allocated close to 1500 megawatts of solar projects as part of the independent power producers programme to reduce the country’s dependence on fossil fuels.

Kevin James: That is right Lyndsay, Jinko is a Chinese company, and it is an 80million US dollars deal, so this is a significant investment into the Cape Town economy. Jinko is a tier 1 manufacturer- I think it is the 4th largest tier 1 solar manufacturer and supplier in the world, so it’s a good deal with a very high profile manufacturer.

Lyndsay: Kevin. you say a good deal no doubt for the South African environment, but is our legislative environment conducive to attracting more of this kind of investment?

Kevin: Well, it’s all about that really. Very clear policy is critical to drive and motivate foreign direct investment into the sector in South Africa. At the moment, my opinion is that there isn’t sufficient policy to motivate significant investment into the sector. Sure, on the REIPPP (Renewable Energy Independent Power Producer) that was referred to a little while back, that has been extremely successful, and there are policies in place to drive that and there is a bit of a roadmap into the future about how much solar – utility generated solar -will be allowed to be provided in South Africa.

I think it came out recently that we are in the top 10 utility solar providers in the world. So we have already taken huge strides towards getting to that position. But it’s the other policies that need a little bit of attention. When we talk about about distributed generation, on having solar on rooftops and on carports and on top of industrial buildings that Minister Helen Zille just referred to. That is where we require things such as feed-in tariffs, net metering – that’s when people can actually engage with Eskom and actually provide power to Eskom and get paid for it or alternatively use the grid as a storage mechanism to provide themselves with power when the sun isn’t shining.

So we can do with quite a bit more policy in South Africa and I believe on the other side incentives and disincentives are extremely important, sticks and carrots as we call them, because it’s critical that import duties are increased on solar panels so that we do actually incentivise local manufacture as well as actually providing incentives to local manufacturing firms because as it stands right now there actually isn’t a huge amount of incentive. The DTI is doing a fantastic job with their MCEP plant but there’s actually a lot more that can be done at a government level.

Wayne: Looking at the report we got I thought maybe the CNC reporter was at a wind farm and not a solar farm. When we look at solar, and we hear the number being thrown around being 88c/kWhr, what does that number mean? Does that mean you can put a panel on your roof and pay 88c? Or is that what one of these mega solar farms can generate? I know that they are building a huge one near Uppington.What is the right number? Because I get very sceptical when I hear numbers being thrown around as to what it costs to generate solar?

Kevin: OK so we have enjoyed three successful rounds on the REIPPP. So far 1450 MW have been allocated to certain providers in South Africa, to certain utility providers. When you put in a bid for a solar farm or a wind park in South Africa its part of a re-bid system whereby you put in your lowest price that you are prepared to accept that makes your project viable. That is the price that is being referred to Wayne. 88c is what Eskom will be prepared to pay, or has to pay, a utility solar generator in South Africa if they’ve put that into their bid. So that is really what it’s all about. How much Eskom will pay an Independent Power Producer for their solar powered electricity. Compare that to what we said earlier to how much coal fired power is costing and will cost when Medupi comes out. It’s significantly more and really significantly more if you take into consideration the environmental and social negative impacts.

Lyndsay: The US Africa Summit is on in Washington at the moment and there’s a lot of talk that the Chinese have stolen a march on their investment policy towards Africa- they’ve been here for years and the Americans are behind. Have they stolen a march on the world again by coming into South Africa with almost 1billion Rand? Are there other people that will enter the market having been flagged of the potential by this deal?

Kevin: Well I think we also need to take a look at the details of this manufacturing plant which I’m not really au fait with to be dead honest. It seems like it’s more of a component assembly plant than an absolute turnkey manufacturing plant. That’s my first comment just by looking at it. Solar energy turnkey manufacturing plants generally don’t provide a lot of jobs they are very automated.

So what we need to consider here (and I will get back to your question now) is that actually what needs to happen here in South Africa is that the standards need to be maintained. Because at the moment there could be issues, we need to ensure that it’s international standards that are maintained and not just local manufacturer standards.

But getting back to your question, President Zuma said the other day , ‘Were open for business’ – I think anybody can come here and invest money and put up a plant- the question is, is it viable and really what is the incentive to do so.

I think having local manufacturers certainly gives Jinko and companies like that a bit of a leg up in terms of being able to participate in the REIPPP. Because of the percentage or the amount of local content in the supply chain which is becoming one of the increasing rigorous requirements. So I think from that perspective is a very smart move.

As I say I think China is ahead in terms of renewable energy due to the fact that they have to get away from fossil fuel based energy, not only from an environmental perspective but from a health and social perspective so they are really installing a significant amount of installed capacity for solar, wind, or other things and they bring that capacity and that know-how to South Africa which is very welcomed and we want to see other countries do the same.

Lyndsay: Kevin, thanks very much for popping in. That was Kevin James from GCX Africa.

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