12% increase in electricity prices makes room for solar in South Africa

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Solar PV has recently been handed a huge responsibility, and solar proponents may now rejoice as the world finally expects solar power to fill the role of the global electricity providing powerhouse.

While the global PV market rang in around 42 GW at the end of 2014, the worldwide market is now gaining even more momentum with emerging markets boasting impressive projects coming down the pipeline during 2015.

Vishal Shah, Managing Director at Deutsche Bank, shares his insight about the current situation of the global PV market in South Africa and what to expect for this growing market in the years ahead.

The African market has plenty of potential moving forward, despite its incredibly slow solar growth in the last 2 to 3 years. Hybrid and solar solutions will have a stronghold in the market from 2015 onwards as the grid is underdeveloped and in urgent need of appropriate solutions.

Mr. Shah explains, “Hybrid in Africa is very significant and there is the potential for some financing solutions that can provide for the implementation of hybrid solutions in Africa. When you consider the amount of potential for growth in South Africa in particular, it is quite significant.”

While the current dip in oil prices has raised questions about the future for solar in Africa, Mr. Shah is confident that the solar market, particularly in South Africa, will remain largely unaffected. “Our general view is when you consider that price increases have been set for the next 5-7 years in South Africa, solar would be very competitive in South Africa just because of the price increases, even if now a reduction in solar material costs occurred.

The current cost of solar electricity in South Africa is 10-11 cents/kWh, and electricity prices there have grown at a 13% compound annual growth rate since 2000. In September 2014, the state utility suggested there will be another 12% plus increase in electricity pricing, which is likely through 2018. We have a strong reason to believe that solar in South Africa will become very competitive for this reason.”

As far as the role of solar in preventing blackouts and disruption from Eskom load shedding, Mr. Shah suggests that the technology today is very competitive, particularly at current retail electricity prices. “The cost of solar is only dropping, we estimate by another 20-30% at least in the next couple of years, so when cost competitive solutions are available on the market, it is only a question of how they can be adopted and installed.

I think South Africa is one of the biggest market opportunities, and solar has a great role to play for solving some of these recurrent blackouts.”

Mr. Shah will participate as a speaker at the Solar Diesel Africa conference (www.solardieselafrica.com) from March 3-5, 2015, where he will further explicate the expectations for solar growth within Africa, and how intensive energy users can find cost effective tailor made solutions to solve their energy woes.

Solar Diesel Africa is a unique knowledge platform that will connect over 20 intensive energy users with some of the world’s biggest solar developers, investors and financiers all eager to discuss the possible energy solutions available on the current market.