Factors Determining the Affordability of Renewable Energy A Note for South Africa

"When a country is deciding on a policy of introducing renewable energy as an alternative energy source, affordability is a prime consideration. Affordability depends on the type of technology, policy direction and investment considerations. All these aspects have a direct bearing on the price that will ultimately be paid by the consumer. As South Africa is on the verge of implementing its renewable energy policy through the judgement to be made on the bids submitted by renewable energy independent power producers, it will be important for decision makers to take into consideration the energy’s affordability. Perceived high costs will lessen renewable energy’s envisioned benefits to the socio-economic development of South Africa. However, while renewable energy is still considered to be expensive, international data reveal a trend of declining renewable energy costs. In developed countries, the experience of Germany stands out in the successive adoption and use of affordable renewable energy. The country started implementing its renewable energy policy in 2000; today it is among the world’s three major renewable energy economies and its policy serves as a model of success to other European countries. In South Africa specifically, the unit production cost and consequently the unit price attached to renewable energy (in particular solar energy) is too high and unrealistic compared with international renewable energy prices. The present approach has the potential to put the country on a sub-optimal and expensive energy mix path. It is recommended therefore that solar energy costs and prices for South Africa be reassessed and the positioning of solar energy in the country’s long-term energy mix strategy be reconsidered against the confirmed renewable energy unit costs and consequent affordability."