MIDRAND, South Africa (Reuters) - South Africa is confident it can overcome structural and financial challenges to balance a power shortage with climate concerns through greater subsidies, tax breaks and clear policies on renewable energy.
Deputy Director General at the Department of Minerals and Energy Nelisiwe Magubane said the government is trying to attract larger investments in renewables, so far largely absent from the country’s energy mix.
South Africa, the largest emitter on the continent, depends on coal for 90 percent of its electricity needs. Moves to diversify to other energy sources have stalled due to a lack of policy framework and incentives for investors.
The country’s power regulator is drafting a feed-in-tariff to stimulate large-scale investments in renewable energy, with a decision expected by the end of March. But there will be more.
“We now charge a carbon tax on electricity ... we will use that to go back to the Treasury to either introduce tax breaks for people who want to invest in renewables or increase our subsidies, now at only 20 million rand,” Magubane said.
Her department is developing an energy and climate change strategy, due by the end of September, which will define the sector’s response to climate change while taking into account the need to balance climate concerns with a power shortage.
State-owned utility Eskom has been rationing electricity since early last year when the national grid nearly collapsed, forcing mines to shut down for days and costing the largest economy in Africa billions of dollars.
Eskom, which supplies 95 percent of the country’s power, has launched a 343 billion rand ($32.70 billion) new power investment program, with two 4,800 MW coal-fired power plants due to come on stream in 2015 and 2016.
The utility is due to make a decision on its next baseload plant later this year to supply the growing demand.
Eskom’s Climate Change and Sustainability Manager Mandy Rambharos said while so far only nuclear and coal have been seen as possible baseload options, the next plant could be based on solar sources, which would take less time to build.
“There’s a big chance that the next baseload plant would come from solar thermal,” she said on the sidelines of a climate change summit.
Rambharos said Eskom is in talks with the World Bank to help fund the pilot plant, which could provide 100 MW at a cost of 6 billion rand, because it was hard to persuade conventional investors to take the technology risk.
Eskom put on hold its plan to build the next nuclear plant because of financial problems and Magubane said the postponement provided a chance to focus on renewables.
Rambharos said if confirmed, the plant could be built within 18 months and would be piloted for two years after that.
“We pilot it to test local conditions ... then we could build it to scale,” she said.
Editing by Sue Thomas