South African tariff triggers proposed to ease grid blockages

South Africa could reduce transmission capacity shortages by introducing nodal pricing to support PV development in lower yield areas with less grid constraints and optimize the placement of wind and CSP plants, Corne van der Westhuizen, Project Development Manager at Juwi, said.

Image credit: Phoenix0013

South Africa has seen a rapid expansion in renewable energy capacity since it launched its Renewable Energy Independent Power Producers Procurement Program (REIPPPP) in 2011.

Faced with ongoing financial difficulties, state power utility Eskom has not matched the expansion in generation capacity with necessary strengthening of the power grid, particularly in the sun-drenched Northern Cape province in the north-west, where PV capacity has soared.

The REIPPPP has thus far procured 3.4 GW of wind, 2.4 GW of PV and 400 MW of CSP and the Northern Cape hosts 65% of the solar PV capacity procured in bid windows to date and 100% of CP projects.

The introduction of nodal pricing for solar and wind development could use actual transmission losses, infrastructure costs, load center data and other socio-economic considerations to allow more efficient utilisation of transmission infrastructure, Van der Westhuizen said at the CSP Today South Africa 2016 conference on June 8.

Grid constraints at substation level can be overcome by relatively limited investments by Independent Power Producers (IPPs), but the removal of constraints at area transfer limits, such as those forecast in the coming years in the Northern Cape, will require significant grid investments by cash-strapped Eskom, Van der Westhuizen said.

"That assumes at least four 400 kV lines built from the Northern Cape, either down to Cape Town or to Johannesburg--to the major load centers. The question is... is it worth it, or is there an alternative?" he said.

Areas next to the Northern Cape currently still have large amounts of grid capacity available at substation and area transfer limit level and nodal pricing triggers could promote deployment of PV plants in these areas to reduce grid costs, Van der Westhuizen said.

Lessening the need for transmission infrastructure development could accelerate the deployment of renewables and cut Eskom's spending bill, he said.

PV placement

The Northern Cape province holds South Africa's highest yield levels for solar irradiation. The difference between the highest yields in the west of the Northern Cape and the highest yields in the eastern coastal areas is around 20% for single axis tracking technology and the difference is greater than 50% for fixed angle systems.

According to initial calculations based on multiple assumptions and high-level data, lower yields in areas neighbouring the Northern Cape can be offset by savings on transmission losses and new transmission infrastructure costs, Van der Westhuizen said.

Large parts of the country have solar PV yields around 10% lower than the highest yield Northern Cape and these areas could be developed at the same or lower overall cost to the consumer, he said.

"The variance between the area where the majority of development is taking place and the neighbouring areas with available capacity is probably around 5%," he noted.

The calculations worked on the principle that average losses for the entire South African network are 3.2% and losses can vary between 3% and 10% depending on the length and loading of the transmission line.

"If you assume that energy needs to be evacuated between 500 and 1000 km from the highest yielding areas you can assume a transmission loss of approximately 5%.... If we move closer to the load centres we can probably save approximately 2.5%-- half of the losses on the transmission network," Van der Westhuizen said.

Expected constraints in the Northern Cape province could see transmission losses from this region in the upper end of the 3% to 10% range, he noted.

By factoring in the required grid investments, the study showed that the transmission costs of remote high yield solar PV generation in the Northern Cape would be around 315 million rand ($21.3 million) per 75 MW of generation capacity. Assuming a 20-year payback on transmission lines, the infrastructure cost of a single tracker plant could be around 18 cents/kWh (1.2 US cents/kWh), representing a 25% increase of a tariff of 70 cents/kWh for a single tracker plant in the highest yield areas, Van der Westhuizen said.

This implies the effect of nodal pricing would need to be at least 10 cents/kWh to enable development of single axis tracker plants in neighbouring areas with higher grid connection availability.

Wind, solar mix

Van der Westhuizen said that while all technologies should compete on electricity prices, nodal pricing triggers used for PV would have a different effect on wind power siting as small variances in wind resource have a major impact on yield and these could not be offset by savings in grid losses and infrastructure costs.

"If you did the same calculation you would not find that wind would move if you bring a 5 to 10% nodal pricing signal," he said.

In addition, the placement of CSP plants is more dependent on other factors such as local water availability, he noted.

In order to achieve a balanced and optimized generation mix, the nodal pricing mechanism could be designed to prioritize wind and CSP projects in certain areas, he said.

"If the pricing signal is correct for nodal pricing, it will automatically create that prioritization of certain areas for the technologies which can't be moved, while moving other technologies," Van der Westhuizen said.

The next step for such a pricing mechanism would be a comprehensive study by Eskom and the final formulas would need to be "fed into the procurement process-- it would need to be in the evaluation criteria," he said.

Van der Westhuizen also noted that going forward, the influence of transmission costs on consumer prices is expected to increase, relative to renewable energy costs.

"As [renewables] prices come down, this influence and consideration for external costs such as grid losses and new infrastructure costs become more and more important."

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