December 2013

Real Cost of Solar Energy is Cheaper Than New Coal

South Africa is the world’s 4th largest coal producing country and is blessed with an abundance of a natural resource in high demand. However, with an economic growth outlook heavily dependent on electricity shortages and affordability of energy it is important to recognize that solar energy now is cheaper than new coal. Furthermore, using reliable, affordable and local South African solar companies can ensure a lower cost of energy with profitable returns, an increase in jobs, economic growth, and decrease of power shortage.

Many consider solar power as an unreasonably priced source of energy due to biased opinions and outdated information. Recently however, research reveals that the real cost of solar energy is cheaper than new coal, especially in South Africa. PV Tech reiterates a reliable report from Frost & Sullivan in which the “… South African Photovoltaic Industry Association (SAPVIA), found that state utility Eskom will be selling coal-fired electricity for R1.69/kWh by 2020.” PV Tech claims “…the cost of electricity from solar [energy] could fall as low as R0.74-1.26/kWh…” on a levelized cost of energy basis as early as 2018. Although these costs were forecasted for 2018 already today in 2013, we are seeing lower prices for solar PV. The Republic of South Africa’s Department of Energy has provided the fully indexed price of Rand per MWh for the six preferred bidders for round three of the Renewable Energy Independent Power Producer Procurement programme. The average price of these six bidders falls at a cost of R0.99/kWh. One of the six preferred bidders and successful projects is Adams Solar PV 2, developed by Aurora Power Solutions, SOLA Future’s parent company. This project has the lowest cost of the six bidders at R0.86/kWh.

Renewable Energy Advisors (REA) suggest that the costs of PV components have become more affordable in the past two years while coal prices have increased due to diminishing of reserves. Furthermore REA claims, “With currently-available tax incentives, a well-priced, well-designed system can easily provide a very satisfactory return on one’s investment.” Recently published data from Deutsche Welle (DW) states, next to wind, “…solar PV is the second cheapest energy source on a per kWh basis.” Furthermore, the same DW article claimed that regions such as South Africa, where there is an overabundant amount of sun are likely to produce cheaper energy than wind, coal or gas. These continued benefits allow solar power to be cheaper than new coal and further cement its future as a key energy source for Southern Africa.