Solar clusters are a golden opportunity

Saliem Fakir, head of the Living Planet Unit at World Wide Fund for Nature South Africa, talks to Energy Forecast about the unexplored potential of solar clusters

Is the recently mooted Upington Solar Park idea a viable proposition?

I think much depends on the detailed feasibility study that is to be conducted soon.

Fluor, the United States company hired to undertake an assessment, did a first high-level feasibility of the landscape, which was presented at last year’s investor conference. The conference itself was well attended, but potential independent power producer (IPP) participants want more meat.

The crucial question is whether it is feasible to do the full 5 000 megawatts in one area or if it is better spread across several areas, the grid connection and cost issues, and government guarantees for certain types of concentrated solar power (CSP) that do not have full bankability to them at present because commercial financiers do not feel confident that the technologies have proven themselves as of yet. I refer here to CSP tower and linear Fresnel technologies.

Things are changing, though. Mature venture capital companies that put effort into getting some of the CSP technologies to where they are now are being partnered or bought over by more experienced engineering, procurement and construction type firms that have better creditworthiness and bank balances. I am talking about Areva, for instance, buying into linear Fresnel, and Ferrostaal into solar tower technologies.

There is certainly a trend emerging that is building confidence in the sector. But globally, troughs are still the dominant CSP technology of choice.

The involvement of experienced project developers in this space lowers lending risks, and so capital costs can be brought down.

There is also the issue of availability of water for the full 5 000MW, but now that the Orange River is flooding, perhaps that is not an issue.

How would the solar park idea relate to the solar cluster concept?

It’s pretty similar, but you could conceive them as having different tags: A solar park idea talks of having land set aside for the actual generation of electricity from different sources of solar technology. It’s more a power park than a technology park.

At least the South African solar park idea is agnostic about solar technology choices.

A solar cluster is perhaps more of an allusion to a technology park or hub where the actual technology production and development can take place, rather than installation. Perhaps this is the most important distinction I have in mind, and it may or may not be located in the same place where solar plants are based.

If I am not mistaken, China is busy developing solar industrial zones or parks. You could ideally just focus on one technology such as solar water heating (SWH), and different types of SWH products are developed in one area.

But I am merely throwing ideas out there and hoping we can have some discussion about the merits – or not – of such an idea.

We could learn a great deal from the Square Kilometre Array (SKA) project. Installations will happen in the Northern Cape, but production and control of the systems probably in Cape Town and elsewhere.

SKA will be building 3 000 radio telescopes that will be state-of-the-art if they win the international bid. They are going ahead anyway with 300, called the MeerKAT. It will be completely new technology with huge intellectual property (IP) spin-offs for South Africa.

One lesson I take from SKA is that it is built on a vision of developing cutting-edge, new astronomical technology – and not merely economics. Although, the success of it will depend on international grant financing.

Do you have any concerns about the introduction of the renewable energy feed-in tariff in South Africa?

I think most people are excited about the opening of the renewable energy space even though the current allocation only caters for 1 000MW.

This is a very important test case for South Africa’s reputation with local and international investors.

The biggest risk at the moment is institutional risk. If it takes too long, the funding is cut, or the process for adjudication over preferred bidders is mired in controversy and confidence in our ability to run a good process would be in jeopardy.

The bidding process has to be clear, it has to be fair, transparent and presided over by independent adjudicators. Treasury has stepped in, which is a good thing. It is building confidence in the market.

The truth is we have almost no IPPs for electricity in general, especially not renewables – except for one or two here and there.

What is important is that getting the first one gigawatt right will bring tremendous value in terms of learning and capability to manage more large-scale rollouts. It could be seen as a good pilot phase. But we must take advantage of it.

It takes a while to learn. But the more we do, the better we will get at it.

Of which elements would a South African solar cluster platform consist?

I think the idea is basically an appeal on clustering innovation, production, knowledge, financing and collaboration. It could be facilitated by a state entity or could be a state-owned enterprise (SOE) itself that enters into partnership with a private entity. It could be something similar to the recent establishment of a dedicated space agency for South Africa.

But the idea is that small and large companies would work together. The thought could be to join up state institutions with private institutions and concentrate international collaboration around a focused area of work.

The entire feasibility of it, of course, depends on the scale-up of solar technologies. The domestic demand can support an export-led growth into the region.

But we are faced with challenges. China offers lucrative incentives for foreign investors and it supports its own SOEs because it is more interested in the capability than the cost initially. It is well prepared to finance losses in the early phases because it wants to acquire the learning and retain the capability. Then, of course, it backs it with its market size.

We will have to be quite strategic and smart. I think for CSP and perhaps photovoltaic (PV), we could acquire some strategic capabilities. This is quickly becoming a very competitive field, as many new players are getting into this area. South Africa is not the only emerging economy trying to develop this technology.

Are there any particularly favourable development sites for solar industrial zones in South Africa?

This is a very difficult question to answer. I am sure proximity to markets and where infrastructure is being developed will matter.

People have been thinking about Saldanha as an option. It is at the interface of the western and northern Cape. This area would be ideal for CSP plant and even PV production.

The key issue is proximity to demand, logistics cost and concentration of expertise and other support services that will be required to service the needs of such a zone. I suppose one would have to do an economic feasibility study.

There is also the Eastern Cape with Coega, and even the industrial heartland – like Gauteng itself.

What preliminary action would have to be taken to set up a solarindustrial zone?

It all depends whether we want to make the development of solar technologies a strategic new industrial development sector. I do think there are opportunities.

Secondly, we would require consistent and long-term installation of solar technologies. For instance, for CSP, we are looking at least between 50MW and 100MW of plants to be installed per year. This alone would make such a proposition viable.

Without scale we won’t be able to pull this off, certainly not to justify a solar industrial zone.

We may still do cutting-edge technology development, but in a very niche and under small scale. And it may be only for specific parts.

So, I think everything hangs on getting renewables to scale and linking that, in a strategic way, with industrial development.

How could the private sector get involved?

Currently, most of the solar technologies are locked up in various types of IP arrangements. It’s easy to get a power block together, as this is standard technology.

But it’s more difficult to produce efficient heat transfer tubes or storage capacity because this is very specialised know-how. There are things such as drives etc. for the heliostats, which can be produced in South Africa, but building ones with a great degree of precision will require some experience.

We will have to work with companies that have IP over some of these components if we want to manufacture them here. We are talking about both soft and hard technology.

Then there is the learning of actually having put up plants. We haven’t done any greenfield projects for CSP thus far.

We need to get out there and do them so we can test our own capability and ability to organise ourselves around the development and delivery of a specific technology. We will have to secure arrangements through joint ventures or other forms of arrangements to import know-how and capability.

We do have capability to simply do our own things, but we will be reinventing the wheel and leaving a certain time lag when others will be already onto the next advancement, leaving us further behind.

What infrastructure and activities (generally speaking) would be present in a solar industrial zone?

I will speak generically: Some of it could be research and development facilities, assembly plants, part manufacturing facilities, security of premises, and other services such as secure high bandwidth cables, accommodation facilities for visiting businessmen, scientists as well as engineers.

There could also be things such as test rigs for different components and facilities to optimise specific materials or parts.

Coega, for instance, has general services that manage the human resources, payrolls, and even the construction of facilities. I suppose you could provide these generic things.

Others could be a secure and independent source of power. Ironically, this may be required because of potential power shortages.

It all depends on what we can afford to fund or subsidise to get the zone going.

Are there any areas in solar power production where South Africa has a competitive advantage?

We haven’t developed the capability to put a fall plant together, but we have certainly the ability to do it, given that we have an industrial base to work from.

We can certainly produce many of the parts in South Africa. Basic foundational stuff can be done.

However, parts that require more precision engineering, machinery and specifications we can do with time, with the right support.

But original equipment manufacturers would look at the industrial base and enter into service contracts with different parts manufacturers as it is done for the car industry.

Studies have been done on the extent of the value chain we can secure in South Africa. It all depends on what bite size we want to choose.

We could develop some comparative advantage for certain types of CSP, although SWH and PV are pretty much a done deal. SWHs are a low- to middle-end technology and can be replicated anywhere easily.

The crucial issue in all of these is the quality of the product. Big brand names will most likely dictate the market.

On CSP for linear Fresnel and solar tower technologies, there are still opportunities to have manufacturing locations established in South Africa.

Some of these big decisions depend on which country will offer the best deal, and the nature of the local content provisions.

Remember, we also have high direct natural irradiation and we also developed some local thin-film IP.

Everything is dependent on scale and concentration of effort.

What would be the benefits of such a platform in terms of local development and South Africans’ positioning in the international solar space? Is there an international ‘solar energy race’ of which we are only dimly aware?

Many countries are moving fast to occupy this new space. IP is concentrated in the hands of a few countries. Spain, the US, Israel, Japan and South Korea have developed strong IP in the solar area.

India is talking of a solar mission that involves different types of solar technologies. It has a target of 20GW. India has develop strong science and engineering capability.

China has primarily focused on low hanging fruits such as SWH and PV. In the last two years, the scale of production from Chinese factories has already brought the price of PV (mostly silicon-based PV) down by half or more. China is busy looking into CSP and has plans to put up plants soon. But it has concentrated so far on the quick wins.

So, the strategic opportunities are limited. And, even if we don’t go full hog, we could go for specific parts manufacturing that requires specialised skills.

What opportunities, beyond energy provision, would a solar cluster offer?

I understand there are non-electrical technologies that can be developed out of a solar cluster. For instance, in CSP, we could develop more modular units for specific facilities such as strategic state assets or military facilities.

There are options for generating heat for processing or cracking of fuel. People have long researched producing hydrogen from solar sources, etc.

I think what happens, is that if you start somewhere, new innovation paths can be opened up, especially if you foster this innovation and entrepreneurship. In doing these types of projects, we learn soft skills such as how to plan them, cost optimisation, management of these projects and so on. These are skills and know-how we can export with time.

Do you have further details on Eskom’s 100-megawatt CSP tower plant?

I understand the CSP plant is under technical due diligence, and once this has been done and issues resolved, the funds will be released.