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This paper models the costs and benefits of setting a target of generating 15% of South Africa’s electricity from renewable sources by 2020. The modelling results show that the most promising scenario is a mix of solar thermal and wind, which benefits both from the lower cost of wind and the ability of solar thermal plants to contribute to peak demand.

Key findings of the study are:

• reaching a 15% renewable target by 2020 will cost only slightly higher than the baseline (around 15%)
• combined with an energy efficiency programme, average electricity costs will be lower than the baseline for most of the 2015-2020 period
• with the addition of carbon finance for both the efficiency programme and the renewable programme, average electricity costs will drop to 18% below the baseline by 2020
• the target could reduce GHG emissions from the electricity sector by up to 14%.

Financing the renewable electricity programme is identified as the main challenge to achieving the target. The study suggests that financing could be accomplished through:

• a feed-in tariff
• tradable renewable energy certificates
• international climate-related finance including current and “new” Clean Development Mechanism (CDM) or a second form of support which may be forthcoming known as Sustainable Development Policy and Measures
• subsidies for technology development through direct government grants for research and development.

The authors suggest the following policy measures in order for the 2020 target to be met:

• Eskom, the national utility, could play a key development role in piloting solar thermal and wind energy technology. If they become a African or global leader in this regard, this could stimulate investment in their projects
• the development of an industrial strategy by the government that focuses on increasing the local content of renewable plants and developing a competitive edge in solar thermal technology.

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