PV has an increasingly vital role to play in breaking Africa’s reliance on costly diesel generation. Ben Willis reports on the solar industry’s efforts to realise the potential of PV-diesel hybrid systems in Africa
In many parts of the developing world, diesel generators are a vital source of electricity, providing back up in areas where grids are weak and functioning as the main source of power where there is no grid at all. According to one estimate, the installed base of diesel generation worldwide is around 500GW, with some 40GW of new capacity being added each year.
But diesel is an expensive fuel. In many Sub-Saharan African countries it costs over US$1 per litre, which translates into electricity that costs about US$0.40-0.50/kWh to generate – a figure that is likely to inflate further if oil prices stay on their current upward trajectory. PV, meanwhile, is on the opposite course: falling costs mean PV-generated power in countries with strong irradiance can be as cheap as US$0.10/kWh, with further cost reductions likely as technology and supply chains develop.
These two factors are the key drivers behind a growing interest in hybrid systems that combine PV with diesel generators to help reduce the need for costly fuel. For businesses in emerging economies, particularly in Sub-Saharan Africa, high electricity costs represent a prohibitive barrier to growth; in many cases, the combination of PV with existing diesel generating facilities offers businesses the prospects of retaining the reliability of diesel but significantly reducing the amount they spend on fuel.
“Africa’s got a very large proportion of its energy generation based on diesel or expensive fuels,” says John Eccles, fuel displacement solutions director for US-based firm First Solar. “For a number of reasons it’s unlikely to change in the near term – so that dependency is going to continue, and Africa’s economy would benefit very greatly from its independence from diesel.”
First Solar is one of a number of well-known PV players taking an early lead in exploring the fuel-saving opportunities offered by PV-diesel hybrid systems in Africa. These exist across the business spectrum, from safari lodges through to mines, but with its expertise rooted very much in the development of massive utility-scale PV plants, Eccles says First Solar’s natural inclination is towards larger hybrid systems.
“First Solar has classically been a utility-scale provider, so we talk about projects that are in the megawatts,” he explains. “Hybrids themselves are a different order of magnitude from your utility-scale PV projects, so most are likely to be sub-10MW; a large majority will be sub-1MW as well. But in terms of having a focus, the industrial players and mining companies with larger loads are the more attractive clients at this early stage.”
First Solar revealed earlier this year that its first significant PV-diesel hybrid project would be built in Australia for the global mining giant Rio Tinto. Eccles says that beyond Australia, Sub-Saharan Africa is also very much in the company’s sights for similar projects, specifically South Africa, Kenya Tanzania and Uganda, where he says First Solar is already in discussions with a number of international mining firms.
The hybrid offer
Eccles says the main challenges in getting projects off the ground in Africa will not be technology related so much as commercial and financial. The fact there are relatively few working examples of large PV-diesel hybrids he says is not down to any “mystic perception” the market may have of mixing two very different technologies as much as simple economics: diesel is cheap to install but expensive to run over time, whereas for PV the opposite is the case.
“Diesel grids are more expensive overall, but a cheaper solution to begin with,” he says. “So if you’re capex-constrained, you typically go for a diesel solution. The challenge therefore is that you’re trying introduce a capital-intensive technology like PV into a market that doesn’t inherently favour that solution.”
What will make the PV-diesel hybrid concept ultimately sink or swim, then, will be the extent to which companies such as First Solar and others are able to come up with commercial models that work for capex-sensitive businesses.
According to Markus Schwaninger, a project manager for the renewable energy project development programme of Germany overseas development body, GIZ, European EPC companies are already busy developing new business models that will address some of the issues highlighted by Eccles and allow them to tap into new markets.
“Since markets in Europe have crashed, we now see a situation where more and more companies are getting into these new innovative business models,” Schwaninger says. “Talking to companies at Intersolar [in Munich in early June] they mostly all say they are working on PPA [power purchase agreement] or leasing-based business models; all of them are wanting to have a PPA with a credit-worthy off-taker, such as a large industry.”
One such company is the Italian EPC firm Solesa, which at the end of June announced a partnership with US independent power producer Astonfield specifically targeting the PV-diesel hybrid market in East Africa and India. Its managing partner Stefano Fissolo explains some of the commercial routes through which the partnership is able to offer hybrid systems to its clients.
“The financing is either direct financing from the customer – if the customer wants to save electricity costs, he will have to invest,” Fissolo says. “Otherwise there is the lease-back, where we take on the risk of the user, we buy the equipment and lease it back to the customer. There is also the PPA model, where we sell the electricity to the customer and ask some securities from the customer such as letter of credit. But this is usually not easy for projects in the range of 500kW or 1MW – PPAs are much easier when you’re talking 10MW or 50MW.”
Staying in balance
But while the initial challenge for the fledgling hybrid market will be to fine-tune its commercial proposition, that’s not to say the installation and optimal operation of the systems won't also require some technical consideration. The main challenge is stability, says Volker Wachenfeld, senior vice president of hybrid and storage and German inverter manufacturer, SMA Solar.
“In a diesel grid, as long as there’s no PV, the diesel is providing exactly the kind of energy that the local load is consuming,” he explains. “Load and generation are 100% in balance. Introducing PV means there’s another source, and the existing load demand is not really changing. What we have to take care of is that the diesel operation is stable, robust, and not put at hazard by the PV – and this is why we need an additional control mechanism.”
SMA’s ‘Fuel Save’ controller has been designed specifically to facilitate the feed-in of PV to a diesel-based system. It has so far been used in 10 large hybrid systems, including two of Africa’s largest, a 1MW system at a mine in Thabazimbi in South Africa, and another of the same size at a tea farm in western Kenya [link to project focus].
Wachenfeld says that in conjunction with the system’s inverters the controller works by “talking” to the diesel generators, analysing their status and controlling the input of PV at an optimum level depending on certain load conditions.
For example, it will only allow a higher penetration of PV into the system if there is the necessary spinning reserve in the diesel element to take over from the PV should a cloud suddenly cause a large drop in PV output. Similarly, the controller is vital in throttling back the injection of PV should the system experience a sudden drop in load, a common enough occurrence in industrial facilities where power-hungry pieces of equipment are turned on and off at a moment’s notice.
But ultimately it will be the business case not the technology that determines whether or not PV-diesel hybrids take off. Fissolo predicts that hybrids could face some constraints in the mining sector due the nature of the mining business, where sites are opened, exploited, exhausted and closed within just a few years.
“When you install PV it has to stay there for 20-25 years, otherwise it doesn’t make sense,” he says. “If you’re planning to change the location of your factory, if you’re planning to stop the leasing of the site or planning to move to another country, it doesn’t make much sense to install PV, because the PV system will earn its return in four years, but then the earnings are for 25 years. This is the drawback for mines – mines are very unstable.”
Schwaninger, meanwhile, points out that although large figures are often quoted in relation to the size of the installed diesel base worldwide these can give a misleading impression of the theoretical scale of the hybrid market. What they do not convey is that only a proportion of the total capacity will be “100% diesel cases” where hybridisation makes the most commercial sense; more commonly, diesel systems are used as back up, meaning that the addition of PV would carry a longer payback period – say seven or eight years rather than three or four. And with companies in regions such as East Africa operating on a short-term basis, this could make a crucial difference to whether or not they decide to deploy PV.
Nevertheless, Schwaninger predicts some big strides forward for PV-diesel systems in the near future, with the Kenyan government shortly due to invite tenders for the retrofitting of PV to all of the country’s existing diesel power stations and a number of other African countries set to follow its lead. Other areas he says could see an uptick in the use of PV hybrids are the telecoms industry, farms and safari eco-lodges. “Lodges might also be the best clients because they really intend to go for a very high PV share to have the diesel gen almost not running at all to reduce noise and promote ecotourism,” he says.
First Solar’s John Eccles is confident that even in the mining sector, which others think may be hesitant in embracing PV, momentum could pick up soon. “I’m hoping that by the end of 2014 there will be some announcements about projects in the multi-megawatt scale,” he says. “And my expectation is that once these projects have been demonstrated and the proof of concept has been demystified, the floodgates will open.”
Indeed the only thing it seems that could disrupt the deployment of the PV-diesel hybrid model is the price of oil suddenly falling and staying down for a significant period of time. But as Eccles points out: “I don’t see the geopolitical drivers being in that direction.”