Renewables price index rises by 1.2% in July

From the newsletter

The Renewables Rising price index climbed by 1.2% in July, its highest jump since April. This is due to increases in fossil fuel prices, which continue to make renewables attractive. The monthly index reflects the combined average price changes for cash product prices and power costs in four major African economies: Kenya, Nigeria, Egypt, and South Africa.

• We track product prices by monitoring the cost of solar panels, inverters, lithium-ion batteries and solar home systems across the four countries. A rise in our index indicates increasing renewable energy attractiveness.

• Nigeria had the highest increase in fuel prices, with diesel increasing by 9.5% and petrol by 3.4%. This occurred despite the new Dangote Refinery starting direct distribution of its fuel across the country.

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• Nigerians, however, enjoyed some relief on the grid, with prices declining by about 2.7% and 1.9% for residential and commercial customers, respectively. The prices of solar panels, inverters, and batteries remained relatively unchanged, with panels seeing a 2.7% decline, though this was more likely due to specific offers rather than a major market downturn.

• In Kenya, fuel prices reversed a decline that had lasted for more than eighteen months. Prices increased by 4.4% for diesel and 7.2% for petrol. Conversely, electricity prices went down by an average of 1.7%. Despite this, the country still faces an electricity shortage to meet its peak demand, resorting to imports from Ethiopia. However, Ethiopia's low-cost hydropower means the grid prices will not be affected upwards.

• South Africa experienced an increase in electricity prices for both commercial and residential customers, as well as a rise in diesel prices. Only petrol prices saw a decrease. This month, the country began implementing an 11.32% increase in electricity prices for customers supplied by municipalities. The grid will also benefit from an additional 100 MW from the recently completed Redstone Concentrated Solar Power project, which will help cushion it from loadshedding, especially during peak hours.

• On renewable energy products in South Africa, prices for solar panels, inverters, and solar home systems remained unchanged. Lithium-ion battery prices, however, declined by 6.2% in the market, primarily due to special offers. The demand for battery energy storage remains high in South Africa, with many customers installing solar home systems with battery backup. Furthermore, the government has waived registration fees for residential solar installations, encouraging further adoption.

• In Egypt, electricity prices saw a slight increase of 2.7% for commercial customers, while residential prices remained the same. Diesel prices increased by 0.6%, and petrol prices went down by 0.5%. Egypt continues to face increased demand for diesel for power generation due to supply cuts of natural gas from Israel. Simultaneously, the country is encouraging its major consumers to install their own generation plants to reduce strain on the national grid and has moved to allow private-to-private power generation agreements.

Our take

• The stability of product prices for renewable energy technologies, even amid fossil fuel supply chain disruptions, represents a significant strength for their development. This consistent pricing provides the market certainty crucial for accelerated growth.

• Already, tangible progress is evident, with countries like Egypt and South Africa completing several projects ahead of schedule. These new capacity additions from renewables are anticipated to offset reliance on fossil fuels and potentially stabilise electricity prices.

• Renewables are expected to gain a further competitive advantage in the future as countries embark on local manufacturing, particularly for solar panels and lithium-ion batteries. Given Africa's abundant mineral resources, this localisation is projected to lower production costs and reduce supply chain expenses, ultimately leading to even lower product prices.