Experts weigh in on government’s draft Integrated Resource Plan and its implications for energy provision and the environment
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The Renewable Power Generation Costs in 2021 report by the International Renewable Energy Agency found that two-thirds of newly installed renewable generation capacity was cheaper than the cheapest coal-powered options in the G20. The 2022 report found renewables saved R9.8-trillion in global power costs that year. The International Energy Agency’s Renewable Energy Market Update – June 2023 reported that onshore wind and solar were the cheapest new generation options in most countries worldwide. The numbers are clear, the trends apparent.
South Africa has a power crisis. The consolidated budget deficit is 4.9 per cent of gross domestic product for the 2023 fiscal year, as reported by the National Treasury. We have an average of 2 500 hours of sunshine annually, above the global mean.
And yet the Department of Mineral Resources and Energy’s draft 2023 Integrated Resource Plan, released for comment in January, with a deadline of 23 March, diminishes new renewable builds, delays shutting down coal plants and intends to increase the proportion of gas-to-power to more than a quarter of generation total. It’s a document that has left experts wringing their hands at a time when we desperately need more electrons in the grid as quickly, cheaply and carbon-effectively as possible.
In this issue of Energy, some of these experts share their views on what this draft plan could mean for our energy needs and environmental obligations, along with what they want to see from government. We also look at solar subscriptions, renewable energy investments, advances in storage technology, our e-mobility prospects and a project that’s bringing affordable renewable power to townships. Because while the minds in charge seem to be fossilising, the rest of the industry is blooming with potential.
Editor Anthony Sharpe
7 POLICY
Experts weigh in on the draft 2023 Integrated Resource Plan.
11 SOLAR
The solar-as-a-service subscription model offers a more affordable way to get off the grid.
17 STORAGE
Utility-scale batteries can provide a wide range of benefi ts to the electricity network.
20 SOLAR
The iShack project is working to infl uence energy policy, one household at a time.
23 INVESTMENT
Private-sector investment in renewables is booming while public-sector planning stalls.
26 AUTOMOTIVE
New energy vehicle adoption in South Africa involves reimagining the entire automotive ecosystem.
Experts are taking issue with the draft 2023 Integrated Resource Plan, claiming it misrepresents the energy landscape.
By ANTHONY SHARPEGovernment gazetted the latest iteration of its Integrated Resource Plan (IRP) on 4 January. The IRP aims to guide the planning and development of energy-related infrastructure in step with the country’s anticipated needs. The introduction to the 2019 plan described it as: “The IRP is an electricity infrastructure development plan based on least-cost electricity supply and demand balance, taking into account security of supply and the environment (minimise negative emissions and water usage).”
This defi nition comes directly after a paragraph acknowledging South Africa’s environmental obligations in terms of the Paris Agreement on Climate Change, so you’d be forgiven for thinking that the planned electricity infrastructure development in question would largely be of a renewable bent. However, something seems to have gone awry in the years since, with the new draft IRP leaning less on renewables and more on fossil fuels, particularly gas.
New wind allocation to 2030 has dropped from 17 742MW in the 2019 IRP to just 4 468MW in the new plan, while new solar photovoltaic (PV) has fallen from 8 288MW to 4 468MW. That brings the energy contribution to 2030 from renewables (including hydropower) down to 22 per cent, compared with the 33 per cent planned in the IRP 2019. This is despite international bodies such as the International Energy Agency (IEA) having identifi ed solar and wind as the cheapest electricity generation options in most countries. In a 2023 executive summary, the IEA wrote: “Today, wind and solar PV plants can provide electricity at prices 30–50 per cent lower than those of future power contracts in most key markets, increasing renewables’ attractiveness for investors.”
“THE IRP REALLY JUST LOOKS AT ELECTRICITY. GIVEN THE CURRENT CRISIS, BUILDING CAPACITY IS CRITICAL, AND ANY NUMBER OF TECHNICAL STUDIES SAY WE SHOULD JUST BUILD RENEWABLES AS FAST AS POSSIBLE.” – JAMES REELER
Despite the Department of Mineral Resources and Energy’s estimations of solar photovoltaic only contributing 3 615MW of new generation capacity by 2030, rooftop solar capacity alone increased from 983MW in March 2022 to 4 412MW in June 2023 – an increase of 349 per cent in just over a year.
Source: Energy Monitor
Much of the criticism levelled at the 2023 IRP thus far has been due to the opacity of the process used by the Department of Mineral Resources and Energy (DMRE), which is responsible for drafting the plan, to calculate energy provision. James Reeler, senior manager for climate action at WWF South Africa, says the process of developing the latest IRP has been very much in line with the DMRE’s historical approach. “The department does some black box modelling, which is supposed to be guided by the least-cost principle, but then goes to cabinet for policy amendments and then presents it to the public. Historically, there’s been quite interactive feedback from the public, but a lot of the technical inputs were not taken on board.”
One of the major issues, says Reeler, is that the technical inputs used in the modelling process remain unclear. “Following some questions from the public, the DMRE released the benchmarks they measured against, but not actually what
“THE DRAFT IRP 2023’S REDUCTION IN RENEWABLE ENERGY COMPONENTS FLIES IN THE FACE OF ESKOM’S INDICATION THAT THESE NEED TO BE INCREASED SIGNIFICANTLY.” – CHRIS YELLAND
their assumed or modelled costs were.” These were later released, but they do not align with the modelling that’s been seen elsewhere.
Those cost assumptions are essential, as they inform the results of the modelling process. Chris Yelland, MD of EE Business Intelligence, laments that, after two years of work drafting the plan, the DMRE released it for public comment over the Christmas period with a 23 March deadline and without the necessary assumptions. “The commenting process is really all about the assumptions. If you publish the outcomes without the assumptions, you can’t expect people to comment meaningfully.”
Under pressure from the public and industry, the DMRE released the assumptions, but it quickly became clear that, although some may have been correct two years ago, these were outdated and thus incorrect, says Yelland. He gives the example of solar PV that, under the draft IRP, includes only 3 615MW of new generation capacity by 2030. “That’s completely wrong, as we already saw 2 000MW of embedded generation done in 2023.”
Another outdated assumption that has somehow found its way into the draft IRP is the inclusion of megawatts from Karpowership, despite Eskom having retracted the grid capacity reserved for the Turkish power plant provider after several of its projects failed to reach financial close.
Yelland says that the draft IRP 2023’s reduction in renewable energy components flies in the face of Eskom’s indication that these need to be increased significantly. “It is out of line with many existing accepted government policy documents, including Eskom’s Transmission Development
Plan and Medium-Term System Adequacy Outlook, the Presidential Climate Commission’s findings, the Just Energy Transition Investment Plan and the Renewable Energy Masterplan.”
The biggest winner in the draft IRP 2023 is gas-to-power (GTP), with a massive proposed capacity increase of around 7GW – more than double that proposed in the 2019 IRP. The assumed utilisation rate is also high, at more than 85 per cent, meaning GTP plants will likely contribute more than a quarter of the country’s electricity by 2030.
“I think this plan is a case of putting the cart before the horse,” says Yelland. “They’re taking their desired outcomes of big gas and reduced renewable energy and working backwards to get there.”
It’s a sentiment echoed by Prof Hartmut Winkler of the University of Johannesburg’s Department of Physics. “In essence, this seems to be a plan that has been drafted and tweaked to justify certain projects the DMRE has been looking at for a long time, including new gas projects, a nuclear build at some stage and the continued use of coal plants.”
Prof Winkler also feels that the calculations used to work out what the DMRE claims is the best scenario don’t make sense. “If you look at what these technologies ultimately cost, the only reason you wouldn’t want to build solar plants is because you didn’t want your energy system to be completely reliant on the sun. In South Africa, however, renewables constitute a very small fraction of generation, most of which comes from coal. Even if we made huge investments in solar and wind, we’re nowhere near the point where the
system is in danger because of a few cloudy days.”
This isn’t to say there’s no role for gas in the system, however. “The main role originally envisioned for gas in the 2019 IRP was as a backup for wind and solar to make up the shortfall on days when conditions are poor for renewables,” explains Winkler. “That’s the advantage of gas: you can start and stop gas plants very quickly.”
However, while GTP plants are relatively quick and low cost, maintaining the supply of gas is not, says Yelland. “Before you can import liquefied natural gas, you need to build harbours and import infrastructure, regasification plants and transmission pipelines, none of which exist at present. Alternatively, you need to develop offshore gas resources. The infrastructure required to get fuel to the power station takes a lot of time and risk.”
It may be called the Integrated Resource Plan, but one of the greatest shortcomings of the planning process is the lack of integrated planning by the DMRE, says Reeler. “The IRP really just looks at electricity. Given the current crisis, building capacity is critical, and any number of technical studies say we should just build renewables as fast as possible.
“In the longer term, however, the IRP needs to think about the transition of the whole economy in terms of energy demand,” adds Reeler. “That means considering the shift in high-energy industry and transport for the provision of paid and free basic electricity to homes. Instead, what’s happened historically and continues to happen is that the DMRE thinks about the energy landscape as a series of discrete sectors and pursues master plans for each of those sectors.”
Another issue is the cost of not decarbonising. This has obvious implications for the health of South African citizens, but very real ones for the economy, concludes Yelland. “South Africa will be punished with carbon taxes and cross-border adjustment tariffs if we do not decarbonise our energy supply. I see no sign that has been taken into account.”
*The Department of Mineral Resources and Energy has noted that the IRP is a “living plan”, which is intended to evolve in accordance with shifting circumstances. It offers scenarios along two timelines 2023–2030 and 2030–2050, scenarios predicated upon particular outcomes
The rise of rooftop solar-as-a-service offerings gives consumers a way to overcome load shedding without the significant upfront cost of buying a system outright, writes
RODNEY WEIDEMANNDriven to escape the worst effects of daytime load shedding, many South Africans have sought ways to get off the grid, generally through the adoption of solar installations. However, despite costs dropping significantly in recent times, a full solar setup remains a costly purchase.
That is unless one chooses to purchase a solar-as-a-service (SAAS) solution, eliminating the need for the user to invest in the physical solar infrastructure, says Paul Miller, commercial executive at Decentral Energy. “SAAS is a term for the
sale of electricity or backup electricity capacity to a business where the generation or storage of the electricity takes place on the premises but the facilities for the generation or storage of the electricity remain the property of the electricity provider.”
Essentially, the provider and the user enter into a power purchase agreement (PPA) that governs their commercial relationship, continues Miller. “Generally, the facilities provided include photovoltaic solar panels, inverters and backup batteries or diesel generators (or both).”
“A PPA ALLOWS THE BUSINESS BEST SUITED TO THE TASK TO TAKE ON THE RISK OF MANAGING A COMPLEX ENERGY SOLUTION WHILE ALLOWING THE BUILDING OWNER TO INVEST AVAILABLE CAPITAL IN THEIR CORE OPERATIONS.” – PAUL MILLER
Miller suggests that a PPA with an experienced producer provides a compelling way for businesses seeking a low-risk way of switching to solar. Asked to compare the costs between outright purchase of solar equipment by the user and SAAS, he says the former will undoubtedly be higher. “This is certainly the case if risk, ongoing operations and maintenance are properly taken into account. A PPA allows the business best suited to the task to take on the risk of managing a complex energy solution, while allowing the building owner to invest available capital in their core operations.
“There is also a less obvious benefit: it is absolutely in the interests of the electricity provider to ensure that the facility is properly specified, sized and appropriate for the actual requirements of the business and is operated efficiently over its life,” he states.
Ross Mains-Sheard, CEO of solar rent-to-own provider Versofy, agrees, noting that this is because the electricity provider takes on the risk of panel efficiency degradation and replacement of parts. “It is in the provider’s interest to ensure the system runs optimally, as they are paid only for electricity provided. They do this through off-site monitoring and regular physical inspection, maintenance and cleaning.
“A business that owns its system will need to do this itself or appoint an outsourced service provider to do so.”
The allocation of the majority risk associated with the system being transferred from the client to the service provider is the primary benefit of using SAAS, says Martin Meyer, head of Power and Infrastructure Finance at Investec.
“This means that any operational risk associated with the system is passed on to the service provider, who will need to repair and optimise the system at its own cost. There can also be no tariff adjustment (of the electricity price) if the system does not work, as this is a fixed component of the agreement. While the tariff will be escalated at a pre-agreed inflation rate, the client will always have a good sense of the future price of electricity to be generated by the system.”
Perhaps most crucially, Meyer continues, the client does not have to come up with the upfront capital, which can be fairly substantial, depending on the system composition. He also suggests that comparing costs between solar-as-a-service and outright purchase is not a straightforward comparison. “It really depends on numerous factors.” Some of the components that need to be factored into such a comparison include:
• the tenor of the agreement;
• the ongoing cost of servicing and maintenance (if purchased outright);
• the client cost of capital (both debt and equity);
• the economies of scale associated with service providers’ procurement;
• the purchase options embedded in the electricity supply agreement; and
• the interest rate and inflation forecasts. Mains-Sheard points out that the expense associated with a rental offering, compared to an outright purchase, makes the former the most cost-effective way to get the benefits of solar.
“Traditionally, solar was reserved for the precious few who could afford to pay for a system outright or had a strong enough credit record to take out a loan,” he explains. “The introduction of SAAS has now made solar accessible to a much wider audience, as citizens can now enjoy the benefits of clean, reliable solar power and backup at a reasonable price. The market has gravitated to this offering for its flexibility and hassle-free nature. With this model, customers are subscribing to a service, not a product, and therefore any issues with equipment, insurance
claims, maintenance or monitoring must be handled by the service provider.”
The service is suitable for multiple market segments, says Mains-Sheard, including residential complexes, freestanding homes, small to medium enterprises and factories. It can even be used in the tenant market –a tenant doesn’t need to own the property to subscribe.
“In terms of impact, solar implementation is contributing to a reduction in demand on the grid. As more households and businesses adopt these solar solutions, there should be a notable drop in reliance on Eskom’s generation, ultimately contributing to a more stable and resilient energy landscape,” Mains-Sheard explains.
However, he feels that while the adoption of rooftop solar will play a massive role in eliminating load shedding, it is not a silver bullet. “To end load shedding, the public and private sectors need to work together by allowing private individuals and businesses to sell excess power back to the grid. Nonetheless, the adoption of solar at such scale makes South Africa one of the quickest adopters of renewables, which should ensure a greener and brighter future for generations to come.”
Tonye Irims, founder and CEO of Wisolar, suggests that substantial uptake is expected in real estate development. “When residential units are constructed, the buyers may not need to choose an energy supplier individually. Instead, with real estate developers investing in decentralised energy systems, they can now offer buyers access to integrated SAAS. These qualifying estates may include sectional title properties and single dwelling units in lifestyle estate communities, but the model can also be applied to affordable housing communities and retirement villages.”
Miller indicates that in the organisation’s experience, shopping centres and industrial concerns have
Service provider Wisolar says there are multiple benefits across the board.
• For the homeowner: it offers access to reliable and cleaner power at a lower cost, more relaxed credit criteria, along with simplicity and convenience, better budget management, thanks to payas-you-go, and a buy-out clause that allows them to fully purchase and own the system anytime within the 15-year PPA.
• For developers: properties with solar power are more attractive, it offers an additional stream of income, as the developers can benefit from property solar recharge, and it increases property values.
• For the general community: it plays a critical role in both climate change mitigation and job creation.
led the uptake in this market. “However, this is rapidly changing. There is now also a lot of interest from body corporates of all kinds, as well as educational institutions.”
Tonye Irims
Investec’s Meyer points to a solid uptake in client-funded rooftop solar. The bank itself has funded some of the major solar service providers in the market and has seen significant growth in these portfolios. “We believe that rooftop solar will become the primary source of power generation during daylight hours and, together with battery backup, will go a long way in resolving the load shedding crisis.”
Utility-scale batteries can benefit the functioning of the national grid and improve electricity supply, writes RICHARD HALSEY, policy adviser on the South African energy team at the International Institute for Sustainable Development
Batteries are woven into the fabric of the modern world. From the tiny ones in watches and the small ones in cellphones and laptops to the larger ones that power electric vehicles, batteries keep us powered up when we’re on the move or when infrastructure fails.
But with 2023 being the worst year on record for load shedding in South Africa, Eskom’s blackouts meant consumers often couldn’t plug in to charge up. This frustration prompted them to look for alternatives and highlighted another benefit of batteries. With technology improving, consumers can use batteries in combination with solar photovoltaic systems to reduce their reliance on Eskom and be less affected by rotational power cuts.
As a result, the imports of lithium-ion batteries into South Africa reached more than R20-billion in the first six months of 2023.
That’s five times greater than all of 2021, and proves that consumers sought to use batteries to secure reliable energy supply. However, the value of much larger battery systems, which can be housed in groups of containers up to 12 metres long and used for public rather than private supply of electricity, remains underappreciated.
Utility-scale batteries can provide a wide range of benefits to the electricity network. For example, by providing electricity stored during a prior period of low demand during peak demand times, batteries can reduce the use of expensive peaking plants that burn diesel. What’s more, they can optimise the use of limited grid capacity, which is a huge problem countrywide. Adding battery systems can allow more solar power plants to be built than the
UTILITY-SCALE BATTERIES ARE A DISRUPTIVE TECHNOLOGY IN THE POWER SECTOR AND WHILE MANY AREAS NEED ATTENTION, EDUCATION AND AWARENESS ARE GOOD STARTING POINTS.
local grids can handle at their maximum output, as the oversupply can be stored and used later. At a municipal level, distributors can even use batteries to avoid fines for exceeding demand limits during peak periods, and they can serve the system operator for frequency and voltage control. The list goes on, but the point is that these large, grid-located batteries can provide many different benefits to the functioning of the national grid and improve electricity supply.
Eskom recognises this. In its Transmission Development Plan of 2022, it tripled the planned battery capacity to 2032 compared to the same plan the previous year. Although delayed, the first project in Eskom’s battery programme came online in November 2023.
Utility-scale energy storage is not new in South Africa. Pumped storage – moving water to a higher dam and then letting it run downhill through turbines – has been used in the country since 1979, and Cape Town often has one stage less of load shedding thanks to the Steenbras pumped storage scheme. However, this form of storage takes a long time to build (an average of eight years in South Africa) and can only be constructed in regions with suitable geography, water supply and space. Conversely, batteries can be put pretty much anywhere, in a short time frame, and provide a wider range of services than pumped storage due to their rapid response times and flexibility.
What really put big batteries on the map was the rapid reduction in cost. Lithium-ion batteries are now 80 per cent more affordable than in 2013, and performance has improved. Global energy markets have responded with annual grid-scale battery storage additions increasing by over 70 per cent each year from 2020 to 2022. Rystad Energy predicts that by 2030, the world will add 10 times more battery storage in that year than it did in 2022. It’s clear that when it comes to energy storage, batteries are where the action is happening.
However, while individuals, businesses, scientists and Eskom agree that installing batteries is a way to improve electricity supply, are the government and the Department of Mineral Resources and Energy on board?
The national electricity infrastructure plan called for 513MW of grid-located batteries to come online by 2022, but by December 2023, the process was only at the stage of selecting preferred bidders. The projects still need to reach financial close and then be built. So, things are happening, but much slower than anticipated. Moreover, crucial pieces of the puzzle are missing.
For example, a study prepared for the Department of Science and Innovation in 2022 concluded that defining and classifying energy storage in the regulatory framework was the highest priority intervention in developing a local market for energy storage, but the Electricity Regulation Amendment Bill, which came out in 2023 and is being finalised, is silent on energy storage. This apparently technical detail is symptomatic of a lack of political prioritisation of the issue. As the bill is a key step in shifting legislation to support a transformed electricity
WHAT REALLY PUT BIG BATTERIES ON THE MAP WAS THE RAPID REDUCTION IN COST. LITHIUM-ION BATTERIES ARE NOW 80 PER CENT MORE AFFORDABLE THAN IN 2013, AND PERFORMANCE HAS IMPROVED.
sector with competitive trading, government should adequately cover energy storage in it.
Another consideration is that the business model for a grid-located battery operator improves signifi cantly if it can generate revenue from more than one of the services it can provide – something called “revenue stacking”.
At present, it is very diffi cult for prospective developers to access this additional revenue in South Africa as there are not yet suffi cient structures in place and a variety of tariffs require revision. In contrast, the United Kingdom has established markets where battery operators can be paid for having capacity available (like a doctor being on call) or for providing so-called “ancillary services” such as fast response balancing to regulate the frequency at which the grid runs.
Government needs to ensure that the battery industry respects the highest sustainability standards. The best ethical and environmental practices need to be adopted for mining raw materials and battery design, along with endof-life handling of waste material and recycling. Given South Africa’s mineral wealth, there are substantial opportunities in the longer term to develop local value chains, particularly for batteries based on vanadium chemistries.
Just as small batteries have become part of our daily lives, so too big batteries will become an integral part of our future power system. These utility-scale batteries are a disruptive technology in the power sector and while many areas need attention, education and awareness are good starting points.
The South African government should update legislation and create collaborative platforms for energy storage stakeholders to improve revenue opportunities, tariff structures, sustainability standards and local value chain development. These are initial steps toward an enabling environment for the deployment of batteries that reduces risks and maximises benefi ts.
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The iShack Project is working to influence energy policy, one household at a time, writes director DAMIAN CONWAY
Free Basic Electricity (FBE) is intended to mitigate the worst effects of energy poverty endured by the most financially vulnerable. While FBE does benefit many indigent households lacking the basic necessities, the 2022 census shows that approximately one million households still do not have access to electricity.
The iShack Project has been working for 11 years to demonstrate that off-grid solar electricity can be used as an interim measure to speed up access to basic electricity in communities waiting indefinitely for grid electrification (and FBE). The project now operates as a social enterprise in 10 informal settlements in Cape Town and Stellenbosch, installing and maintaining solar home systems (for lighting and media). Subsidies, grants and donations are used, where possible, to reduce end-user co-payments. To date, more than 3 000 households have been served by the project.
While a small solar system can only provide a limited amount of daily electricity, the positive impacts are more significant than one might think. The benefits include:
• Avoiding unsafe fuels and candles for lighting, which significantly decreases the risk of shack fires and improves indoor air quality.
• The ability to charge a cellphone at home, alleviating the need for residents to wait until they get to work or pay a neighbour with a generator or battery.
• Access to media and communication, which goes beyond entertainment and socialising to include opportunities for learning, literacy and access to jobs.
Finally, delivering a solar service as a utility –as done by the iShack Project, ensuring sufficient skilled capacity and resources for ongoing maintenance – creates a platform for meaningful skills development and job creation. At scale, replicating the iShack model, for example, through franchising, could contribute hugely to South Africa’s elusive revolution in small, micro and medium enterprise development.
This rapidly advancing technology is desired and valued by informal settlement residents. However, the data indicates that, without significant subsidy support, less than 10 per cent of informal settlement residents can afford the cost of a small solar home system, even when payments are spread over three years. If the state remains committed to its poverty-alleviation policies, the large-scale deployment of off-grid solar electricity as a pillar of energy-poverty relief cannot be “left to the market”. The severe scarcity of private enterprises providing clean energy products and services to this market in South Africa proves the point.
Of course, the mounting pressures on South Africa’s fiscus, particularly the escalating budget for social welfare, raises the question: Where
will the money come from? Funds for FBE are already provided by national government, via the “Equitable Share” (augmented by some municipalities through electricity tariff cross-subsidisation). It is also worth noting that the capital and maintenance costs of an off-grid solar service (run as a utility) are far lower than the maintenance costs of grid-electricity distribution on a per-household basis. Perhaps the bigger challenge is for municipalities to allocate their funds for basic service delivery and indigent support in a way that prioritises those who are most energy-poor before extending FBE support to better-off households.
iShack’s primary mission has always been to influence policy reform – namely, a new national policy that gives a clear directive to municipalities to expand their tools for energy-poverty relief, including off-grid solar technologies, such as solar home systems and mini-grids. The iShack Project was only made possible through a grant from the Green Fund, administered by the Development Bank of Southern Africa, to demonstrate what such policy reform might look like – an objective accomplished more than five years ago. However, despite the ongoing advocacy, there has been no national policy reform (specifically of the 2003 FBE Policy).
To keep building the argument for reform, the iShack Project will set up a Basic Energy Fund to demonstrate how a monthly energy grant can help eligible households purchase an energy service. The idea is that a meaningful grant (equivalent to the rand value of FBE) can foster a competitive market for off-grid energy companies so that households receive good value and choice. The “market-making” effect of such a grant would also build enterprise-development opportunities that contribute to the Just Energy Transition, making “socially owned renewable energy” projects and inclusive energy franchising far more viable. We hope this will finally stimulate the political will to implement an enabling fit-for-purpose national policy that maximises economic, social and environmental benefits.
The capital and maintenance costs of an off-grid solar service (run as a utility) are far lower than the maintenance costs of grid-electricity distribution on a per-household basis.
South African private sector investment in renewables is booming while public sector planning stalls, writes
TREVOR CRIGHTON
South African businesses and residents spent R11.4-billion on solar photovoltaic (PV) installations in the third quarter of 2023 alone, according to the National Energy Regulator of South Africa (NERSA). During those three months, NERSA registered 98 new generation facilities with 908MW capacity, seven of which were purely for commercial purposes.
Gaylor Montmasson-Clair, senior economist at Trade and Industrial Policy Strategies (TIPS), says that the removal of the licensing threshold for private generation has driven massive investment in renewable energy in South Africa. “By March 2023, Eskom indicated that there were 13GW of private sector renewable projects under development,” he says. “The exponential growth in the importation of solar panels in Q1 of 2023 – over R32.2-billion in that quarter, alone – is reflected in private sector registrations with NERSA.”
According to TIPS data, 86MW of projects were registered in 2021, 1.7GW in 2022 and 3.9GW in the first nine months of 2023 – estimated to grow to 5GW in 2024.
Rogan Davies, executive director of Rhino Energy Solutions, says that while government has ambitious plans to “fix” Eskom, add transmission and build more capacity, he doesn’t see
“THERE’S REGULATORY AND POLICY SUPPORT TO FIX THE ENERGY SHORTFALL, BUT NOT THE KIND OF REQUIRED MACROLEVEL FUNDING, WHICH IS FORCING THE PRIVATE SECTOR TO FILL THE ENERGY GAP.” – ROGAN DAVIES
South Africa’s biggest solar battery storage system started supplying electricity to the national grid in 2023, contributing more power than the last unit at Komati Power Station.
The Kenhardt hybrid solar and battery facility in the Northern Cape was built with funding of approximately R18.65-billion from lenders and comprises three solar plants with a combined 540MW capacity, alongside a battery system boasting 225MW output.
Source: Daily Investor
much private local or international investment going into the energy sector at the macrolevel. “What I am seeing is more progressive policy development, but government and international financial institutions aren’t backing that up with investment,” he says. “There’s regulatory and policy support to fix the energy shortfall, but not the kind of required macrolevel funding, which is forcing the private sector to fill the energy gap.”
Rhino Energy Solutions is seeing incredible investment, intention and an increasing understanding of how renewables can solve the private sector’s energy needs, notes Davies. “All the banks have formal renewable energy policies and investment options, and are communicating those to corporate clients while offering an array of different ways to facilitate the purchase or rental of renewable energy solutions.
“There are so many sad stories where we see clients trying to invest in their capacity, importing new equipment and looking to grow,
but not being able to acquire the utility power to operate what they need. They’re all looking to make significant investments in producing their own renewable energy. Many are finding that the returns in terms of energy savings and uptime provided by renewables exceed those of the company’s operations themselves,” Davies explains.
Montmasson-Clair says that much of the nearly R162-billion in financing from the Just Energy Transition Partnership, announced at the end of 2021, will be spent on vital improvements to South Africa’s transmission system rather than directly on renewables. “That’s a good thing, as a lack of transmission capacity is one of the major stumbling blocks in the country’s energy system.”
There was incredible growth at the start of last year when the country was immediately saddled with high levels of load shedding, says Davies. “Plant requirements were previously in the 1MW range and now we’re seeing 4–5MW plant installations that run to R100-million investments.”
That’s not surprising. Whereas most major economies are investing in renewable energy with an eye on reducing their environmental impact, Montmasson-Clair says that the driver in South Africa is primarily to mitigate the effects of load shedding, followed by a desire to reduce electricity costs, with clean energy seen as more of a “bonus”. “In the renewables space, it really is ‘all systems go’. Local and foreign players are investing because there is such a huge appetite. There are some issues to be addressed – namely in terms of transmission and market infrastructure –but by and large, there’s still something of an investment frenzy.”
Montmasson-Clair adds that an area that could do with massive investment, but where investors
China, by far the world leader in solar and wind installations, installed 21 500MW of stationary storage capacity in 2023 –impressive, considering Eskom’s total generation capacity (when fully operational) is 44 602MW, with an additional 1 934MW of power from Koeberg. The China Energy Storage Alliance expects the nation to install an additional 35 000MW in 2024.
Source: PV Magazine
“A LACK OF TRANSMISSION CAPACITY IS ONE OF THE MAJOR STUMBLING BLOCKS IN THE COUNTRY’S ENERGY SYSTEM.” – GAYLOR MONTMASSON-CLAIR
are more circumspect is in establishing the manufacturing capacity in South Africa for renewable energy products such as batteries, panels and inverters. “There is a huge appetite – and there has been significant investment on the battery production side recently – but there’s a bit of a ‘wait-and-see’ attitude until the future of the market over the next few years becomes clearer. There’s huge growth, but people are waiting to see if it’s going to last for long enough to justify the investment.”
There’s no silver bullet solution to South Africa’s energy problems, but Montmasson-Clair believes that by improving two processes in parallel, we can start to improve things. “The first element is getting public procurement on track. We need more Renewable Independent Power Producer Programme (REIPPP) bid windows or a different system that allows us to procure as much renewable energy as possible continuously. That will help with pricing certainty, technology deployment, building market confidence and attracting investment from manufacturers.
“In parallel to that process, we need to work to get the ecosystem for private sector investments to remain conducive, which means investment in transmission. That can be done by either actually building the transmission network or finding ways to free up transmission capacity. Being more creative or investing in the grid is critical,” Montmasson-Clair explains.
Standard Bank has committed more than R60-billion since the first Renewable Independent Power Producer Programme (REIPPP) bid window in 2010. “We continue to show commitment to sector innovation, new business development and funding initiatives across business banking, commercial banking and corporate and investment banking,” says Rentia van Tonder, head of Power, Corporate and Investment Banking at Standard Bank.
“The total industry investment, including funding to date, is estimated at R250-billion over five bidding rounds, reaching financial close under REIPPP and some projects as part of the Risk Mitigation Independent Power Producer Programme.”
Absa CIB recently provided financing and corporate banking services to SOLA Group for its third utility-scale renewable energy captive power project – a 100MW solar PV power plant located in the North West Province, at an estimated project cost of R2.5-billion. The power generated by the power plant will be supplied to African Rainbow Minerals Platinum under a 20-year
power purchase agreement and, once operational, the project will be able to supply electricity through a wheeling arrangement with Eskom to three of its mining sites located in Limpopo.
The bank also acted as a mandated lead arranger and lender for three Red Rocket Energy renewable energy projects valued at approximately R12-billion.
“Within Relationship Banking, we have dedicated lending criteria and products that unlock capital for business owners who want to own solar installations outright as part of their investments into the business,” says Justin Schmidt, head of Manufacturing, Renewable Energy and Transport Logistics at Absa Relationship Banking.
“By reducing reliance on the grid for businesses over time, these assets can also be seen as cash-flow-generative. Our funding of smaller independent power producers, outside of the REIPPP and utility-scale projects, remains a focus area. We are taking a longer-term view on these projects and fund them in a manner that addresses their long-term sustainability.”
Engineers at the CSIR’s Learning Factory with some of the battery electric mobile platforms that have been developed for data collection, collaborative research and industry application.
South Africa’s automotive industry faces a pivotal moment with the global shift towards new energy vehicles, write
CHANEL SCHOEMANand ISABEL MEYER of the Council for Scientific and Industrial Research
New energy vehicle (NEV) sales worldwide grew by 55 per cent to 10.5 million units in 2022, capturing a 21 per cent market share in Europe, South Africa’s major export market, according to the EV Volumes sales database. However, South Africa’s transition is nascent, with NEVs constituting less than one per cent of new car sales in 2022.
The industry, supporting over 116 000 jobs, risks obsolescence in a rapidly evolving global market. Challenges include the high cost of NEVs, range anxiety, insufficient charging infrastructure and local constraints, such as load shedding and inefficient logistics. The Electric Vehicles Whitepaper, recently released by the Department of Trade, Industry and Competition, positions the sector through ten supply-side and six demand-side policy actions, including increased investment, support for the development of a regional battery value chain and infrastructure investment, among others.
The local industry, primarily focused on internal combustion engine (ICE) vehicles, produced just over 3 650 hybrids and plug-in hybrids up to June 2023. Transitioning to NEVs involves overhauling the automotive ecosystem, encompassing new technologies, design and manufacturing processes.
• Manufacturing complexity: ICE vehicles comprise complex fuel injection, exhaust and transmission systems, requiring a broad supply chain and skilled labour. NEVs have fewer moving parts, simplifying manufacturing but demanding precision, especially in battery technology.
• Skills and workforce: the shift to NEVs requires new skills in electrical engineering, battery chemistry and software proficiency.
• Maintenance: ICE vehicles need regular maintenance due to wear and tear on mechanical parts. NEVs, with fewer moving parts, have lower maintenance requirements, though battery lifespan is critical.
• Fuelling infrastructure: ICE vehicles rely on a widespread network of fuelling stations, while NEVs need a new charging infrastructure. South Africa, with about 350 charging stations in 2023, faces a challenge in expanding this network amid an energy crisis.
NEVs generally cost more than ICE vehicles due to:
• Battery costs: batteries require rare materials such as lithium, cobalt and nickel. Although battery prices are decreasing, they remain a substantial part of NEV costs.
• Advanced technologies and R&D: NEVs incorporate sophisticated systems, such as battery management, electric drivetrains and regenerative braking, with R&D costs passed on to consumers.
• Manufacturing infrastructure: adapting or building new facilities for NEV production is a significant investment. The dual nature of South Africa’s market, focusing on ICE locally and NEVs for export, complicates this.
• Economies of scale and competition: NEVs have not yet achieved the production volumes of ICE vehicles, as such lacking economies of scale. The market, with fewer players than the ICE sector, is expected to see increased competition and reduced prices as it grows. However, NEVs can offer lower total ownership costs over time due to fuel savings, lower maintenance and tax incentives. As the NEV market matures, the price gap with ICE vehicles is expected to narrow.
Transitioning to NEVs necessitates significant changes in technology and infrastructure, and the definition and development of skill sets. Multiskilling, digital literacy and competencies in new technologies will be paramount.
Partnerships with world-class institutions are vital for producing locally relevant skills of international standard. Here, the Council for Scientific and Industrial Research’s (CSIR’s) Learning Factory platform and Smart Factory initiative can play a significant role in collaboration with initiatives, such as the Automotive Industry Development Centre (AIDC) Gauteng’s Learning Centre and Incubator, AIDC Eastern Cape’s Smart Academy and EV Incubator, NAACAM’s High Gear, TVET colleges and more.
The AIDC Gauteng and the CSIR collaboration, focusing on aspects such as skills development, NEV roadmap initiatives for localisation and policy guidance, is a step in the right direction.
The CSIR is conceptualising a national micromobility platform to position South Africa as a contender in NEV technology innovation and local manufacturing. The platform aims to facilitate the manufacturing of e-scooters, e-trikes, and similar – tailored to Africa’s unique needs. By upskilling workers in cutting-edge technologies and fostering local entrepreneurship, South Africa can create a vibrant ecosystem for micromobility solutions that can spill over to its broader NEV industry. Collaborations with African nations can expand market reach, while localising component manufacturing can reduce costs and increase overall competitiveness.
NEV adoption in South Africa is also about reimagining the entire automotive ecosystem. With strategic planning, investment in infrastructure and a focus on skills development, South Africa has the potential to keep pace with global trends and emerge as a leader in the NEV space in Africa. Collaboration is needed to drive this transformation, ensuring South Africa’s automotive industry remains competitive and sustainable in the new energy era.
