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THOUGHT LEADERSHIP | SOLARPOWER EUROPE
Grid improvements, support for PPAs and ‘
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THOUGHT LEADERSHIP
SCALING UP SOLAR IN SOUTH AFRICA
The case for renewable energy development in South Africa is undeniable – specifically, the climate offers obvious solar power potential. Looking at the entire continent, according to the International Energy Agency (IEA), Africa has 60% of the world’s strongest solar resources, but only 1% of solar generation capacity, highlighting a clear untapped opportunity for the region. On the other side of the coin, it is clear that South Africa’s transition from fossil fuels must be accelerated. Currently, 80% of the country’s electricity is coal-generated, and correspondingly, South Africa is the world’s 13th largest GHG emitter.
South Africa has announced the decommissioning of its ageing coal power plants in three progressive stages: 5.4 GW by 2022, 10.5GW by 2030 and 35GW by 2050, further demonstrating its growing political ambition for the energy transition. To replace coal energy generation, and as part of efforts to reach a net-zero economy by 2050, South African can feasibly tap into its strong renewable potential.
Key steps forward
Alongside increasing generation capacity, facilitating private sector involvement in grid strengthening and extension projects is a crucial step in South Africa’s energy evolution – with twin benefits. For citizens and businesses, the move would help tackle loadshedding. Without increased investment in expanding generation capacity, and the corresponding requirements of national grids, power supply will continue to be unreliable. Unreliable power supply is having a detrimental impact on businesses and the wider South African economy, with citizens having to plan their lives around loadshedding. A stronger grid, designed to host increasing amounts of distributed and flexible power generation capacity, will be crucial to support the roll out of South African renewables.
Máté Heisz, Director of Global Affairs at SolarPower Europe
With a stronger grid, the energy landscape can build on this year’s important developments for South Africa’s commercial and industrial (C&I) solar sector. Recent legislative changes exempt small-scale projects under 100 MW like rooftop solar on warehouses or factories, or embedded generation projects in mining activity, from applying for generation licenses. Draft legislation currently tabled in parliament will remove the 100 MW licensing threshold and pave the way for greater private sector involvement in a future competitive power market. Consequently, there are now many opportunities for corporate power purchasing agreements (PPAs) with large firms headquartered in South Africa.
Until May 2021, the main route to the energy market for Independent Power Producers was through South Africa’s single buyer Eskom and Renewable Energy IPP Procurement Programme (REI4P). We can see this is now changing through the emergence of PPAs, which help to reduce bottlenecks and the administrative burden on Eskom, as well as boosting economic development by lowering prices. Companies have already started to take advantage of the opportunities that new legislative changes have created. In what could prove to be a major breakthrough in the South African PPA market, two 100 MW solar power plants achieved financial close in September 2022. They will serve five sites owned by the US-based titanium products supplier, Tronox. Encouragingly, the solar projects are 100% South African owned, financed, constructed, operated, and managed.
More recently, in early October, French company, Voltalia, signed a PPA with Richards Bay Minerals, a subsidiary of the Rio Tinto mining company, that will include the development of a 148 MW solar power plant. Voltalia are working to ensure that the project has a positive environmental and social impact, planning to employ 700 people locally for construction and creating 50 full-time roles once the plant is completed. In a boost to the wider South African renewables value chain, Voltalia have also said that they plan to source goods and services locally. These three initial successes, reflecting commitment to local ownership, financing, and value chain development, and the current draft legislation, shows that the future is bright for the South African PPA market. This will help support South Africa’s decarbonisation and accelerate energy generation capacity growth.
The government can also lean on its existing initiatives, such as prioritising supporting REI4P auction winners to close financing faster, and help Broad-based Black Economic Empowerment by increasing participation of Black South Africans in the energy sector. One of the core objectives of the REI4P programme is developing an inclusive and fair domestic industry. This, in turn, is already boosting REI4P bids with South African owned EPCs and O&Ms.
In terms of rolling out renewables on the ground, South Africa could introduce national training schemes to scale-up the necessary skilled workforce, which presents a key opportunity to increase the representation of Black South African workers. The EU-South Africa Just Energy Transition Partnership provides an ideal platform for co-operation, reducing barriers to investment, and for upskilling new workforces. South Africa’s industry association, the South African Photovoltaic Industry Association (SAPVIA), alongside key stakeholders in government and the private sector could play a critical role in the development of a strong, inclusive domestic industry. which can play a constructive role in a more inclusive approach to renewable energy development, as well as broader economic growth. Eskom’s evolution will be critical in realising South Africa’s solar potential. Currently, with the significant financial challenges that Eskom faces, government guarantees for renewable projects are one of the main ways to ensure their bankability – though this has been changing, with the market tapping into new mechanisms. Taking it further, completing Eskom’s unbundling would help support its status as a reliable off-taker, even in a scenario without a government guarantee for REI4P projects. Eskom should start trading on the Southern African Power Pool more actively as a way of avoiding the curtailment of renewable plants, and improving their balance sheet.
Support and Partnership
South African actors, industry bodies such as SAPVIA through its membership base, are best placed to advance South Africa’s solar and renewable transition. As partners in the global energy transition, SolarPower Europe stands ready exchange information and experience, and support the South African solar journey. In 2021 we were pleased to collaborate with SAPVIA to deliver tailored O&M Best Practice Guidelines for South Africa. In March 2022, we also launched our EPC Best Practice Guidelines: subSaharan Africa Edition with the support of GET.Invest. Both reports are free to download, and we hope act as useful tools to support the practical rollout of high-quality solar in South Africa.
To complement our written publications, our GET.invest-supported podcast series ‘Solar Success in Africa’, showcases a range of inspiring and innovative solar projects from across Africa, highlighting the benefits of solar’s accelerated deployment in the region. In September we were also pleased to co-organise a landmark moment in the continent’s renewable transition – the first annual Africa Renewables Investment Summit, held in Cape Town.
What next ?
Grid improvements, support for PPAs and auction winners, ensuring the green workforce, and evolution of Eskom will all be crucial to support South Africa’s renewable transition. Crucially, a Stellenbosch University study estimates that South Africa will need $250 billion over the next 30 years to transition to green energy sources and close down its coal-fired power plants. The potential and path forward is clear – now we must move together to catalyse game-changing investment and deliver the South African renewable transition.
written in consultation with the South African Photovoltaic Industry Association (SAPVIA)
