This market intelligence report informs investors of changes and developments within South Africa’s utility scale renewable energy sector. It highlights the composition of the market, discusses key players, market size and noteworthy trends, and then covers the main guiding policies and legislation in the renewable energy space, before exploring opportunities, incentives and barriers within the sector.
Globally, renewable energy (RE) has gained momentum, with a significant rise in the uptake of various RE technologies such as: solar photovoltaics (PV), wind energy, biogas and other biofuels, hydroelectricity, landfill gas, geothermal energy and concentrated solar power (CSP). Government policy support and procurement programmes, sustainability concerns, reducing RE technology costs, increasing need for energy security and increasing conventional electricity prices are key drivers of this shift, especially in the South African context.
In South Africa, Ministerial determinations to procure renewable energy, as per the Integrated Resource Plan (IRP) 2010 – 2030 have provided a major boost to the growth of the renewable energy sector. The IRP document paved the way for the RE independent power producer procurement programme (REIPPPP) that we see today. It is, however, due for an update with the potential for increased allocations to some renewable sources given their performance (price-wise) over the past five years. The REIPPPP is one of the primary pathways to entry into the utility scale RE sector.
Since it was established in 2011, the REIPPPP has procured over 6 300 MW in five bidding rounds (including round 3.5). At the time of writing, 92 projects covering the following generation technologies are under various stages of development: solar PV, onshore wind, biomass, small hydro, CSP and landfill gas. Over 37 of these projects (as of June 2015) had reached commercial operation date and already contribute some 1 900 MW of generation capacity to South Africa’s generation mix.
Increasing requirements to procure locally have created more opportunity for investments into local manufacturing and assembly facilities, supported by government programmes such as the Department of Trade and Industry’s (dti) black industrialists programme (dti 2015a). Localisation studies (for both solar PV and wind energy) have already been concluded. These indicate that there is sufficient space and demand for the establishment of facilities for the manufacturing of key components such as wind towers and wind blades. Similarly, government’s requirement for successful projects to implement socio-economic development and enterprise development presents further opportunities to see meaningful impacts in communities local to selected projects. The industry is increasingly embracing this component of bid requirements – as a competitive advantage in bidding, but more importantly as a responsibility of industry and as an opportunity to garner continued support for the RE sector from a variety of stakeholders.
South Africa’s utility scale RE sector is the most mature in the region, and therefore offers a useful platform for investors seeking to venture into the rest-of-Africa market, which is growing rapidly. Various regional, continental and international programmes are in place to support the development of requisite infrastructure, technical and financial capacity, and policy environments conducive to increased uptake of RE.