South Africa’s renewable energy market continues to evolve while growing significantly, demonstrating the industry is maturing.
This is according to renewable energy industry body, the South African Wind Energy Association (SAWEA).
With South Africa experiencing a worsening energy shortage crisis, government has been pushing for the adoption of renewable energy sources.
This, as Eskom, which supplies the majority of SA’s electricity, has been struggling to maintain a steady supply of electricity.
The embattled power utility generates the bulk of its power from ageing coal-fired power plants.
“What we are witnessing is the liberalisation of the energy market, moving towards a mature and sustainable wind sector, as these shifts are underpinned by government’s push for an accelerated transition to clean energy technologies,” says SAWEA in a statement.
According to the industry body, the renewable energy industry has witnessed significant changes this last year. This is resulting in the market’s transition from being one with a single off-taker (Eskom) to an open model, brought about by the removal of the licensing requirement for generation plants over 100MW as a liberalisation mechanism promulgated into law by the Department of Mineral Resources and Energy (DMRE).
With more renewable energy projects being introduced through this intervention, SAWEA believes this will significantly contribute to the reduction of carbon emissions in line with the country’s Nationally Determined Commitments.
“There is a clear indication of a changing energy landscape through policy interventions that promote a green pathway to energy security, which have come about as a result of our country’s need for energy security and commitment to decarbonise,” says Niveshen Govender, CEO of SAWEA.
“The private off-taker market model is very different to the public programme, and together, these two structures will allow for the procurement of new capacity to meet the need of the country as a whole, and to facilitate the implementation of the targeted energy mix.”
Govender explains this shift offers flexibility and allows for private entities to accelerate the reduction of their carbon footprint, further attracting new investors to renewable energy.
The structure of power purchase agreements (PPAs) for the private off-taker market will be viewed differently to the conventional Renewable Energy Independent Power Producer Procurement Programme PPA structure, the industry body notes.
“Tariffs in the private PPA market will be determined by bilateral negotiations between willing buyers and willing sellers, creating an open market mechanism that will lead to IPPs approaching commercialisation differently,” adds Govender.
“While there is an argument for the standardisation of PPAs, the allocation of risk remains a concern and will be approached differently, depending on the project conditions.
“Contributing factors to future tariffs could include inflation, the cost of logistics and shipping, global changes to raw material and production costs, among others. This may lead to an unintended imbalanced market shift between established and new IPPs competing on scale and price,” Govender explains.
To date, SAWEA says, the country has procured 3 442MW of wind energy plants through an established public procurement programme, with a further 984MW of wind energy projects having National Energy Regulator of South Africa registrations for private procurement.
It adds there’s a potential pipeline of at least 4 000MW as bid in Bid Window 6 for public procurement and 15 000MW as indicated by the DMRE for private procurement.
“When considering South Africa’s long-term energy planning, both private and public markets are required to significantly increase the penetration of renewable energy towards a sustainable energy transition,” it concludes.
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