The South African renewable energy market demonstrated resilience and steady growth in 2023, despite uncertain policy conditions and technical hurdles.
This is according to the National Energy 2024 Market Intelligence Report published recently by non-profit organisation GreenCape, in partnership with the UK’s Partnering for Accelerated Climate Transitions (PACT) programme.
Antony Phillipson, British High Commissioner in South Africa, says: “I am delighted that the British High Commission, through our UK PACT programme, has supported the latest Market Intelligence Reports focused on large-scale renewable energy, energy services and electric vehicles in the context of South Africa’s rapidly-changing energy landscape. The reports present information on the most promising investment opportunities in these sectors which have the potential to create new jobs and skills as part of a just energy transition.”
The market intelligence report provides an overview of the national markets in large-scale renewable energy, energy services and electric vehicles.
This includes new online sections highlighting key developments and achievements, the key players, legislation and regulation, and the market opportunities and challenges, as well as funding opportunities.
According to the report, the lifting of licensing requirements for large-scale generation projects and efforts to address the electricity crisis have all played a role in this growth.
The report comes as SA continues to battle energy shortages that have seen embattled power utility Eskom implementing load-shedding.
Amid the power crisis, SA has gradually been adding renewable energy sources, such as solar and wind, to the national grid in a bid to plug the electricity shortfall.
Paris Agreement commitments
GreenCape points out that the opportunities, drivers and barriers in the renewable energy market are best understood within a national and global context.
It says factors outside of the large-scale renewable energy sector have the potential to drive or block the industry to an extent that opportunities can be positively or negatively impacted or new opportunities may arise.
South Africa is a signatory of the Paris Agreement, it adds. The Paris Agreement was adopted at the 21st annual Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change and set a global goal of staying well below a temperature rise of 2°C, and preferably below 1.5°C, compared to pre-industrial levels.
Announced at COP 26 in Glasgow in November 2021, South Africa, France, Germany, the UK, US and the EU entered into a long-term partnership, the Just Energy Transition Partnership (JETP).
The JETP aims to support South Africa’s decarbonisation efforts, focusing on the electricity system and goals set out in South Africa’s updated Nationally Determined Contribution to enable a just transition to a low carbon and climate-resilient economy.
According to the report, the first phase of financing will mobilise $8.5 billion (R156 billion) through various mechanisms, including grants, concessional loans and investments, and risk-sharing instruments, including mobilising the private sector.
Subsequent to this, it adds, South Africa presented its JET-IP at COP 28 in December 2023. The JET-IP covers electricity, new energy vehicles and green hydrogen, and identified $98 billion (R1.8 trillion) in financial requirements over the next five years.
GreenCape notes Denmark and the Netherlands have recently become integral members of the International Partners Group (IPG) within the broader framework of the JETP. Prior to this, commitments were made at COP 27, elevating the total funding available for South Africa’s JET-IP from the IPG to $9.3 billion (R171 billion).
Electricity Regulation Act boon
The large-scale renewable energy and energy storage market remains a promising avenue for sustainable growth and energy security, says the report.
“This growth will likely be driven by investment in the private procurement market. By navigating the opportunities, drivers and barriers provided in the report, investors are expected to be able to unlock significant investment opportunities.”
The report reveals the private renewable energy offtaker market is a core market for investment into South Africa’s renewable energy sector, either through direct electricity sales or build-to-own projects.
It adds that the private procurement market is experiencing rapid growth, driven by amendments to schedule two of the Electricity Regulation Act (ERA).
Amendments to the ERA changed the generation capacity limit for projects that do not require an electricity generation licence, which was previously set at 1MW, revised to 100MW in 2021, and proposed to be removed entirely in the latest draft.
“The affordability of renewable energy makes it an appealing alternative to relying solely on supply from public utilities like Eskom and municipalities, especially for large energy users. The tariff for Eskom’s large power users increases above inflation each year, with an 18.65% increase for the 2023/24 financial year,” it states.
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