South Africa’s Renewable Energy Programme was launched in 2011 and has helped turn South Africa into one of the leading renewable energy investment destinations. According to CNBC Africa, an estimatedR193 billion has already been committed to renewable energy investment in the country. In 2013, Investec alone announced it was investing R8 billion in South Africa’s renewable energy independent power producer procurement programme (“REIPPPP”) for concentrated solar power, photovoltaic projects and wind projects.
This is hugely significant in a country where the state electricity public utility (Eskom) cannot meet the electricity demands and is in dire financial crisis. Energy tariffs now offered by recent REIPPPP projects are much lower than those that will come from Eskom’s future coal plants.
In the early stages, however, the REIPPP had many challenges to overcome. One such challenge was the price discovery process:
“The price discovery process was a key challenge for the fledgling industry (in 2011), given there was no history of large-scale renewable energy projects built or financed in the country and hence no ‘market-established’ tariffs off which to benchmark. REIPPPP had to set tariff caps in order to ensure reasonable prices were bid and limit capacity allocations in order to generate sufficient interest while still promoting competition.” - WWF
Unfortunately, when it comes to competition, consolidation is now taking place, and the consolidation of international companies is seeing seen smaller South African players being priced out of the game. Unless the programe is amended to account for this, South African companies will now have to consider local consolidation or cross-border consolidation in order to compete at the same level as the international firms.
Still, the REIPPPP has received much praise for its:
- Strong regulatory framework;
- Specific focus on economic and socio-economic development and community ownership - every bidding company must be 40% South African owned (minimum), 12% (minimim) of the company’s shareholders must be black and 2.5% (minimum) of the company must be owned by communities living within a 50km radius of the project site; and
- Vigorous qualification benchmarks that have to be met by bidders.
As of June 2015, the South African renewable energy production stats as published by Reuters:
- More than 6327 MW (under );
- Of the 6327 MW:
- 53% was for wind;
- 36% for solar photovoltaic; and
- 10% for concentrated solar power.
- Estimated that a will be procured; and
- 37 projects (1827 MW) have been connected to the local energy grid.
Wind energy is around half of all renewable energy currently produced in South Africa. According to the South African Wind Energy Association (“SAWEA”), wind power has contributed approximately 740MW of electricity into the grid and the average capacity factor for the entire fleet is over 70% (keep in mind that wind does not blow consistently).
“In terms of energy delivered, South Africa produces about 2,5% of what Denmark produces as a proportion of their ultimate electricity usage. So there’s a lot of space for us to still improve…We are generally building 130, 140MW (farms) — 60 large turbines — and that normally takes about 18 months, which is still the blink of an eye compared to fossil fuel or nuclear power plants, that take 10 to 15 years.” - SAWEA CEO.
The REIPPPP has achieved great successes, including bringing power to local communities that have never had access to such basic services. One such example is 300 homes in the !Kheis Municipality in Northern Cape were connected to power through 75 watt photovoltaic solar systems so that children could do their homework at night.
Successes aside, there is still much room for expansion when it comes to the renewable energy sector in South Africa, and as the Eskom crisis worsens every day, this expansion cannot come soon enough.