Southern African countries possess vast renewable energy potential. Countries in the region seek to extend electricity access, improved from 24% (5% in rural areas) in 2010 to 48% (32 % in rural areas) in 2017, improve their energy security and, ensure environmental sustainability. Most SADC countries have set renewable energy targets in the NDCs to and meet climate goals. Meanwhile, financing renewable energy projects remains a significant challenge. The SADC’s Regional Energy Access Strategy and Action Plan aim to utilise energy resources strategically to ensure affordable, sustainable, secure energy supply. Key forum activities include matchmaking between projects, project developers, and potential financiers and investors.
Renewable energy in South Africa is energy generated in South Africa from renewable resources, those that naturally replenish themselves-such as sunlight, wind, tides, waves, biomass, and geothermal heat. Renewable energy focuses on four core areas: electricity generation, air and water heating/cooling, transportation, and rural energy services. The energy sector in South Africa is an important component of global energy regimes due to the country's innovation and advances in renewable energy. South Africa is a member of the International Renewable Energy Agency (IRENA), an international organization that promotes renewable energy policies.
As the largest economy in Africa, South Africa is often looked to as a regional leader and trendsetter. In a continent characterized by extreme energy scarcity, the country had by 2012 achieved an 84% electrification rate. But these efforts, coupled with a significant industrial base, have also made South Africa the highest emitter of greenhouse gases in the region and frequently led to electricity demand outstripping supply. South Africa's greenhouse gas (GHG) emissions is ranked as moderate and its per capita emission rate is higher than the global average.
In the last years, South Africa has more actively utilized its natural renewable energy resources to change its course on dominant fossil fuels like coal in the future. South Africa’s geography favors wind, hydropower, and solar energy, making them the country’s leading renewable sources. These resources now account for a growing share of electricity generation, driven by supportive regulations and shifts in the energy market. While the market for renewable energy production in South Africa is growing, countries like Egypt, Zambia or Mozambique are leading in power generation. Despite this, South Africa leads in capacity compared to other African countries and has expanded its capacity tenfold from 2013 to 2023.
With its “Just Energy Transition Investment Plan” (JET IP) for 2023-2027, South Africa has outlined a comprehensive strategy to transition the country toward a low-carbon and climate-resilient economy. Nonetheless, South Africa must address its ambitions for more renewable energy feedstocks in the overall energy mix by enhancing policy and regulatory frameworks, upgrading the grid infrastructure, increasing capacity, and exploring other potential.
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To incentivize the further rollout of renewable energy generation by the private sector, the South African Revenue Service has of 1 January 2016 amended the Income Tax Act No. 58 of 1962 to include accelerated depreciation for renewable energy assets commissioned by a tax paying entity. Government plans make a special provision for photovoltaic systems that are smaller or equal to 1 MWp (Megawatt peak) in section 12 B of the Tax Act. Depreciating the photovoltaic solar system 100% in the first year grants the taxpayer a tax shield due to saved income tax. This provides, in effect, a 28% discount on the photovoltaic solar system. The tax shield applies even if the photovoltaic solar system is installed mid-year. By partially financing the photovoltaic solar system through debt, systems can achieve a repayment time of 1 year.
Key Renewable Energy Sources in South Africa
Primary sources of renewable energy in South Africa are solar, wind, hydroelectric, and biomass.
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Solar Energy
Solar energy is light and heat that is radiated from the Sun. It is then transformed into electricity through photovoltaics (PV) or concentrated solar power (CSP). Solar energy in South Africa is primarily based in PV and CSP. South Africa’s capacity leads solar energy in Africa, surpassing six gigawatts in 2023 , well ahead of Egypt and Morocco. Solar energy drives the country’s renewable expansion, with installed capacity and annual production rising sharply since 2013. Photovoltaic projects, both commercial and utility-scale, have become key to increasing renewables in the energy mix. Alongside large solar parks, off-grid initiatives such as home systems and solar lighting improve rural access and reduce energy poverty. The levelized cost of solar electricity is relative to the quality and quantity of solar radiation in South Africa. Solar energy is a low-cost source of energy compared to traditional non-renewable energy resources in South Africa.
Most areas in South Africa average more than 2 500 hours of sunshine per year, and average solar-radiation levels range between 4.5 and 6.5kWh/m2 per day. The Southern African region, and in fact the whole of Africa, has sunshine all year round. The annual 24-hour global solar radiation average is about 220 W/m2 for South Africa, compared with about 150 W/m2 for parts of the USA, and about 100 W/m2 for Europe and the United Kingdom. This makes South Africa’s local solar resource one of the highest in the world. The use of solar energy is the most readily accessible resource in South Africa. It lends itself to a number of potential uses and the country’s solar-equipment industry is currently developing. Annual photovoltaic (PV) panel-assembly capacity totals 5MW, and a number of companies in South Africa manufacture solar water-heaters. Solar water-heating is used to a certain extent.
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According to a report by Fitch Solutions, South Africa’s growing domestic solar industry is attracting project developers, along with an increasing number of manufacturers looking to set up production facilities in the country. In August 2014, Chinese solar manufacturer Jinko Solar opened a solar module production factory in Cape Town with an annual manufacturing capacity of 120MW.
Wind Power
Wind power uses wind turbines to produce electric power. Wind levels vary depending on factors such as terrain, bodies of water and vegetative cover. Wind turbines convert the wind into kinetic energy and mechanical power. The wind turns 50-metre-long blades attached to 80 metre-high shafts that generate the electric energy. Wind turbine farms can range between 10MW to over 100 MW and produce energy when the wind is between 13-90 km/h. Wind turbines farms can be onshore or offshore.
South Africa's wind energy market has expanded rapidly since 2014, with total installed capacity rising each year and leading among African countries with 3,442 megawatts. Wind power now contributes a growing share of total electricity generation, supported by an abundance of suitable sites and continued regulatory support for renewables. Jeffrey's Bay Wind Farm is located on the Eastern cape and has a production output of 100MW. It is the second largest wind farm in South Africa. In 2014 the first major wind farm became operational with approximately 10 either operational or in construction today. South Africa's extensive coastline and geographical terrain including lowlands and high veld escarpment, provide wind energy that can be extracted and generated into off-the-shelf technology. There are currently 19 wind energy developments in South Africa with more than 600 wind turbines. On the international scale, South Africa ranks as having fair to reasonable wind resources. Wind power is a renewable, widely distributed and clean form of energy. South Africa's installed wind capacity reaches 3,442 MW in 2022, with 668 MW installed in 2021 and no new installations in 2022.
Hydropower
Hydropower, or hydroelectric power, is energy that is captured from flowing water and turned into electricity. The most common forms of hydropower use hydroelectric dams to create a reservoir. Hydropower, while established and essential for grid management, has been outpaced by growth in solar generation and take a comparatively smaller share of South Africa’s renewables. Although South Africa’s hydropower production is robust, its annual output is less than half the volume generated by solar photovoltaic plants, which have recently seen accelerated growth. Among selected African countries, Ethiopia and Angola dominate in hydropower capacity.
In South Africa, there is a mix of small hydroelectricity stations and pumped water storage schemes. In a pumped water storage scheme, water is pumped up to a dam. Pumping the water uses some electricity but this is done in off-peak periods. During peak hours, when extra electricity is needed, the water is released through a turbine that drives an electric generator. Peak hours are usually between six and eight in the morning and evening. South Africa’s rivers carry potential for run-off river hydro projects. The Eastern Cape and KwaZulu-Natal are endowed with the best potential for the development of small, i.e. less than 10MW, hydropower plants.
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Biomass
Biomass is physical biological material that comes from living or recently living organisms. It comes from plants or materials derived from plants (lignocellulosic biomass). Biomass has the capacity to produce electricity, heat, or liquid fuels. Biomass can be used as a direct energy source as heating or cooking fuel, or can be burned to generate electricity. It can also be used indirectly by using its biological processes and producing ethanol, methanol, and fuel that can be used in transportation and cooking processes. Wood is currently the largest producer of biomass fuel-including tree stumps, forest residue, dead trees, and wood chips.
The concept of Biomass to Energy is still at its infancy in South Africa but holds promise for future sustainable development. There is currently no specific comprehensive legislative framework that governs the waste to energy sector- only individual pieces of legislation dealing with aspects of the waste to energy sector in a piecemeal type of manner. Two modern attempts to develop South Africa’s biomass energy potential failed: the Howick wood pellet plant, and the Tsitsikama biomass plant.
Key Players in the Renewable Energy Sector
The South African energy sector is dominated by the company Eskom. Eskom currently produces 95% of South Africa's electricity. Due to their large presence in the non-renewable energy sector, there are independent power producers (IPP) who are capable of providing renewable energy sources. To reach the 10,000 GWh renewable energy target, the government has joined agencies and implemented policies that promote independent renewable energy producers.
- BioTherm Energy is the leading IPP because of their three wind and solar projects that are involved in REI4P.
- Mulilo is a South African company who provides clean energy such as wind and solar to the national grid. Mulilo is a member of the South African REI4P and has won 420MW worth of projects. They currently have 30MW of solar PV operational and have another 185MW scheduled. By the end of 2017, Mulilo was to contribute 240 megawatts of wind power.
- juwi South Africa is a renewable energy company who is also one of the world's leading renewable energy companies. juwi South Africa's main focus is on the production of solar energy on a utility and commercial scale, as well as onshore wind energy. juwi South Africa has built five utility-scale solar plants under the REI4P and they are also a member of the IPPs.
- WiSolar is an on-demand prepaid solar utility company in South Africa, which provides affordable solar energy options to South Africans while addressing climate change.
Investment and Market Trends
South Africa is one of the most popular countries for investment in renewable energy. In 2014, the country received US$5.5 billion towards renewable energy projects. Renewable energy in South Africa has the potential to increase access to electricity in rural areas because of its suitability for off-grid and small-scale solutions.
There is more interest in renewable energy in South Africa as the government is looking to decommission most of coal fired power plants. The biggest energy consumers or users, like the mining and manufacturing companies, are also showing interest in energy independence by procuring Solar Power mini-grids. These companies are pursuing opportunities to assemble these mini grids where their plants or operations are based. This has also extended to other users interested on procuring rooftop solar power for industrial use. Therefore, it is safe to say that although there is a potential for other forms of renewable technology, solar power (PV) is the most attractive.
Renewable Energy Independent Power Producer Procurement Programme (REIPPPP)
The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) was established by the Department of Energy (DoE) in conjunction with the National Treasury and the Development Bank of Southern Africa (DBSA) at the end of 2010. The REIPPPP is one of South African government’s urgent interventions to enhance the country’s power generation capacity. Its main objective is to secure private sector investment to develop new electricity generation capacity. This is in accordance with the policy decision to diversify South Africa’s energy mix - first articulated in the 1998 White Paper on Energy Policy of South Africa.
The REIPPPP has also been designed to contribute to broader national developmental objectives such as job creation, social upliftment and economic transformation primarily through broadening of economic ownership. The IPP Office was established with a mandate to implement this program and achieve its broader objectives. A number of bid windows have been implemented to procure renewable energy resources. On September 11, the Political Task Team on Eskom, chaired by Deputy President David Mabuza, stated that the DMRE would open-up various bid-windows, including Bid-Window 5, and that the “process will be completed in December 2020”. It also caters for 513 MW of energy storage, contributing to a total procurement of 11 813 MW when other technologies besides renewable energy are taken in to account.
Challenges and Opportunities
South Africa faces several challenges in its transition to renewable energy, including:
- High Initial Costs: Renewable energy technologies often have high upfront capital costs.
- Infrastructure Limitations: The existing electrical infrastructure was primarily built for conventional power plants.
- Policy and Regulatory Frameworks: Policies and regulations may favor monopoly providers.
- Land and Water Scarcity: Scarcity of land and water resources can impact the adoption of certain renewable energy technologies.
However, there are also significant opportunities:
- Energy Access: Renewable energy can provide energy access to facilities and households disconnected from the main national electrical grid.
- Economic Diversification: The abundance of renewable energy resources can foster new industries.
- Technological Advancements: Advancements in IoT, AI, and Web 3.0 can ensure affordable access to sustainable energy.
Trade and Investment Opportunities
U.S companies have an opportunity to participate in Eskom’s first Battery Energy Storage System (BESS) request for bids (RFB), which has been long-awaited for and finally released. Under BESS, the World Bank, African Development Bank, and New Development Bank is supporting a procurement for 80 MW/320 MWh. This specific procurement is referred to as the Skaapvlei project, Eskom’s first large-scale BESS project. It is worth noting that even though the Skaapvlei project’s procurement is for 80MW/320MWh, the Eskom Battery Energy Storage Systems (BESS) program is planned to be implemented in two phases, achieving a total of 360 MW/1440 MWh of energy shifting per day.
The South African market is sophisticated. Entry should be well-planned, taking into consideration the following factors:
- The price-sensitive nature of most consumer demand;
- A potentially volatile Rand-Dollar exchange rate;
- Distribution issues, given that large retail centers are concentrated in five metropolitan regions;
- A conservative market bias that tends to stick to known suppliers;
- South Africa’s position as a stepping stone for developing market opportunities in Sub-Saharan Africa.
South Africa's Just Transition Strategy
In the face of climate change, South Africa's Just Transition strategy aims to ensure a high standard of living for all citizens. The National Just Transition Framework aims to decarbonise the energy sector and bring about a just transition in the minerals and energy value chains. It seeks to provide a good quality of life for all South Africans while promoting resilience to climate change, enhancing the ability to adapt to the adverse impacts of climate change and achieving net zero greenhouse gas emissions by 2050. In its first five years, the JET-IP has prioritised three sectors: green hydrogen (GH2), new electric vehicles (NEVs) and electricity.
| Sector | Investment Needs ($Billion) |
|---|---|
| Green Hydrogen (GH2) | Specific amount not provided in text |
| New Electric Vehicles (NEVs) | Specific amount not provided in text |
| Electricity | Specific amount not provided in text |
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