According to a report released by the University of Johannesburg, the centralized decision-making structure with a top-down approach in South Africa restricts national utility, Eskom, from accelerating renewables rollout and deters the increased participation of the private sector in mobilizing funds and technologies required for the country to become a green energy hub. Despite the provision of a number of roadmaps for clean energy adoption in South Africa – notably, through the introduction of the Hydrogen Society Roadmap; the Integrated Resources Plan (IRP) of 2019; and the REIPPP -, more needs to be done, both from an execution and incentivizing standpoint. By opening up the market and encouraging private sector participation, South Africa can accelerate renewable deployment.
Despite South Africa’s significant renewable energy potential, inadequate investment in renewables has prevented the maximization of the sector. While the REIPPP has made a strong case for private investment, delays regarding the introduction of bid windows as well as a lack of financial, technical and procurement planning serves as a deterrent. To unlock further private sector participation and foreign investment, the rapid rollout of bid windows within the REIPPP as well as the introduction of favorable fiscal terms will not only encourage foreign investment but make the sector increasingly competitive.
There has been success in this area with the Ministry of Mineral Resources and Energy announcing the lifting of the licensing threshold for embedded power generation from 1MW to 100MW in 2021, allowing private companies and stakeholders to deploy renewable projects across a variety of industries. Since then, Shoprite Group announced 22 new solar plants; vehicle manufacturer Ford installed 30,226 solar panels at its Silverton Assembly Plant carport; and the mining industry announced plans to introduce up to 3,900 MW of solar, wind and battery energy projects, with companies already implementing plans to develop 585 MW of solar projects. Efficiency regarding bid window rollout will only add to this success, deploying renewables at a rapid speed in South Africa.
National Grid Challenges
While generation projects are taking off, infrastructure challenges associated with Eskom’s grid network provide a barrier to energy security and supply. Eskom’s grid was built based on a centralized model, and with renewable energy requiring a decentralized grid management approach, significant investments are required to modernize the electricity system in South Africa. Through a series of grid modernization initiatives including a smart meter project being deployed by City Power in Johannesburg, progress is being made, however, a lot more needs to be done to restructure the system.
Despite renewables presenting South Africa with an opportunity to decarbonize power generation, intermittency and inadequate baseload challenges associated with these resources continue to hinder their penetration in the market, with the country already struggling to meet its energy demand during peak periods. While coal, nuclear and gas offer more secure supply, renewables require integration with battery storage – a relatively costly technology. Therefore, significant investment needs to be directed towards energy storage solutions, improving energy security and reliability.
South Africa’s power sector workforce is largely skilled in mature industries such as coal and nuclear. As the share of renewables increases and the transition from coal is accelerated, the risk of job loss within the sector is high. Unless focus is placed on up-skilling the workforce, prioritizing capacity building and skills transfer regarding renewable energies, not only will unemployment rise for coal workers but there will be an inadequate workforce for the clean energy sector. As renewable projects take off, training programs, workshops and skills and technology transfer initiatives need to follow suit.