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Over the following ten years, South Africa’s total power capacity is expected to expand by just under 4GW according to Fitch Connect forecast. The vast majority of this capacity will come from non-hydro renewable sources, which will increase from a 9.3% share of total power generation in 2023 to 17.0% by 2032 according to the predictions. This growth will be fueled by the Renewable Independent Power Producer Programme and the lifting of the license cap, which will enable more private sector participation in the power sector.
The production of thermal energy in South Africa is expected to decline from 200.1 TWh in 2023 to 188.0 TWh in 2032. The Just Energy Transition Partnership’s plans to decommission and repurpose outdated coal-fired power plants in an effort to lower the market’s high level of emissions and the persistent underperformance of the country’s existing thermal capacity are mostly to be the reason for this. By 2032, the government is apparently planning to shut down seven coal-fired power facilities, but until more specifics are known about when and how this will occur, there is not much that can be said about this.
Policy: The South African Government''s National Development Plan (NDP) is the blueprint for infrastructure development to 2030. The NDP lays out a framework for future power generation in South Africa, while energy policies in South Africa are driven primarily by the Department of Mineral Resources and Energy''s (DMRE) Integrated Resource Plan (IRP). The IRP is DMRE''s estimate of electricity demand growth and what energy generation types should be procured to meet that demand, along with the generation capacity, timing, and cost. The IRP is an electricity infrastructure development plan based on least-cost electricity supply and demand balance, considering security of supply and the environment (minimize negative emissions and water usage).
The IRP envisages a total addition to electricity capacity of 29,500 MW by 2030, led by renewables (notably 14,400 MW from wind and 6,000 MW from solar photovoltaic).
Policy Direction: The South African Government''s National Development Plan (NDP) is the blueprint for infrastructure development to 2030. The NDP lays out a framework for future power generation in South Africa, while energy policies in South Africa are driven primarily by the Department of Mineral Resources and Energy''s (DMRE) Integrated Resource Plan (IRP). The IRP is DMRE''s estimate of electricity demand growth and what energy generation types should be procured to meet that demand, along with the generation capacity, timing, and cost. The IRP is an electricity infrastructure development plan based on least-cost electricity supply and demand balance, considering security of supply and the environment (minimize negative emissions and water usage).
Policy Direction: As a result, the government announced a procurement package in September 2020, which represents a major acceleration of the goals set out in South Africa’s latest Integrated Resource Plan. This was government''s way of trying to respond to the problem of persistent electricity shortages in the country by announcing a new phase of power-generation procurement totaling a projected 11,813 MW.
The bulk of the new capacity will be distributed as follows:
All projects will be undertaken by independent power producers (IPPs), with output being sold to Eskom. Ambitiously, the authorities aimed for the new capacity to be in place by 2022 but there seem to have been delays on putting some of the projects into financial close. This is mostly due to some companies that won bids based on prices that changed significantly as consequence of Covid-19 which affected the supply chain on manufacturing.
Government Initiative: Renewable energy is increasingly regarded as an attractive source of power in the country. To diversify its energy mix and attract more IPPs to the sector, South Africa has developed a renewable energy independent power producer program, namely the Renewable Energy Independent Power Producer Procurement Program (REIPPPP), which has proven very successful in bringing renewable energy projects to commercial operation. To date, REIPPPP has successfully procured 6.4 GW from 112 IPPs across seven bid windows.
After numerous rounds under REIPPPP, the program has seen a significant decline in costs by approximately 55 percent for wind (ZAR 1.51 to ZAR 0.62 per kWh) and 76 percent (ZAR 3.65 to ZAR 0.62 per kWh) for solar PV, which make the technologies cost-competitive with new-build coal. Furthermore, renewable power sources account for just under 3 percent of South Africa''s national electricity supply, from a baseline of zero in 2010.
Investment: The program has leveraged approximately $135.6 billion in investment across South Africa, and projects include wind, solar (both PV and concentrating solar power), small hydro, landfill gas, and biogas as sources of energy. Of this, 25.8 percent is from foreign financiers and investors across the globe. To date, the United States is the largest source of foreign direct investment (FDI) in the renewables space, and several U.S. companies have shown strong interest in this program and have participated in tenders issued by the South African Department of Energy.
At the request of the South African government, the World Bank Group authorized the $497 million Eskom Just Energy Transition Project (EJETP) in November 2022. In order to decommission the 56-year-old Komati coal-fired power station, repurpose the project area with renewable energy and batteries, and create jobs for workers and communities, it will support its public energy provider, Eskom. If the project is successful, it might serve as a model for a fair energy transition in South Africa and beyond. The Canadian Clean Energy and Forest Climate Facility (CCEFCF), a $47.5 million concessional loan, a $10 million grant, and a $439.5 million loan from the World Bank all contribute to the project’s funding.
Opportunities: According to research house BMI, non-hydropowerrenewableswill be the fastest growing source of electricity generation in South Africa between 2019 and 2028. Struggling thermal capacity at Eskomand the government’s commitment to REIPPPP contracts suggest good growth opportunities. Wind power will be the primary source, accounting for 60 percent of renewablesoutput by 2028. The large presence of the coal power sector means renewables''contribution to total electricity output will remain below 10 percent during this time.
The South African Department of Energy is tasked with the procurement of 3,126 MW of power from gas in the period 2019–2025. This is to be baseload and mid-merit energy generation capacity needed from gas-fired power generation to contribute toward energy security. The Department''s "Gas IPP Program" has been initiated through the IPP Office. At present, the IPP Office is concentrating on the LNG-to-Power IPP Program. The demand for natural gas is expected to expand by an average of 5.2 percent per year in 2021-30, boosted by government efforts to encourage its use and reduce reliance on coal. Under the IRP, gas-fired generating capacity is projected to rise by 3,000 MW.
The switch from diesel to gas is particularly applicable to developments at the domestic Ibhubesi gas field. This field is being developed by Sunbird Energy and is set to feed a 1,350MW power plant at Ankerlig, which currently runs on diesel. Eskom released an RFP in May 2024 for the supply, delivery and off-loading of Propane Gas via road tanker to Ankerlig and Gourikwa Power Station. The propane will be supplied to the respective sites on an "as and when required" basis for a 5-year period. Optional provision of storage space for 10 000kg of Propane within the vicinity of the Power Stations.
Nuclear power accounts for just over 6 percent of South Africa’s electricity output. Eskom operates the country’s only nuclear plant, at Koeberg, near Cape Town, where two reactors completed in the 1980s have a combined generating capacity of 1,830 MW. Although the two units at Koeberg were planned for closure in 2024 (Unit 1) and 2025 (Unit 2), upgrades to the reactors have extended their lifetimes to 2045 and 2047 respectively.
The national embedded generation market for installations and operation and maintenance of rooftop solar PV has grown in the past 12 months. Local solar PV data suggests an installed capacity increase by as much as ~110 MW throughout South Africa (possibly as high as 250 MW). It is expected that the total annual available market could continue to grow at this rate to a saturation point of ~500 MW installed per year on an ongoing basis. This market could reach a total of 7.5 GW of installed capacity by 2035. The commercial and industrial (C&I) sector has been leading investments in this sector, with ~70 percent of new rooftop solar PV installations nationally in this sector.
With increasing demand in embedded generation, the South African energy storage market is expected to grow to ZAR14.5 billion by 2035, becoming a keystone of the future energy services market. This will create opportunities for investors, manufacturers, suppliers, and energy end-users in the energy storage value chain.
Energy efficiency also presents a significant opportunity to investors and businesses in all sectors. The estimated annual total available market currently stands at ZAR3 billion, reaching an estimated ZAR21 billion by 2035.
Business Insider South Africa: https://
The issue of aging network infrastructure remains a concern for the distribution network as it compounds the supply and limits South Africa''s ability to expand electricity access. The South African Department of Mineral Resources and Energy has completed a study to estimate the backlog, and work is currently under way to determine the most effective way to fund the rehabilitation of these networks and assets going forward. Eskom estimates that it will need 8,000km of transmission infrastructure by 2030 to bring more renewable energy online.
Public Enterprises Minister Pravin Gordhan has confirmed that Eskom''s business model is up for discussion as government seeks to reduce the fiscal risk currently posed by the utility and to reposition the state-owned enterprise (SOE) for future sustainability.
Discussions could look to enhance Eskom revenue in the short-term through both higher sales and, controversially, tariff increases. Yet further tariff increases (which have increased by over 300 percent in the past eight years for some consumers) could spur more consumers to find ways of using less electricity, possibly even through full or partial defection from the grid.
The National Energy Regulator of South Africa (NERSA) has also warned of a "utility death spiral," whereby price elasticity of industrial demand is emerging as a primary driver of the lack of demand. This has served to exacerbate a "vicious cycle" in which increasing electricity prices drive declining sales, thereby resulting in the utility having to recover the same cost base from a shrinking customer base.
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