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South Africa’s Energy Sector: The Growing Demand for Renewables

Updated: May 2, 2022



The South African renewable energy market is expected to register an average annual growth rate of more than 8% during the forecast period of 2022-2027. In this article, we shall review the factors which are leading to such a growing demand for renewable energy in South Africa

Energy Market Overview

According to the South African Ministry of Energy, the country’s total domestic electricity generation capacity, from all sources, is 51 309 megawatts (MW). Approximately 91.2% is generated from thermal power plants, while 8.8% is generated from renewable energy sources.

Thereby resulting in South Africa being one of the least energy efficient nations in the world. As a result, South Africa consumes 40% of Africa's electricity and is one of the world's 15 largest emitters of CO2.

Conventional thermal energy sources are likely to be the dominant source of electricity generation for the foreseeable future, but their share of total capacity is expected to decline as renewable energy generation is expected to increase in the coming years.

At the same time, increased economic growth and the lack of investment in power plants and generation capacity are leading to shortages in electricity supply across the country.

Additionally, as a result of cheap coal and Eskom's (South Africa's largest, state-owned electricity company) monopoly on the energy market, there has never been an incentive to switch from fossil fuels to renewable energy. As people had to mine deeper and deeper for coal, and as the price of coal rose and discouraged further investments in power stations, South Africa's electricity generation has stagnated between 2000 and 2008. A privatization of Eskom was even considered.

Meanwhile, the South African economy was rapidly expanding over the same period, doubling its GDP from 136.36 billion USD in 2000 to a GDP of 286.77 billion USD in 2008.

This led to an energy supply crisis in 2008, when demand for electricity was much higher than supply, resulting in several blackouts and load shedding in entire neighbourhoods.

Increasing the diversity of South Africa's electricity generation sources is essential, not only to enhance the country's critically important security of supply, but also to support job creation and mitigate climate change. There is a need to move away from coal to other energy sources, including renewables. In this article we will focus on solar energy.

South Africa’s Shift Away From Coal

South Africa has set a target of increasing the share of renewable energy in electricity generation to 9% by 2030.

After 2008, the South African government began to introduce renewable energy on a large scale and stepped up the promotion of energy efficiency in all sectors to meet energy demand while reducing CO2 emissions and creating jobs. As a result, significant investments have been made in renewable energy and energy efficiency and are still being made. The South African electricity market grew by 1.4 billion USD in 2009 to reach 5.6 billion USD. The COVID-19 pandemic had no impact on the renewables market, which is expected to register an average annual growth rate of more than 8% from 2022 to 2027.

The shift in the energy model towards renewable sources, frequent power cuts and pressure to reduce dependence on fossil fuel generation are the main factors which will boost the demand.

In 2020, South Africa was assessed as needing an increase of more than 40,000 MW in generation capacity by 2025. To meet the national development planned target of 17,800 megawatts of renewable energy, the government plans to install 8,400 megawatts of wind power, 8,400 megawatts of solar photovoltaic power and 1,000 megawatts of concentrated solar power by 2030.

Thanks to South Africa's Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), South Africa's renewable energy sector has experienced explosive growth in recent years, with investments of more than 10 billion USD to date, resulting in job creation and a socio-economic boom. As such, the REIPPPP signed 27 power purchase agreements in June 2018, and plans to add 19,400 MW of new renewable generation by 2030 according to the 2018 Integrated Resource Plan (IRP).

The Solar Energy Sector Shows Enormous Promise.

South Africa has great potential to increase the share of renewable energy in its energy mix. Investments in renewable technologies such as photovoltaic systems, concentrating solar power plants have increased significantly since 2012. Nevertheless, the investments have not been sufficiently mobilised and the targets for large-scale renewable power plants, rooftop photovoltaics and biogas technology have not been met, and their huge potential is still untapped.

Most parts of South Africa enjoy an average of more than 2,500 hours of sunshine per year, with average solar radiation levels ranging from 4.5 to 6.5 kWh/m2 in a day.

As can be seen from this graph, South Africa as a whole enjoys year-round sunshine. The annual average 24-hour global solar radiation is about 220 W/m2 for South Africa, compared to about 150 W/m2 for parts of the US, and about 100 W/m2 for Europe and the UK. This makes South Africa's local resource one of the highest in the world.

The western region, marked in red, has the highest solar potential in South Africa. Concentrating solar power plants (CSM) have been built in Uprington and Bookport (Northern Cape), for example.

In South Africa, the rural population represented 33% of the total population in 2020, or 19,500,000 people. The off-grid solution is therefore particularly viable.

In 1990, 65% of South Africans had no access to electricity. In 1999, the government launched the Integrated National Electrification Programme (INEP) to promote off-grid solar home systems (SHS). By the early 2000s, 40,000 to 60,000 SHSs had been installed.

However, after the "Electricity for All" campaign, the off-grid population was waiting for the grid, and demand dropped. Recent national energy access policies launched by the government have not prioritised off-grid solutions. As a result, although the solar market has grown overall in Africa, the SHS sector in South Africa remains relatively small in 2018. Demand for SHS is now rising, and investment levels are very low: in 2017, only 150,000 SHS were installed, compared to the programme's target of 300,000.

South Africa's Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) uses concentrating solar power (CSP) plants, which generate solar energy by using mirrors or parabolic troughs to concentrate a large amount of sunlight onto a receiver. Four CSP projects have secured 300 MW in the African market and are being financed by the African Development Bank, the French Development Agency, the Clean Technology Fund (CTF), KfW, the World Bank, Investec Bank, Absa Bank and Old Mutual Specialised Finance. The selected bidders for the projects are Abengoa and ACWA Power. These projects are grid-connected, which is in line with the demand of rural South Africans for electricity distributed on the grid: the demand will be maintained over time; this represents a sound investment.

The growing need for dispatchable renewable energy capacity in rural areas has also been reflected in the latest Integrated Resource Plan (IRP) of 2018, which envisages a total installed CSP capacity of between 3 000 and 4 700 MW by 2030. However, such a project is expensive. Many of the banks and investment funds mentioned above are here to finance any selected bidder, and the South African Solar Thermal Electricity Association (SASTELA), which is at the forefront of promoting the deployment of CSP plants and the local manufacturing of the CSP components, will be of great help to the entrepreneur.

The South African Department of Energy (DoE) introduced an incentive to encourage CSP plants to provide energy during the peak hours. Its incentive is a Time of Day (ToD) tariff: the Department of Energy now multiplies its payment by 270% for the electricity that is emitted between 16:30 and 21:30. It is therefore recommended to equip your CSP plant with a storage battery, in order to store electricity and release it during the peak hours.

Key Problems of the Energy Sector

There are still some barriers to the growth of the renewable energy market in South Africa. Problems include the integration of renewables into the transmission grid, local authority acceptance of integrated rooftop solar PV generation and a significant need for technical expertise.

The main issues and bottlenecks in the investment process are the uneven macroeconomic forces (Eskom monopoly) in the electricity market, outdated Integrated Resource Plans (IRPs), the last of which is dated 2019, and local entry and ownership requirements, which are detailed just below.

For more information about bi-lateral commerce between Israel and South Africa, please contact the Israel-South Africa Chamber of Commerce – or

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