South Africa recorded a spike in renewable energy project registrations in Q1, 2023, following the removal of the licensing threshold for embedded power generation at the end of 2022. Almost 2.5 GW of projects were registered with the National Energy Regulator of South Africa during the quarter, highlighting the role regulatory reform has played in increasing the private uptake of renewable energy in the country.
2023: A Bumper Year for South African Renewables
With large potential for solar and wind-based power generation, South Africa is committed to increasing the share of renewable energy in its power mix –currently dominated by coal at 80%. License reform has made it easier to develop renewable energy projects and the success of this decision was made clear through the number of projects registered throughout 2023.
Speaking to Energy Capital & Power, Gaylor Montmasson-Clair, Senior Economist: Sustainable Growth at Trade & Industrial Policy Strategies said, “if you look at the numbers, it was 135 MW in 2021 and then 1,664 MW in 2022 – that’s more than 10 times the previous year. When we go to 2023, its 4,530 MW. You can clearly see the increase.”
Registered projects varied in size and source, with solar largely dominating the market. Montmasson-Clair explained that “in 2023, we had 405 projects registered. Of these, 316 were small-scale – below 1 MW. You had 12 projects that were between 50 and 100 MW and 18 projects that were over 100 MW.”
Notwithstanding the 2.5 GW spike in Q1, throughout the remainder of the year, registrations averaged between 500 and 1,000 MW per quarter, and this trend is expected to continue going forward. “Without the policy or regulatory reform, you wouldn’t have seen that increase,” Montmasson-Clair notes. “That was a massive shift in the market and it explains – combined with load shedding, electricity price increases and the pressure to decarbonize – the interest that we’re now seeing from the private sector.”
What’s Driving the Market?
South Africa’s efforts to increase investment in renewable energy can be attributed to a variety of factors, all of which differ according to the market. For residential, Montmasson-Clair states that “going forward, the main driver is not necessarily going to be loadshedding but price.”
The cost of electricity has been rising steadily in the country for a number of years, largely due to higher fuel costs, depreciation of generation capacity and procurement challenges. Notably, the country’s state-owned utility Eskom increased the cost of electricity by 18.65% for the 2023/24 financial year and will raise it by a further 12.74% for the 2024/25 financial year. Through renewable energy systems, residential customers can mitigate these costs while ensuring a stable supply of power.
In addition to cost, Montmasson-Clair considers decarbonization to be a primary driver for large-scale industry consumers. He said, “if you’re a mine or a smelter [for example], loadshedding is not really your main driver since you get curtailment.” A push to reduce both costs and emissions is driving the uptake of renewable energy in the country. The mining industry, for example, is developing a combined 6.5 GW of renewable power while the agriculture, transport, manufacturing and food industries are also ramping up developments. License reform will further entice the private uptake of renewables, for both small- and large-scale consumers.
Transmission Remains Top Priority in 2024
While the private sector has responded positively to policy reform, inadequate transmission capacity continues to impact renewable integration into the national grid. Montmasson-Clair highlighted two ways the government plans to address transmission challenges. “One way is looking at our partners in the north to help finance, and that is actually the core of the Just Energy Transition Partnership. The second avenue that the government and Eskom are looking at is the private sector. They are looking at building transmission in partnerships rather than Eskom doing it on their own.”
At the same time, a Transmission Development Plan (TDP) is being implemented by Eskom for the period 2020-2029, the purpose of which is to assess network requirements and propose plans to meet load demand and generation integration. As such, the Ministry of Electricity is inviting investors to help strengthen transmission in the country.
