Energy deals see South Africa boost renewable capacity

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South Africa has stepped up plans to expand renewable energy’s contribution to the power mix, signing a series of new procurement deals that will considerably boost overall capacity and provide greater opportunity for private sector investment.

In early April Jeff Radebe, the minister of energy, announced the government had signed R56bn ($4.5bn) in contracts with 27 independent power producers (IPPs), which would see them add 2300 MW of generation capacity to the national grid over the next five years.

The deals represent the country’s largest IPP procurement to date, and form part of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), a tender process designed to increase private sector investment in the segment.

Northern Cape Province will receive 15 new wind, solar photovoltaic (PV) and concentrated solar projects; Eastern Cape will see four wind developments; and North West Province will have four solar PV projects. In addition, Western Cape will add two more wind projects to its portfolio, Free State will add one hydropower undertaking and Mpumalanga will host its first IPP development, in the form of a biomass project.

The developments are slated to generate some 58,000 new jobs, mostly in the construction phase, with further employment opportunities to be created throughout the value chain, including an estimated 1500 manufacturing jobs, according to Radebe.

Some 2.8m solar PV modules will be procured, along with 600 inverters and 385 transformers, while an estimated 500 wind towers and turbines will be required.

On a sustainability level, the projects are projected to offset 8.1m tonnes of CO2 and save 9.6m kl of water per year, enough to cover the annual water needs of 1.2m people, an important consideration for a country suffering acute water shortages. Municipal authorities in Cape Town, for example, have forecast “Day Zero” – the point at which officials will need to switch off the city’s water supply – to arrive in 2019.

The IPP deals are also significant given slow progress on renewable projects in recent years.

The administration of former President Jacob Zuma had prioritised the development of nuclear energy as a means of power generation, which dampened investment in renewables. Then in March the National Union of Metalworkers of South Africa launched a legal challenge against the 27 IPP projects on the grounds that they would lead to significant job losses. Though the case was later dismissed by the High Court, it nonetheless delayed the signing and progress of the projects.

Renewables to play an increasingly important role in energy mix

The developments mark a growing commitment to renewable energy, in line with the targets laid out in the National Development Plan (NDP), South Africa’s blueprint for eliminating poverty and reducing inequality by 2030.

The NDP, which was launched in 2012, aims to add 20,000 MW of renewable energy to the grid by 2030, as well as decommission 11,000 MW of ageing coal-fired power stations.

This portends a significant shift: renewables made up just 7% of the 60,200 MW of installed capacity in 2017, according to state energy firm Eskom, while coal-based power accounted for around 80%.  

Outlining potential new renewables projects, Radebe said a further R63.4bn ($5.1bn) of contracts amounting to 1800 MW were currently under consideration, with the increased capacity to help ease any concerns over energy supply.

In April Eskom said coal stockpiles at seven of its power stations were below required targets of 20 days; however, the company noted that it had contracted 84% of the coal required over the next five years.

Private investment central to energy sector development

In addition to boosting renewable capacity, the 27 IPP contracts have deepened the potential for private sector participation in the energy industry, providing significant opportunities for local and foreign investment, and offering the potential to boost competition and efficiency.

The R56bn ($4.5bn) in investment will be directly contributed by private operators. Among the participants is Italian-based firm Building Energy, which has reached a deal with Eskom to build, own and operate a 147-MW wind plant in Roggeveld, Northern Cape Province, and a 4.7-MW hydro project in Free State.

Germany’s Nordex will provide 47 turbines for the Roggeveld project, which is expected to create some 700 jobs during the construction stage, scheduled to begin in 2019.

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