Executive Summary
Hydro Power
Wind Power
Solar Power
Biomass Power
Current Market Needs
Recent Market Trends
Competitive Landscape
Best Prospects for U.S. Exporters
Market Entry
Regulations / Registration Process
Technical Barriers & Tariffs
Procurement & Tenders
Getting Paid / Trade Finance
Upcoming Trade Events
Local Industry Resources
U.S. Commercial Service Information
Tab Options
Executive Summary
Hydro Power
Wind Power
Solar Power
Biomass Power
Current Market Needs
Recent Market Trends
Competitive Landscape
Best Prospects for U.S. Exporters
Market Entry
Regulations / Registration Process
Technical Barriers & Tariffs
Procurement & Tenders
Getting Paid / Trade Finance
Upcoming Trade Events
Local Industry Resources
U.S. Commercial Service Information
Executive Summary
The 2003 White Paper on Renewable Energy is one of the policy documents that laid the foundation for promoting renewable energy technologies such as solar, hydro, biomass and wind. Through this policy document, a ten-year target was set on how renewable energy technologies could diversify the country’s energy mix and to secure cleaner energy. The objectives of the 2003 White Paper on Renewable Energy were to:
Ensure that an equitable level of national resources was invested in renewable technologies;
Direct public resources to implementing renewable energy technologies;
Introduce suitable fiscal incentives for renewable energy; and
Create an investment climate for the development of the renewable energy sector.
In line with the national commitment to transition to a low carbon economy, the Integrated Resource Plan (IRP 2010), promulgated in May 2011, set an ambitious target of 17 800 MW of renewable energy to be achieved by 2030. Within this 20-year planning horizon, nearly 5000 MW were planned to be operational by 2019, with a further 2000 MW expected to come online by 2020. In October 2019, the reviewed IRP 2010 was upgraded and published to IRP 2019. Implementation of the IRP 2019 is carried out through Ministerial Determinations, which are regulated by the Electricity Regulations on New Generation Capacity based on the Electricity Regulations Act No. 4 of 2006. Already in 2017, 6 422 MW of electricity had been procured from 112 Renewable Energy Independent Power Producers (IPPs) using the competitive bidding process known as bidding windows. Out of this total, 3 162 MW of electricity generation capacity, from 57 IPP projects, was connected to the national electricity grid by end of June 2017.
A number of bid windows have been implemented to procure renewable energy resources. On September 11, the Political Task Team on Eskom, chaired by Deputy President David Mabuza, stated that the DMRE would open-up various bid-windows, including Bid-Window 5, and that the “process will be completed in December 2020”. This determination calls for a procurement allocation of 6 800 MW for onshore wind and solar photovoltaic generators. It also caters for 513 MW of energy storage, contributing to a total procurement of 11 813 MW when other technologies besides renewable energy are taken in to account. For more information on the REIPPPP program please visit https://www.ipp-renewables.co.za/ .
Hydro Power
In South Africa, there is a mix of small hydroelectricity stations and pumped water storage schemes. In a pumped water storage scheme, water is pumped up to a dam. Pumping the water uses some electricity but this is done in off-peak periods. During peak hours, when extra electricity is needed, the water is released through a turbine that drives an electric generator. Peak hours are usually between six and eight in the morning and evening.
South Africa’s rivers carry potential for run-off river hydro projects. These have been proven feasible through a number of projects for operating facilities within farming communities. The Eastern Cape and KwaZulu-Natal are endowed with the best potential for the development of small, i.e. less than 10MW, hydropower plants. The advantages and attractiveness of these plants are they can either be standalone or in a hybrid combination with other renewable energy sources. Advantages can also be derived from the association with other uses of water (water supply, irrigation, flood control, etc.) – all uses that are critical to South Africa’s future economic and socio-economic development.
The Southern African Power Pool (SAPP) allows the free trading of electricity between Southern African Development Community (SADC) member countries, providing South Africa with access to the vast hydropower potential in the countries to the north, notably the significant potential in the Congo River (Inga Falls).
Wind Power
Wind as an energy source is only practical in areas that have strong and steady winds. South Africa has fair wind potential, especially along the coastal areas of Western and Eastern Cape. The Wind Atlas developed for South Africa provides a basis for quantifying the potential that wind holds for power generation elsewhere in the country- over and above the prevalence of the wind resource around the coastal areas. So far, most wind projects have been developed in the Western Cape and Eastern Cape.
There are about 22 Wind farms in South Africa that are fully operational, with more than 900 Wind Turbines spread out over three provinces. This provides an installed capacity of an estimated 2 078 MW connected to the national grid. Additionally, 11 Wind farms are under construction, for an increased capacity of about 1 244 MW. An average SA Wind power plant size is 93.5 MW- slightly larger compared on the global scale.
Solar Power
Most areas in South Africa average more than 2 500 hours of sunshine per year, and average solar-radiation levels range between 4.5 and 6.5kWh/m2 per day. The Southern African region, and in fact the whole of Africa, has sunshine all year round. The annual 24-hour global solar radiation average is about 220 W/m2 for South Africa, compared with about 150 W/m2 for parts of the USA, and about 100 W/m2 for Europe and the United Kingdom. This makes South Africa’s local solar resource one of the highest in the world.
Biomass Power
The concept of Biomass to Energy is still at its infancy in South Africa but holds promise for future sustainable development. There is currently no specific comprehensive legislative framework that governs the waste to energy sector- only individual pieces of legislation dealing with aspects of the waste to energy sector in a piecemeal type of manner.
Two modern attempts to develop South Africa’s biomass energy potential failed: the Howick wood pellet plant, and the Tsitsikama biomass plant. These failures were not due to insuperable technological difficulties, but instead are contributed to local market conditions and stand-offs in purchase agreements with Eskom (the public energy provider). More coherent incentives for the domestic biomass energy market development within South Africa are needed, both for more efficient wood pellet stoves and also for biomass electricity. These developments are crucial if South African citizens, and particularly its poorer communities, are to have secure access to energy.
Despite the various obstacles that may slow down the introduction of large-scale biomass energy production in the country, it still promises to be a viable solution to the pressing energy concern. Biomass energy production does not require any of the major infrastructures that Eskom is currently relying on. Although the initial setup will require a substantial amount of electricity, running a biomass conversion plant will cost significantly less than a coal-powered power plant in the long run.
Current Market Needs
Opportunities in the Renewable Energy market for South Africa have a positive outlook. The South African government has already included Renewable Energy in the Integrated Resource Plan 2019. This plan highlights Renewable Energy sources as a great complement to energy power in South Africa’s coal power. South Africa is facing consistent and rotational energy blackouts of up to 4000 MW per day and has encouraged companies to privately secure power rather than solely depending on Eskom, the state-owned utility.
Recent Market Trends
There is more interest in renewable energy in South Africa as the government is looking to decommission most of coal fired power plants. The biggest energy consumers or users, like the mining and manufacturing companies, are also showing interest in energy independence by procuring Solar Power mini-grids. These companies are pursuing opportunities to assemble these mini grids where their plants or operations are based. This has also extended to other users interested on procuring rooftop solar power for industrial use. Therefore, it is safe to say that although there is a potential for other forms of renewable technology, solar power (PV) is the most attractive.
Competitive Landscape
South Africa is an open economy that affords a fair competitive advantage to all competitors. The South African government insists on Broad Based Black Economic Empowerment (BBBEE) Policy when it comes to procurement by government departments, entities and institutions. However, some South African companies do not comply with the policy. When it comes to international companies partnering with local companies, it is always a safe bet to partner with those companies that comply with BBBEE policies in order to penetrate to the market.
Best Prospects for U.S. Exporters
Solar PV, Wind and Concentrating Solar Power (CSP) with storage present an opportunity to diversify the energy mix, produce distributed generation, and provide off-grid electricity. U.S companies also have an opportunity to participate in Eskom’s first Battery Energy Storage System (BESS) request for bids (RFB), which has been long-awaited for and finally released.
Under BESS, the World Bank, African Development Bank, and New Development Bank is supporting a procurement for 80 MW/320 MWh. This specific procurement is referred to as the Skaapvlei project, Eskom’s first large-scale BESS project. More details on this opportunity can be found under the Procurement and Tenders section of this report.
Offshore wind has not been taken advantage of in South Africa. This is thought change as the government has recently indicated they are open to welcoming IPP investors interested on such technologies. Prospects:
Market Entry:
The South African market is sophisticated. Entry should be well-planned, taking into consideration the following factors:
The price-sensitive nature of most consumer demand;
A potentially volatile Rand-Dollar exchange rate (the rate tends to be very predictable over the medium term – its volatility can spike in the short term);
Distribution issues, given that large retail centers are concentrated in five metropolitan regions. However, there seems to be an increasing interest in industrial energy users going off the grid;
A conservative market bias that tends to stick to known suppliers and therefore requires sustained market development;
South Africa’s position as a stepping stone for developing market opportunities in Sub-Saharan Africa (the marketing mix should anticipate this medium-term option).
However, the new-to-market foreign supplier will find markedly different conditions when venturing northwards. This lack of regional integration relates especially to financial services, trade documentation and road transportation networks and may have a significant impact on risk exposure and the cost of doing business.
Regulations / Registration Process
The following regulations are in place governing the Renewable Energy Market in South Africa:
Electricity Regulations Act No. 4 of 2006
Irrespective of the size of installation, any hydropower development will require authorization in terms of the National Water Act 1998, Act 36 of 1998.
Technical Barriers & Tariffs
The lack of LNG import terminals and regasification plants are two major technical barriers in the market.
Procurement & Tenders
Design, Engineering, Supply, Construction, Installation, testing and Commissioning of Battery Energy Storage System (BESS) including 5 Years Plant Operation and Maintenance Services at Eskom Skaapvlei Sub-station. Closing date: September 11, 2020. RFP can be viewed here .
Sasol is inviting interested Bidders to participate in a Request for Proposals (RFPs) process for the devel-opment of two embedded 10MW Solar Photo-Voltaic (PV) facilities at its South African operations – one in Secunda, Mpumalanga and another in Sasolburg, Free State – as part of its response to climate change. Closing date: October 2, 2020. RFP can be found here .
ArcelorMittal South Africa is inviting independent power producers (IPPs) to participate in a request for information (RFI) process for the supply and management of several photovoltaic (PV) power plants at its operations. August 28, 2020. RFP can be found here .
The IPP office has legislation and procurement frameworks in place. Their website can be found in this report’s Local Resource.
Getting Paid / Trade Finance
Bundled vs. Unbundled
An unbundled approach requires entities/consortia to bid for parts of the value-chain. Agreements with other parties are then needed to complete the value-chain. This is the preferred model.
Upcoming Trade Events
Solar Power Africa, November 24-25 2020, Cape Town International Convention Center, Cape Town
The Solar Show Africa, November 4-6 2020, Virtual Platform
U.S. Commercial Service Information
Mlamli Mjambana, U.S. Commercial Specialist Mlamli.Mjambana@trade.gov
