South Africa’s C&I opportunity
The structural shift in South Africa’s power supply could lead the way for all Africa
The total capacity of renewable energy projects in the private sector pipeline over the coming eight years nearly tripled over the past two years. There is a growing pipeline of over 22GW of projects with an investment value of R393 billion. Solar PV technology has dominated registrations at Nersa. The first private sector projects to be registered following the legislative changes have started operating Rooftop solar PV and small-scale embedded generation now account for about 4% of South Africa’s electricity generation. The biggest blockage to adding more capacity is the lack of grid connection capacity. Aggregators will become an increasingly vital part of the energy transition as the market liberalises.
The dramatic expansion of South Africa’s commercial and industrial (C&I) electric power market over the past two years may represent the single biggest structural shift in the industry in the whole African continent. According to National Transmission Company of South Africa (NTCSA)’s 2024 South African Renewable Energy Grid Survey (SAREGS), the total capacity of renewable energy projects in the private sector pipeline over the coming eight years has nearly tripled from 63GW in 2022 to 172GW in 2024. The trigger for this phenomenal growth was the increase in the licensing threshold for new embedded generation projects from 1MW to 100MW in August 2021 followed by the complete lifting of the threshold in December 2022. This milestone decision was introduced as part of Operation Vulindlela, a joint programme of President Cyril Ramaphosa’s presidency and the National Treasury targeting major structural reforms to reorient the economy. It has enabled companies and municipalities to generate and sell electricity or procure their own power from independent power producers (IPPs) through power purchase agreements without the need of a generation license. The background to the decision was the power supply crisis at Eskom. Constant breakdowns at its ageing fleet of coal-fired power plants, which
provide about 85% of the country’s electricity, meant it was unable to supply adequate and regular electricity to the market. This resulted in a debilitating period of outages and load-shedding. But other factors also came into play. These included commitments to address climate change which have driven many businesses to adopt clean and sustainable energy technologies. In April 2024, an official report on energy market reform estimated that the change had unlocked a substantial amount of private investment in new generation capacity, describing “a growing pipeline of over 22GW of projects with an investment value of R393 billion.” Much of this capacity is based on deals taking place in the market rather than being led by the government. True to the reforms intention that licences are no longer necessary, most of this pipeline is not registered with the National Energy Regulator of South Africa (Nersa) – although some is. Since it began registering projects in 2018, Nersa’s list of projects has increased from 52 plants with a capacity of 26MW to 1,811 projects with a combined capacity of 10.5GW, valued at ZAR202.7bn, by end-2024. Energy generation by the private sector reached its peak in 2023 when approved capacity nearly tripled to 4,490MW from 1,646MW in 2022. 1
1 Nersa Media Statement, 26 February 2025: www.nersa.org.za/media-statement-nersa-registers-143-new-generation-facilities-in- quarter-three-of-2024-25.
7
South Africa’s Energy Prospects
Made with FlippingBook - Share PDF online