Energy regulations: easing the path for IPPs Stefan Bothma, Senior Project Developer at Sustainable Power Solutions (SPS), highlights SPS's role in helping independent power producers (IPPs) in the renewable energy sector navigate the uncertain landscape towards Eskom grid connection approval.
South Africa has abundant solar and wind resources with significant potential for renewable energy development.
I ndependent Power Producers (IPPs) and developers venturing into South Africa’s renewable energy sector face an onerous, challenging regulatory landscape characterised by uncertainty over securing grid connections and substantial development costs. This is according to Stefan Bothma, Senior Project Developer at Sustainable Power Solutions (SPS), who explains that Eskom’s approval processes, coupled with complex environmental and land-use procedures, con- tribute to the complexities faced by IPPs and supplementary power suppliers. This creates challenges for project developers entering the renewable energy market without the support of development funds and strategic partners who can guide projects to financial closure. SPS is a renewable energy asset manage- ment company actively expanding into the energy trading and wheeling market, enabling businesses to buy and sell energy directly and promoting a more flexible, cost-effective en - ergy market. These SPS projects enable more enterprises to transition to renewable energy. Grid connection uncertainty "The regulatory process to obtain grid con- nection can be quite intricate. While the regulations are clearly defined, the certainty of connection and grid capacity remains variable. Eskom operates within a dynamic market, and although it may indicate capac- ity availability at the time of application, this status can change by the time the application process is finalised. This variability introduces a level of uncertainty for IPPs navigating this regulatory landscape," explains Bothma.
However, he adds that the uncertainty in the regulatory environment presents an op- portunity for a company like SPS, given the significant financial resources, experience and patience required to navigate this challenging landscape. "While the process can be quite chal- lenging, SPS has the potential to leverage its capabilities to capitalise on opportunities that may be out of reach for smaller players. The regulatory requirements, including the need for substantial financial guarantees, have increased the costs of obtaining application approval. Consequently, not every small de- veloper has the financial resources to see a project through to completion," adds Bothma. Opportunities for bigger players “This has created a positive outlook for companies like SPS, as we now see more developers approaching us at an earlier stage, once they have secured the land and some of the necessary permits. Previously, these developers would have been able to take projects all the way to grid connection without needing a partner who can cover the increased costs of the grid application until approval," Bothma notes. He further adds that now, these develop- ers require the involvement of companies like SPS much earlier in the process. This has led to more opportunities for the company, and a significant part of their work is evaluating which of them they want to pursue. Francois van Themaat, Managing Director: Large Projects at SPS, says he would ideally like to see greater certainty around grid ca- pacity, which is currently one of the biggest challenges for IPPs. “By the time the applica-
tion process is complete, the applicant may have already spent millions of Rands, yet there is no guarantee that the required grid capacity will still be available. This uncertainty around capacity availability is a major pain point for IPPs traversing the regulatory environment,” says van Themaat. Tariff structures The ongoing restructuring of Eskom, along with the uncertainty surrounding future tariff changes, also poses significant chal- lenges for IPPs. It is challenging for IPPs to sign long-term agreements with clients, as these effectively lock clients into a specific tariff structure. This creates some uncertainty for IPPs looking to secure long-term offtake agreements, which are crucial to the viability of their projects. The Growing Potential of South Africa’s Renewable Energy Sector Despite the challenges, van Themaat says the outlook for the renewables sector is promis- ing, as South Africa has abundant solar and wind resources with significant potential for renewable energy development. “Renewable energy prices are continuing to come down, making it more viable. The growth of electric vehicles and energy-hungry data centres in South Africa creates increas- ing demand for renewable power,” says van Themaat. “At the same time, there is a skilled workforce in South Africa capable of develop- ing renewable energy plants and sufficient funding available through companies like SPS to support renewable energy projects,” he concludes. https://sps.africa
32 ¦ MechChem Africa • November-December 2025
Made with FlippingBook. PDF to flipbook with ease