Renewable Energy to represent 12% of South Africa's energy mix in 2020

Opportunities in the Renewable Energy Sector in South Africa

The US Trade and Development Agency (USTDA) hosted a major clean energy discussion focused on the sector in South Africa at the US Consulate in Johannesburg on Friday, June 6, 2014.

The event brought together key players in clean energy circles on both sides of the Atlantic. US players included USTDA, Power Africa, Overseas Private Investment Corporation (OPIC)  and US EXIM Bank. South African organizations were arranged on a panel, which included the clean energy units from Eskom, the Industrial Development Corporation (IDC), the Department of Trade and Industry(DTI), the Development Bank of South Africa (DBSA), the Central Energy Fund (CEF), Gauteng Department of Infrastructure Development; the renewable energy industry groupings SASTELA and SAPVIA; and renewable energy company, SolAfrica.

In kicking off the event, USTDA Director Leocadia Zak expressed how pleased she was to see the commitment from both the US and African governments to the Power Africa initiative and the excellent way that the various US Government agencies were working together on clean projects. Much of the impetus behind this was the launch of the US-Africa Clean Energy Development and Finance Center in March of last year. This center is pivotal in channeling green funding and support into promising renewable energy projects not only in South Africa but on the Continent as a whole.

South Africa’s continuing energy crisis, combined with the vast energy needs of the growing economies of the rest of the Continent, means that the work of the Center, US Government agencies, and African agencies supporting development of new power supply is very important. South Africa continues to struggle with insufficient capacity in the power sector and clean energy is seen as part of the solution to this critical problem.

Yousuf Haffejee, Head of Single-Buyer Office at ESKOM, set the context for the state of clean energy in South Africa. He explained that much has happened in the last two years of which South Africa can be very proud. A total of forty-seven power purchase agreements (PPPs) have been signed with independent power producers (IPPs) as part of the Renewable Energy Independent Power Producer Programme (REIPPP), totaling 3,900MW. Interestingly, this accounts for roughly 10% of the South African grid, which up to now has been dominated, to the tune of a whopping 96%, by coal. Of this, 605MW has been connected to the grid, with solar power accounting for two-thirds in just this short time period.

Ironically, Haffejee said that South Africa is now a victim of its own success, in that the biggest worry is increasingly whether it can keep up with the growth of renewable energy. He explained that the grid is accustomed to power projects taking 8-10 years to come on to the grid. By contrast, renewable energy projects can be ready in just two years. The market is also a contributing factor as renewable energy players have taken advantage of steadily declining solar prices amid increasing prices for coal. If one factors in the carbon tax – soon to be implemented in South Africa, one can argue that certain renewables are more competitive than coal.

Other key speakers also spoke of their activities and accomplishments in the sector. From the US side, EXIM Bank Chair Fred Hochberg stressed that it can provide 80% financing for US local content and arranges for loans with 18-year terms. EXIM also provides a guarantee which is invaluable in catalyzing additional finance. He ended by saying that he wants to do more in the region.

Pamela Quanrud, Regional Energy Counselor at the US State Department and a representative for Power Africa, spoke of how excited she was to have partnerships with IDC, DBSA and PIC to facilitate clean energy projects throughout Sub-Saharan Africa. Liseka Matshekga, the new head of the Green Industries SBU at the Industrial Development Corporation (IDC), shared about their experience in partnering on REIPP projects and said it “wants to do more”. In particular, she said that the IDC should take advantage of its experience in South Africa and use and apply it elsewhere in Africa.  She also spoke of the slow uptake in the area of local content and the need to better understand the issues related to local content.

Describing the Overseas Private Investment Corporation as the development bank for the US Government, Peter Ballinger, Director of Business Development at OPIC, explained that it is seeing opportunities throughout southern Africa and of its interest in working with local content. Noteworthy is the fact that of a budget of $29 billion, OPIC has allocated only $17 billion, leaving 12 billion in available funds. His closing comment that “financing is not the problem” provides a welcome contradiction to the idea that clean energy projects are prevented from moving forward due to lack of funding.

From the local participants, Ntombikanina Malinga, CEO of the SA Solar Thermal Electricity Association (SASTELA) pushed Concentrated Solar Power (CSP) technology due to its ability to provide base-load power via its storage capacity. She also gave statistics supporting the idea that CSP is creates more jobs per MW than coal, with those jobs being “at the bottom of the pyramid” where they are needed. This finding is aligned with many studies suggesting that the ‘green jobs’ created by the greater use of renewable energy more than make up for jobs lost in the move to clean energy. She says the biggest need is more innovative financial solutions.

Oliver Chimusoro, Chief Engineer in the Department of Infrastructure Development of Gauteng Province, stressed the social infrastructure element saying that ‘load-shedding’ (the South African term for scheduled power cuts) does not discriminate on the basis of whether it is a hospital or school. Not surprisingly, in Gauteng, the South African province with the most people and the least land, roof-top solar is seen as the answer.

At the end of the event, there were two agreement signings on projects that had been approved by the US-Africa Clean Energy Initiative. The first project will evaluate CSP technology at two plants in the Northern Cape. The US partner company is Areva, which will do the feasibility study. The second project is a run-of-river hydro power plant, also located in the Northern Cape province. The project will be part of the 5th bidding window of the REIPPP. Basil Reed is the US company involved.