by the Environmental & Clean Energy Law team at Shepstone & Wylie Attorneys
South Africa’s Renewable Energy Programme was launched in 2011 and has helped turn South Africa into one of the leading renewable energy investment destinations. According to CNBC Africa, an estimated R193 billion has already been committed to renewable energy investment in the country. In 2013, Investec alone announced it was investing R8 billion in South Africa’s renewable energy independent power producer procurement programme (“REIPPPP”) for concentrated solar power, photovoltaic projects and wind projects.
This is hugely significant in a country where the state electricity public utility has been battling to meet the electricity demands. Energy tariffs now offered by recent REIPPPP projects are much lower than those that will come from Eskom’s future coal plants.
Unfortunately, when it comes to competition, consolidation is now taking place, and the consolidation of international companies is seeing some smaller South African players being priced out of the game. Unless the Programme is amended, South African companies now have to consider local or cross-border consolidation in order to compete at the same level as the international firms.
Still, the REIPPPP has received much praise for its:
Strong regulatory framework
Specific focus on economic and socio-economic development and community ownership – every bidding company must be 40% South African owned (minimum), 12% (minimim) of the company’s shareholders must be black and 2.5% (minimum) of the company must be owned by communities living within a 50km radius of the project site
Vigorous qualification benchmarks that have to be met by bidders
As of mid-last year, 2015, the South African renewable energy production stats were:
More than 6327 MW (under );
Of the 6327 MW:
53% was for wind;
36% for solar photovoltaic; and
10% for concentrated solar power.
Estimated that a will be procured; and
37 projects (1827 MW) have been connected to the local energy grid.
Wind energy is around half of all renewable energy currently produced in South Africa. According to the South African Wind Energy Association (SAWEA), wind power has contributed approximately 740MW of electricity into the grid and the average capacity factor for the entire fleet is over 70% (keep in mind that wind does not blow consistently).
The REIPPPP has achieved great successes, including bringing power to local communities that have never had access to such basic services. One such example is 300 homes in the !Kheis Municipality in Northern Cape were connected to power through 75 watt photovoltaic solar systems so that children could do their homework at night.
Successes aside, there is still much room for expansion when it comes to the renewable energy sector in South Africa.
For any queries on the above, please contact:
Head of the Environmental & Clean Energy Law department
+27 82 775 3720