Renewable energy gains momentum in Africa

PUBLISHED: Wed, 09 Jun 2021 10:44:36 GMT
Boitumelo Kiepile, Head of Regulatory affairs at EGPRSA
CNBC Africa

The development of renewable energy has evolved dramatically over the years, with sophisticated solutions, underpinned by technological advancements, becoming more readily accepted and adopted. Boitumelo Kiepile, Head of Regulatory affairs at Enel Green Power South Africa (EGP RSA), discusses these solutions, as well as trends in the renewables industry, regulatory changes, and how renewable energy can contribute to the economy.

In recent years, both developed and developing countries have been increasing their uptake of renewable energy sources, especially wind and solar, as preferred sources of energy. This has been driven by various factors, including country-level commitments to decarbonisation (linked largely to the Paris Agreement); decreasing technology costs leading to even lower tariffs for new solar and wind generation; commitment by large global corporates to greening their operations; and new and ever-changing technology that is making it easier to deploy renewable energy.

These trends can be grouped into four main categories, namely global climate change trends, technological trends, demand-driven trends, and the local country-specific trends. Technologically, grid integration of both large-scale wind and solar is reaching parity to fossil fuel generation, and the introduction of energy battery storage is leading to improvedreliability of the power system.

Demand-driven trends are emerging from end-customer choices, including communities, corporations, and cities seeking reliable, clean and affordable energy supply. Lastly, at country-specific level, adoption of enabling policies and regulations is likely to further increase the uptake of renewable energy sources. Specifically, various countries in Sub-Saharan Africa are setting targets (as capacity targets or production targets) to increase the share of renewable energy sources in their respective energy mixes, and are also updating regulations to enable the achievement of these targets.

Regulatory changes

It is always argued that regulatory and policy changes lag technological changes. In South Africa, one can see how regulatory and policy changes have lagged the adoption, deployment and integration of solar PV embedded generation by the residential, commercial and industrial electricity-consumption segments.

The larger utility scale programme, namely Renewable Energy Independent Power Producer Procurement Programme (REIPPP), was established a decade ago through a supporting policy framework in the form of the Integrated Resource Plan and associated Ministerial Determinations and processes for permitting, licensing and connection to the grid fully established.

The electricity regulation framework in South Africa had previously provided for ‘own-use’ generation in the form of a Schedule to the main legislation. In this old Schedule, no limits were set as to the capacity that could be built for ‘own-use’ and no permitting and licensing process existed. It was only in 2016 that an amendment to the Schedule was proposed and a capacity allocation was provided for in the initial update to the Integrated Resource Plan.

Since then, the Schedule has gone through various iterations, the most recent providing that generation facilities not exceeding 10 MW for embedded generation will not be required to apply and hold a generation license, and the updated 2019 IRP makes an allocation of 500 MW per annum for these kinds of generation facilities. These updates happen on the back of a self-generation/own-use market that is estimated to have grown from 21.5 MW in 2013 to 282 MW in 2020 (according to a report by the South African Local Government Association) led by the commercial and industrial markets installing either rooftop or ground-mounted solar PV solutions. The Council for Scientific and Industrial Research estimates a total small-scale embedded generation installed capacity at about 1.2 GW.

Other areas in which policy and regulation could adapt to keep pace with technology include advancements in the areas of energy storage, off-grid systems as an option to increasing electrification rates, smart grids, green hydrogen, and the general decentralisation of energy services.

There is therefore a need for enabling new and updated policy and legislation to move to a more open business model for the electricity supply industry – a model that embraces the existence of multiple generators including independent producers, an independent systems operator, and multiple distribution entities providing a suite of electricity services to meet the needs of different classes of end-users. 

How renewables can contribute to the economy

The role of renewables in the economy cannot be overstated. In South Africa, The REIPPPP attracted investment (equity and debt) of a total value of R209.7 billion (R41.8 billion: foreign investment). Since inception of REIPPPP in 2011, 55 217 job years were created for South African citizens to date, the programme further contributed to socio-economic development and enterprise development of R1.3 billion and R402.5 million respectively, according to reports from the Independent Power Producer Office.

Black South Africans hold 33% of the shares across the entire supply chain. Local communities hold 9% equity in the IPPs who were awarded projects in the REIPPPP. These numbers will increase with the recent determination issued by the Department of Mineral Resource and Energy for the procurement of 4 800 MW of wind and 2 000 MW of solar PV between 2022 and 2024.

The future of renewables

The renewables sector holds vast opportunities for the global economy and local economies in terms of both transitioning to cleaner energy and also as a contributor to economic growth. The opportunities lie not in the end product that is clean energy, but in the entire value chain that spans manufacturing of components, to provision of supporting services, the development of power plants, and their operation and final dismantling of used assets.

In South Africa, the re-imagined industrial policy has identified the green economy, which includes renewables, as a sector that will play a key role in the industrialisation of the economy and contribute to the economic reconstruction and recovery plan post the Covid-19 pandemic.

Specifically, the commitment to the acceleration of the implementation of the Integrated Resource Plan (with its target of 17.7 GW of wind and 8.2 GW of solar PV installed by 2030), as well as the implementation of the now-in-bid stage Bid Window 5 of the Renewable Energy IPP Procurement Programme, the changes to the regulatory framework to facilitate further uptake of renewables by the commercial and industrial market segment, and the continuation of work for the restructuring of Eskom into three separate generation, transmission, and distribution entities, all bode well for the renewables sector in South Africa.

More specifically, amendments to electricity regulations on new generation capacity were published on 16 October 2020, which allow municipalities to procure their own power from IPPs. This change in regulation improves the prospect of earnings from future investment in generation capacity to meet the demand for a growing economy.  

Recent efforts have been made by the government to open up the electricity-generation market, although more is needed to address the immediate challenges of security of supply and affordability of electricity. The Department of Mineral Resources & Energy (DMRE) recently issued a notice that intends to lift licensing requirements for generation facilities of up to 10 MW. It is expected that the lift will boost the uptake of renewable energy in the commercial and industrial segments.

Frequent power outages experienced since 2015 and above-inflation electricity tariff increases have expanded the need for self-generation for intensive energy users. A significant increase in the number of RFI and RFP issued in 2020 indicate an increased appetite for self-generation, despite regulatory barriers.

Examples from publicly available information include: Shoprite investing in rooftop PV (12 300 MWh per year) and Sasol together with Air Liquide announcing their intentions to procure 900 MW of renewable energy. The key drivers for growth of the embedded generation segment of the market include: high tariffs, unreliable supply, and the presence of intensive energy users. It is therefore likely that, with enabling regulations, these end consumers will take the opportunity to procure their own electricity.

In the African context, abundant endowment in renewable energy resource, increasing population, increasing economic growth and changes to modern ways of living are driving the growth in energy demand, and thus the need to accelerate adoption and deployment of renewable energy technologies. The abundance of renewable energy resource in most African countries makes it economically competitive to deploy technologies such as solar, wind, and in other cases, biomass and geothermal power.

Furthermore, the democratisation and decentralisation of power means that local communities can be empowered to participate actively in the harnessing of their energy needs, thus improving their economic status. Research studies have further indicated that in Africa, about 600 million people have no access to modern electricity services – this presents an opportunity for the expanded role of renewable energy.

Renewable energy is certainly moving towards establishing itself more prominently in our future, and its value is undeniable. Increased adoption is happening at a more rapid pace, and this is opening the door to opportunities not only in terms of stable power-generation, but in terms of much-needed economic development in South Africa and the African continent.

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