Accelerating renewable energy industrialisation in South Africa: What’s stopping us?

Accelerating renewable energy industrialisation in South Africa: What’s stopping us?

Executive Summary 
A global transition to a clean energy future is underway. Many countries across the world have already achieved high levels of renewable energy integration, facilitated through technological investment and the creation of enabling policy and regulatory environments. \
South Africa has seen past successes in stimulating growth in the renewable energy industry and facilitating additional capacity onto the national grid system, however, severe obstacles have stagnated this process in recent years. This has created an environment of uncertainty for the industry and resulted in missed opportunities to capitalise on cost-optimal wind and solar PV to address energy supply gaps and contribute to national climate change commitments. 
In the current climate of pandemic and recession, South Africa will likely be looking to large, infrastructure-led programmes to stimulate economic recovery. Increasingly, ‘green’ stimulus packages which harness the opportunities presented by renewable energy technologies are being promoted by local and national institutions in the country. 
This report presents the results of a study which unpacks some of the major political, institutional, regulatory and social barriers to renewable energy deployment in South Africa. It also provides some insight into proposed means of addressing these barriers to facilitate accelerated industrialisation in the renewable energy sector. 
Because renewable energy development has largely been facilitated through private investment via the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) in South Africa, this report has focused on the constraints that have been faced by the private sector. Many of these constraints will also be relevant to public sector or community-driven renewables, however there are likely to be additional and specific constraints that these sectors may experience. It will be critically important to identify and address these, in addition to the constraints explored in this report, as participation in the renewable energy sector broadens in the ongoing pursuit of a just energy transition and inclusive transformation of the South African economy.
Key findings 
Currently, the three most critical constraints on scaling up renewable energy are lack of political commitment to renewable energy, regulatory restrictions in the energy sector, and grid capacity issues: 
• Lack of political commitment and policy certainty around an energy plan has obstructed industry growth in recent years. Delays in the publication of the country’s Integrated Resource Plan (IRP) and the stop-start procurement of renewable energy have contributed to serious market uncertainty in South Africa. Developers and industry experts argue that this has resulted in the inability to establish a local manufacturing industry and skills base which may have knock-on effects on industry growth. It has also hampered the ability to resolve regulatory barriers to renewable energy project development and integration. 
• Regulatory restrictions on generation licences and power purchase agreements (PPAs) with third parties make it difficult for businesses, municipalities, and other potential generators to produce their own electricity and/or trade outside of the current national procurement model. Experts argue that this has hampered opportunities in the small-scale embedded generation (SSEG) space and constrained the number of large-scale projects developed, limiting the contribution of renewable energy to alleviate national generation capacity constraints. 
• Lack of grid capacity and connection issues are reported as an immediate physical constraint on rollout. According to interviews, this is largely owed to a lack of strategic alignment between planning efforts around the timing and location of project development and transmission network upgrades. Both experts and developers argue that lack of coordination and slow processing of grid connection applications has resulted in the saturation of grid capacity in resource-rich areas and delays in projects coming online.
An important finding of this study is that, despite the top ranked constraint of policy uncertainty, industry players are reportedly still ‘taking the risk’ and have continued to develop projects during South Africa’s procurement hiatus. There is reportedly a large portfolio of mature projects – in the order of 7- 10 GW – that are ‘shovel ready’ and could come online over the next 12-24 months to alleviate existing generation capacity constraints at Eskom. However, delays in reaching concurrence on new determinations for procurement and slow regulatory processes are reportedly diminishing this potential and limiting the country’s emergency response to the energy crisis, placing strain on smaller, local companies with limited capacity to absorb transaction costs and withstand market uncertainty. 

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