Large-scale renewable energy

2024 Large-scale Renewable Energy Market Intelligence Report

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1. South African electricity sector overview

This section gives an overview of the South African electricity market and provides foundational information needed to explore the investment opportunities in the South African clean energy sector.

1.1 South African electricity landscape

South Africa’s electricity supply is dominated by coal-fired power generation (Figure 1). These power stations are primarily owned and operated by Eskom, the national power utility. A minority of the power demand is met through municipalities, imports, and independent power producers.

Figure 1: Electricity contribution by source
Sources: Eskom, 2023.

1.1.1 Rolling blackouts

Historical supply and demand imbalance in South Africa’s single buyer electricity model resulted in intensive rolling blackouts (locally referred to as ‘loadshedding’) countrywide. Rolling blackouts are classified into ‘stages’, with each stage representing a gigawatt of electricity demand that is required to go offline to match electricity supply with demand. Figure 2 provides an overview of the stages implemented and total energy consumption reduction incurred for each year since the first loadshedding started in 2007. Data are collected and shared by EskomSePush (ESP).

Figure 2: Loadshedding by stage (2018 – 2023)
Source: EskomSePush, 2023.

Loadshedding has intensified over recent years due to the degradation of Eskom’s coal fleet, illustrated through their Energy Availability Factor (EAF) (Figure 3). Many of Eskom’s coal power plants have reached their design end-of-life and are becoming less reliable and prone to breakdowns. Eskom’s board of directors, appointed in 2022, were mandated by the then Minister of Public Enterprises, Pravin Gordhan, to achieve an EAF of 75%.

Figure 3: EAF for Eskom power plants (2017 – 2023)
Source: Eskom, 2023

1.1.2 Grid constraints

Following the rollout of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) Bid Window 6 (BW6), it became apparent that there is no more grid capacity available in key areas for connecting new generation projects. Eskom confirmed that there is no longer grid capacity available in the Northern Cape, Western Cape, Eastern Cape, and parts of the Free State. New project developments will need to focus on areas with grid capacity that may be in an area with less desirable wind or solar resources. Eskom recently published data on grid capacity.

LCRE Figure 4

Figure 4: Eskom generation connection capacity
Source: Eskom, 2023

1.2 South Africa’s renewable energy value chain and key players

In South Africa, the global industry players dominate the renewable energy value chain, which has a typical structure as illustrated in Figure 6. With market developments (e.g. reduced profit margins due to decreased tariffs), there has been considerable consolidation in the market globally.

Figure 5: Renewable energy value chain
Source: IRENA, 2017.

South African industry awaits the launch of a new Integrated Resource Plan (IRP), new REIPPPP BWs, the South African Renewable Energy Masterplan, and changes in South Africa’s regulatory environment. The need for local creation is driving the establishment of a local manufacturing base and just transition objectives, including job creation in transition areas.

Stakeholders in the large-scale renewable energy industry developed in response to the REIPPPP can be categorized according to the project development phases that the programme follows: development, construction, and operation and maintenance. Accordingly, the key players or company types involved in this market are described in Figure 6, indicating the project development phase in which they are typically involved.

Figure 6: Typical company types involved at different stages of project life

2. Market size

The introduction of renewable energy in South Africa dates to 2003 with the delivery of the 2003 White Paper on Renewable Energy. However, the renewable energy framework only started to take shape in 2010 with the introduction of the IRP (2010-2030). The purpose of the 2010 IRP was to determine the preferred energy mix over the next 20 years. The IRP was intended to be updated regularly, however, only one update occurred in 2019. A new IRP update is being developed but has not yet been released.

2.1 Large-scale renewable energy market size

The REIPPP was established to facilitate the uptake of renewable energy in South Africa, as originally detailed in the 2010 IRP. The Independent Power Producer Office (IPPO) was created to fulfil three specific duties for the REIPPPP, namely professional advisory services, procurement management services, and monitoring, evaluation, and contract management services.

The first REIPPPP project became operational in November 2013. A number of related public programmes followed the REIPPPP including the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP) and Battery Energy Storage Independent Power Producer Procurement Programme (BESIPPPP). The RMIPPPP aims to fill the current short-term supply gap, alleviate the current electricity supply constraints, and reduce the extensive utilization of diesel-based peaking electrical generators. The BESIPPPP aims to increase the available grid capacity in constrained regions, such as the Northern Cape, which will allow more generation capacity to be connected. The progress of the bid rounds is summarized from the IPPO report, in the Table 1.

Table 1: Progress of bid rounds (years)
Source: IPPO, 2024

Bid window	No. of projects	Total capacity	Progress
REIPPPP BW1	28	1 415 MW	All operational
REIPPPP BW2	19	1 033 MW	All operational
REIPPPP BW3	16	1 428 MW (excl. 17 MW cancelled)	16 operational 1 cancelled
REIPPPP BW3.5	2	200 MW	1 operational 1 under construction
REIPPPP BW4&4b	26	2 205 MW	25 operational 1 under construction
REIPPPP BW5	25	2 583 MW	9 under construction 16 awaiting commercial close
REIPPPP BW6	6	1 000 MW	Commercial close delayed
REIPPPP BW 7	Not known	5 000 MW	Announced in December 2023
RMIPPPP	5 (renewables only) out of 11	353 MW (renewables only)	2 operational 2 under construction 1 awaiting financial close
BESIPPPP BW1	4	513 MW	4 preferred bidders announced
TOTAL	131+	15 730 MW

The private sector has witnessed a notable surge in both the total number of projects and their overall capacity. In 2021, the Department of Mineral Resources and Energy (DMRE) made amendments to Schedule 2 of the Energy Regulation Act, Act 4 of 2006 (ERA). This revision resulted in a substantial elevation of the licensing exception for connecting power generators, increasing the limit from 10 MW to 100 MW. However, in the upcoming 2023 amendment (pending final approval), the exception is slated for removal, thereby eliminating capacity constraints for privately developed generation projects seeking grid connection. The removal of a substantial regulatory impediment has empowered the initiation of new and private renewable energy projects. Consequently, there has been a marked expansion in the realm of large-scale private offtaker agreements. The National Energy Regulator of South Africa (NERSA) publishes a comprehensive list of registered private projects, providing transparency and accountability in this dynamic landscape (see Figure 7).

Figure 7: Projects registered with NERSA
Source: NERSA, 2024

The future market size of large-scale renewable energy projects is uncertain, with changes to the projections occurring every few years. Despite this uncertainty, key planning organisations predict a large amount of growth. Figure 8 shows the projections from different sources for new renewable energy projects and grid storage projects.

Figure 8: Renewable energy capacity projections
Sources: DMRE 2019; Eskom 2023; Eskom, the South African Photovoltaic Industry Association, and the South African Wind Energy Association 2023

The renewable energy projections in Figure 8 are summarized from three different sources. The 2019 IRP update focussed on the government-planned energy production and storage capacities. Its implementation for government projects are limited to the ministerial determinations, but private project growth has escalated. However, since the transmission of electricity will be done through Eskom’s new subsidiary, the National Transmission Company of South Africa, all projects need to be accommodated through long-term grid planning that considers the existing grid constraints. Eskom’s Transmission Development Plan (TDP2023) therefore provides insights into the grid capacity constraints and renewable energy connection capabilities. A separate grid survey was conducted in partnership between Eskom, the South African Photovoltaic Industry Association and the South African Wind Energy Association, which provided insights into the areas, technologies, and statuses of new renewable energy projects that the large-scale renewable energy industry is focussing their resources on. Many of these projects will not materialize, but the survey nevertheless provides insights into the capacity demand from industry for new developments.

3. Policy and regulation

This section provides an overview of key policy regulations that impact the large-scale renewable energy and energy storage market.

3.1 Governing bodies

There are a large number of government entities involved in developing and implementing policies, plans, and programmes for the electricity sector. The most prominent of these are listed in Table 2 below.

Table 2: Prominent government bodies involved in governing the electricity sector

Category	Text
DMRE	The mandate of the DMRE is to regulate and transform the sector for the provision of secure, sustainable, and affordable energy and the promotion and regulation of minerals and mining. This includes the electricity sector, governed mainly through the ERA. This department was previously referred to as the Department of Energy and is also responsible for developing the Integrated Energy Plan and IRP.
Eskom	South Africa’s state owned entity, Eskom, is responsible for most of South Africa’s generation infrastructure, transmission infrastructure, and a large portion of distribution infrastructure. Eskom is in the process of unbundling into transmission, distribution, and generation as separately managed entities. It is a central entity for the large-scale renewable energy industry, serving as both an offtaker and a wheeling partner, with most of the private renewable energy projects connected directly to Eskom infrastructure.
NERSA	NERSA issues licences for the operation of generation, distribution, and transmission infrastructure; regulates imports, exports, and trading of electricity; determines and approves electricity prices, tariffs, and the conditions under which electricity may be sold.
National Nuclear Regulator (NNR)	NNR regulates the operation of nuclear power stations such as Koeberg, and all elements of the South African nuclear energy value chain. Its role is to protect people, property, and the environment against nuclear damage.
Department of Public Enterprises	The Minister of Public Enterprises is the shareholder representative of the South African government and has oversight responsibility for Eskom.
National Treasury (NT)	NT is responsible for financial and reporting oversight for Eskom (as a state-owned entity) and has played a pivotal role in providing government loans and guarantees in favour of Eskom.
Department of Water and Sanitation (DWS)	DWS oversees water allocations and ensures adequate water supply infrastructure, among others, for the South African electricity sector.
Department of Forestry, Fisheries, and the Environment (DFFE)	DFFE ensures adherence to environmental compliance and rights protection relating to preventing pollution, ecological degradation, promoting conservation, and securing ecologically sustainable development.
Department of Trade, Industry and Competition (dtic)	The dtic is responsible for ensuring industrialisation including, in the case of renewable energy, through the REIPPPP’s economic development component, especially local content and black economic empowerment, and development of small businesses.

3.2 Local policies

There are various local policies and regulations that recently changed or in the process of changing, which will have a significant impact on the large-scale renewable energy market (Table 3).

Table 3: Policies and regulations that impact the large-scale renewable energy market
Sources: As found in hyperlinks

Policy or regulation	Details
Electricity Regulation Act (ERA)	Schedule 2 of the ERA provides for exemptions from the obligation in the Act to apply for (and hold) a generation license. All capacity limits have been removed from the ERA, with the publishing of the amendments in April 2023, previously set at 100 MW. The amendments are currently in the final approval process This allows any sized electricity generator onto the network without the need of a generation license. A key driver of growth for the large-scale renewable energy sector.
Preferential Procurement Regulations (2022)	The Constitutional Court ruled in 2022 that the Minister of Finance exceeded his powers in prescribing the Preferential Procurement Regulations for 2017. In response to this judgment, and in order to reduce uncertainty, the Preferential Procurement Regulations of 2022 came into effect in January 2023. The Regulations require organs of state to provide a preference point system and associated goals for all tenders. Without any specific targets, organs of state have the authority to provide their own local content and Black Economic Empowerment targets for contracts. However, the Regulation is merely a place holder for the Public Procurement Bill under development.
IRP 2019 Update, potentially for 2023	The IRP specifically outlines the planning, sourcing, and quantities of electricity generation sources contributing to the country’s generation mix. The last update was in 2019, however, a new update has been announced but not yet published. Additionally, with the rapid growth of the private renewable energy market, it is unclear what value the IRP provides in terms of electricity infrastructure planning.
Public Procurement Bill, potentially for 2024	In order to replace the Preferential Procurement Regulations of 2017, the Preferential Procurement Bill seeks to empower the Minister of Finance to set preferential procurement on all organs of state. The Bill aims to create clear policy objectives and is expected to be signed into law in 2024. The Bill is not intended to set procurement targets, instead, it will rely on Codes of Good Practice for different sectors that still need to be developed.
Eskom’s new grid capacity allocation rules	In order to address the imbalance between grid allocated renewable energy projects and the number of projects under development, Eskom announced changes to their grid allocation rules. The new rules aim to address the imbalance by placing additional requirements on project developers prior to providing grid access guarantees. The new rules have not yet been approved by NERSA and there are a number of contentious issues highlighted by the industry.

3.3 International policies

International trade has a large impact on the export driven manufacturing companies. South Africa’s renewable energy market is not large enough to support specialized renewable energy component manufacturing facilities for key equipment, such as wind blades gearboxes, making component manufacturers either uncompetitive with imported equipment or dependent on government support. Favourable access to international markets will increase the attractiveness of investing into manufacturing in South Africa. Some of the most impactful international policies are listed in Table 4.

Table 4: International policies that impact the large-scale renewable sector
Further to this, the dtic provides a list of trade agreements, available from their website (dtic 2024).

Regulation or policy	Relevant region	Summary	Impact
Carbon Border Adjustment Mechanism (CBAM)	European Union (EU)	CBAM aims to address the greenhouse gas emissions on products or material outside of the EU by issuing a tax on imported goods produced from high-carbon intensive sources in non-EU countries. The CBAM regulation officially entered into force on 16 May 2023. The CBAM itself will enter into application in its transitional phase on 1 October 2023, with the first reporting period for importers ending 31 January 2024 (European Commission, 2023).	Initially, CBAM will focus on carbon intensive products, especially raw products such as cement, fertilisers, iron, steel, electricity, aluminium, and hydrogen. However, it aims to expand to other products in the future. The EU is a major trading partner for South African goods and will be affected by CBAM. CBAM could act as a driver for more clean energy solutions at both large- and small-scale renewable energy projects. It also poses a risk to the export of locally produced products from producers that do not meet the set requirements.
Inflation Reduction Act (IRA), 2022	United States of America (USA)	Despite its name, the main aim of the act is to catalyse investments in domestic manufacturing capacity in the USA, diversify the sourcing of critical supplies from partner countries, and revitalize research, development, and commercialization of clean technology. It also allocates money directly to environmental justice priorities (McKinsey & Company, 2023).	The IRA seek to diversity the USA’s imports, which creates an opportunity for exporters into the US market. South Africa is an aligned partner that benefits form the African Growth and Opportunity Act (AGOA). The focus on sourcing critical supplies domestically or from free-trade partners creates an opportunity for South African manufacturers to access the USA as an export market. However, in the long-term, the IRA aims to revitalize the USA’s manufacturing sector and turn the USA into a net exporter of products which could pose as competition to South African exporters.
African Growth and Opportunity Act (AGOA)	USA	AGOA provides eligible sub-Saharan African countries with duty-free access to the USA market for over 1 800 products, in addition to the more than 5 000 products that are eligible for duty-free access under the Generalized System of Preferences program (Office of the USTR, 2023).	AGOA opens up the opportunity to export South African produced products to the USA with a low or no import duties. Component manufacturers can leverage this opportunity to access a much larger renewable energy market than what is available in South Africa.

References

Department of Mineral Resources and Energy 2019. Integrated Resource Plan 2019. Pretoria, South African Government. Available from <https://www.energy.gov.za/irp/2019/IRP-2019.pdf> [Accessed date]
Department of Trade, Industry and Competition 2024. Trade Agreements. Pretoria, South African Government. Available from http://www.thedtic.gov.za/sectors-and-services-2/1-4-2-trade-and-export/market-access/trade-agreements/ [Accessed date]
Electricity Regulation Act 4 of 2006.
Eskom 2023. Transmission Development Plans. Sandton, Eskom. Available from https://www.eskom.co.za/eskom-divisions/tx/transmission-development-plans/ [Accessed date]
Eskom 2024. GCCA 2025 Results. Sandton, Eskom. Available from <https://www.eskom.co.za/eskom-divisions/tx/gcca/gcca-2025/> [Accessed date]
Eskom, the South African Photovoltaic Industry association, and the South African Wind Energy Association 2023. South Africa Renewable Energy Grid Survey. Sandton, Eskom. Available from https://www.eskom.co.za/eskom-divisions/tx/renewable-energy-grid-survey/ [Accessed date]
Eskom’s new grid capacity allocation rules
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Independent Power Producer Office (IPPO) ??. Specific report (table 1 reference). Pretoria, South African Government. Available from [Accessed date]
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National Treasury. 2022. Preferential Procurement Regulations. Pretoria, South African Government. Available from https://www.treasury.gov.za/legislation/regulations/PREFERENTIAL%20PROCUREMENT%20REGULATIONS,%202022.pdf [Accessed date]
Nyathi, Mandisa 2022. ‘Eskom’s new board under the whip.’ Mail and Guardian. 28 October 2022. Available from <https://mg.co.za/business/2022-10-28-eskoms-new-board-under-the-whip/> [Accessed date]
Office of the United States Trade Representative n.d. African Growth and Opportunity Act (AGOA). Available from https://ustr.gov/issue-areas/trade-development/preference-programs/african-growth-and-opportunity-act-agoa [Accessed date]
Public Procurement Bill
The White House 2023. Building a Clean Energy Economy: A Guidebook to the Inflation Reduction Act’s Investments in Clean Energy and Climate
Action. January 2023, Version 2. Washington, D.C, Government of the United States of America. Available from https://www.whitehouse.gov/wp-content/uploads/2022/12/Inflation-Reduction-Act-Guidebook.pdf [Accessed date]