Utility-scale renewable energy 2020 Market Intelligence Report - GreenCape
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Utility-scale renewable energy 2020 Market Intelligence Report Utility-Scale Renewable Energy: Market Intelligence Report 2020 i
GreenCape
GreenCape is a non-profit organisation that works at the interface of
business, government and academia to identify and remove barriers to
economically viable green economy infrastructure solutions. Working in
developing countries, GreenCape catalyses the replication and large-scale
uptake of these solutions to enable each country and its citizens to prosper.
Acknowledgements
We thank Mandisa Mkhize (lead author), Jack Radmore, Ian Scrimgeour and
Bruce Raw for the time and effort that they have put into compiling
this market intelligence report.
Disclaimer
While every attempt has been made to ensure that the information
published in this report is accurate, no responsibility is accepted for
any loss or damage to any person or entity relying on any of the
information contained in this report.
Copyright © GreenCape 2020
This document may be downloaded at no charge from www.greencape.co.za.
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publications by registering as a member on our website: www.greencape.co.za
Cover image courtesy of Nicholas Fordyce
18 Roeland Street, Cape Town, 8001, South Africa
Editorial and review: Cilnette Pienaar, Lauren Basson
and Nicholas Fordyce
Images: GreenCape, City of Cape Town and New Southern Energy
Layout and design: DEEP Agency
ii Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 iii
Contents List of figures
Executive Summary 1 Figure 1:
1. Introduction and purpose 4 Commencement and timeline of REIPPPP in the South Africa 5
2. Sector overview 6 Figure 2:
2.1. The Renewable Energy Independent Power Producer Procurement Programme 10 Key utility RE movements in South Africa to date 7
2.2. 2019 Integrated Resource Plan (IRP 2019) 15 Figure 3:
2.3. Key market players 18 Governance structure of IPPO 12
2.4. REIPPPP market size 19 Figure 4:
2.4.1. Economic value of renewable energy facilities 19 IPPO procurement process 13
2.4.2. Investments made to date 19 Figure 5:
2.4.3. Allocations of generation capacity 21 Tariff decline and MW awarded for solar PV and onshore wind across all bid windows 14
2.4.4. Future pipeline based on IRP 2019 allocations 21 Figure 6:
2.5. Economic development through the REIPPPP 21 Policy adjusted IRP 2019 17
3. Policies and regulation 24 Figure 7:
3.1. Guiding policies 24 Typical company types involved at different stages of project life 18
3.2. Government departments involved in the energy and electricity sector 26 Figure 8:
4. Opportunities and barriers 27 Countries from where private investments were made in the REIPPPP 20
4.1. Renewable energy IRP 2019 allocations 27 Figure 9:
4.2. Renewable energy manufacturing potential 30 Policies guiding South Africa’s economic growth trajectory 24
4.2.1. Local PV panel manufacturing 30 Figure 10:
4.2.2. Local wind tower manufacturing 31 Eco-system of policies relating to the REIPPPP 25
4.2.3. Local battery manufacturing 32 Figure 11:
4.3. Municipalities exploring the option to procure from IPPs 32 GreenCape’s focus areas 49
4.4. Optimising Early Bid Windows 33
4.4.1. Option in implementation agreement contracts to change O&M provider 33
4.4.2. Refinancing of REIPPPP Bid Windows 1-4 34
4.5. Market uncertainties that may affect the REIPPPP market opportunities 37
4.5.1. Ensuring continuity and transparency 37
4.5.2. Maintaining the country’s existing manufacturing base 37
4.5.3. Eskom unbundling – reforming the country’s electricity sector 37
5. Funding and incentives 42
5.1. General database web page 42
5.1.1. Green Finance Database 42
5.1.2. Government funding and incentives database 42
5.1.3. Finfind database 42
5.1.4. AlliedCrowds database 42
6. The Western Cape: Africa’s greentech hub 44
7. GreenCape’s support to businesses and investors 48
8. References 50
iv Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 v
List of tables
Table 1: Table 23:
Overview of the market opportunities (i.e. investment opportunities) within the utility-scale Key responsibilities of the new Transmissions Entity (Eskom Holdings) 38
REIPPPP projects in South Africa 2 Table 24:
Table 2: Key responsibilities of the new Generation Entity (Eskom Holdings) 39
Additional drivers in the South African RE market 9 Table 25:
Table 3: Eskom Unbundling highlights 40
Establishment of the renewable energy sector in South Africa: development and market
movements in the REIPPPP 10
Table 4:
IRP 2010, IRP 2018, IRP 2019 determinations to date in MW 11
Table 5:
As of end of 2019, the breakdown of the large-scale and small-scale REIPPPP procured,
Exchange rates used
determined and operational MW allocations across all renewable energy technologies 14
Table 6:
Capacities for least-cost plan by year 2030 (DoE 2019) 15
Table 7:
Capacities for least-cost plan by 2030 with annual build limits on renewable energy (DoE 2019) 16
Table 8: 1 USD = R14.62 (October 2019)
New additional capacity by 2030 based on IRP 2019: 17
Table 9:
Tariffs offered by solar PV, wind and CSP projects over bid windows [R/kWh] 19
Table 10:
Actual procured generation capacities per REIPPPP bid window 20
Table 11:
Future pipeline based on IRP 2019 allocations 21
Table 12:
Economic development through the REIPPPP BW 1 – 4 22
Table 13:
Procurement outstanding based on IRP adjustments from 2010 – 2019 27
Table 14:
Local economic development opportunities in REIPPPP round 5 29
Table 15:
Local solar PV manufacturing 31
Table 16:
Key players in wind tower manufacturing/construction located in SA 31
Table 17:
Average Debt funding as percentage of Total Funds 35
Table 18:
Split in debt and equity REIPPPP BW 1 – 4 35
Table 19:
Commercial Operation Date BW 1 – 3 35
Table 20:
Number of projects (BW 1 – 4) funded by lead financiers 36
Table 21:
Lead equity investors BW 1 – 4 36
Table 22:
Key Objectives of the Eskom Unbundling 38
vi Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 vii
List of abbreviations
and acronyms
AUW African Utility Week RECP Renewable Energy Cooperation Programme
BW Bid window REFIT Renewable energy feed-in-tariff
CAGR Compound annual growth rate REIPPPP Renewable Energy Independent Power Producer Procurement Programme
CCA Customs controlled area RMB Rand Merchant Bank
CCGE Closed Cycle Gas Engine SAPVIA South African Photovoltaic Industry Association
CCGT Closed Cycle Gas Turbine SARETEC South African Renewable Energy Technology Centre
CCT City of Cape Town SAWEA South African Wind Energy Association
COD Commercial operation date City of Cape Town SED Socio-economic development
CPUT Cape Peninsula University of Technology SEZ Special Economic Zone
CSIR Council for Scientific and Industrial Research SIPs Strategic infrastructure projects
CSP Concentrated solar power SSEG Small-scale embedded generation
DBSA Development Bank of Southern Africa TE Transmission Entity
DE Distribution entity VRE Variable Renewable Energy
DEA Department of Environmental Affairs WACC Weighted Average Cost of Capital
DMRE Department of Mineral Resources and Energy
dtic Department of Trade, Industry and Competition
EAF Energy availability factor
ED Economic development
EKF Danmarks Eksportkredit (Denmark Export Credit Agency)
EPC Engineering, procurement and construction
ERA Electricity Regulation Act No 4 of 2006
ETI Employment tax incentive
GE Generation entity
GWp Gigawatt peak
ICE Internal Combustion Engine
ICN International Cleantech Network
IDC Industrial Development Corporation
IDZ Industrial Development Zone
IEA International Energy Agency
IEP Integrated Energy Plan
IFC International Finance Corporation
IPP Independent Power Producer
IPPO Independent Power Producers Office
IRP Integrated Resource Plan
kWh Kilowatt-hour
LNG Liquefied natural gas
MCSA Minerals Council South Africa
MTPPP Medium Term Power Purchase Procurement
MWp Megawatt peak
NDP National Development Plan
NEDLAC National Economic Development and Labour Council
OCGT Open cycle gas turbine
OEM Original equipment manufacturer
O&M Operation and maintenance
PCE Portfolio Committee on Energy
PPA Power purchase agreement
PV Photovoltaic
RE Renewable energy
viii Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 ixExecutive summary
Table 1: Overview of the market opportunities within the utility-scale renewable energy market
This market intelligence report is written for investors, equipment suppliers,
project developers, and technical advisers. It highlights opportunities in the utility- Opportunity Stakeholders Key Drivers Barriers Term Macro Impact
scale renewable energy market in South Africa. Renewables • IPPs • Release of IRP in • Delayed 3 – 10 • Eskom’s financial
(utility-scale • OEMs 2019 announcement years health
wind and • EPCs • Decommissioning of REIPPPP • Job transition
South Africa has a single utility model managed Combined, these developments suggest growth in
solar) sector • manufacturers of coal plants Round 5 for coal
by Eskom, with a total installed generation the utility-scale renewable energy market
growth by • Timeline of • Eskom financial • Integration of
capacity of 44 GW. This capacity is currently over the next 10 years (2020 – 2030). Based on the
2030, as per construction of health minerals and
dominated by coal power stations (over 80%). R/MW overnight capital cost per technology1, the
IRP 2019 new generation • Risk Mitigation energy
approximate market value per technology based
• Rolling blackouts PPP, which may departments
Since the establishment of the Independent Power on IRP 2019 allocations is R99 billion for solar PV,
– load shedding reduce the size
Producers Office (IPPO) in 2010, over 6.4 GW of R271 billion for wind, and R48 billion for distributed
of bid window 5
electricity from renewable energy sources has generation of less than 10 MW. Indications are that
been procured through the Renewable Energy prices as low as R0.46/kWh and R0.56/kWh for Bid Window 5 • Renewable • Pre-determined • Uncertainty 2 to 20 • Increased
Independent Power Producers Procurement solar and wind respectively can be expected by of the REIPPPP energy value preferred bid with the timing years international and
Programme (REIPPPP). Of this, just under 4 GW is 2030. by early to chain winners of procurement local investment
already connected to the national electricity grid, mid-2020 announcements • Job creation
with the balance expected to be connected by This will depend largely on (1) the commencement RE • OEMs • Local content • Consistency 5 to 10 • Realisation of
2020/21. The cost of renewable energy projects of new bid windows of the REIPPP programme manufacturing • EPCs requirements of and scale of years 24.4 GW
continues to decrease, with the latest projects against the IRP2019 allocations, (2) the Eskom • manufacturers REIPPPP procurement renewables by
producing a levelised cost of energy of less than unbundling process, and (3) the removal of 2030 will unlock
R0.61/kWh. licensing requirements for distributed generation local manufacturing
(1 – 10 MW). potential
Utility-scale • EPCs • USAID financing • Limited policy 2 to 5 • Mitigate
Key developments influencing the market in Further market opportunities include the
batteries • OEMs • Grid stability and regulations years transmission
2019/20: following:
deployment • Battery pricing for battery power losses
■ The appointment of a presidential task team to ■ An increase in local manufacturing potential in
• Increase in integration • Abundant
address the sustainability of the state-owned South Africa:
renewable energy • No procurement local battery
electricity utility Eskom in December 2018; - wind energy (blade and tower) manufacturing;
• ESKOM battery process raw materials
■ The recommendation of this committee to - local PV panel manufacturing; and
flagship currently • Upscale
unbundle Eskom into three separate entities, - local battery manufacturing.
• Eskom’s own determined renewable energy
namely generation, distribution, and ■ Utility-scale batteries development and
capacity to install • Expectation of to meet baseload
transmission, with the establishment of a deployment.
25,6% wind and significant local requirements
separate transmission entity expected by ■ Municipalities exploring the option to procure
solar into energy content
March 2021; directly from IPPs.
mix by 2030 requirement
■ The release of the Integrated Resource Plan ■ Renewal and reissuing of Operations and
(IRP) in October 2019. The IRP is a national Maintenance contracts of REIPPPP Bid Municipalities • IPPs • Wheeling • Regulatory 10 to 15 • A shift away
government document that aims to provide a Windows 1-4 projects exploring the • municipalities framework uncertainty years from traditional
clear indication of South Africa’s electricity ■ Refinancing of REIPPPP Bid Windows 1-4 option to • commercial • Transmission • Monopoly utility municipal
demand, how this demand will be supplied, and projects procure and industrial • Entity Open structure business model.
at what cost. from IPPs consumers. Market model • Increased
■ The announcement that a new bid window for international and
the REIPPPP (BW 5) can be expected in 2020; local investment
■ A request for information released for short- Optimisation • Advisory • Renewal of O&M • Option 5 to 10 • Increased
term supply capacity of approximately 3 000 of early bid services contracts after 3 inimplementing years international and
MW was issued in December 2019. window plants (economic years agreement local investment
development, • Selling of assets, contracts to
legal, private achieve maximum change O&M
equity, etc.) performance provider
• Financiers • Suitable
efficiencies to
justify expense
1 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 21
Introduction and purpose
This market intelligence report provides investors, equipment suppliers, project
developers, and technical advisers in the utility-scale renewable energy sector
with a greater understanding of current market opportunities in South Africa.
What’s new? Globally, renewable energy is expected to
increase by more than 50% between 2019 and
The world’s total renewable-based
2024, with solar PV constituting 60% of this
expected growth, and distributed solar PV
power capacity will grow by 50%
Since the publication of the 2019 Utility-Scale Renewable Energy Market Intelligence Report, there have growing as rapidly as onshore wind. The increase between 2019 and 2024. This
been a number of important developments in the sector and in the national government’s Renewable in the forecast is driven by improved policies and increase of 1 200 gigawatts –
Energy Independent Power Producers Procurement Programme (REIPPPP). increasing competitiveness (IEA Renewables, equivalent to the current total
2019). power capacity of the United States
What happened in 2019:
– is driven by cost reductions and
■ May: Gwede Mantashe appointed as Minister of Mineral Resources and Energy. Renewables will represent the fastest growth in
■ July: Advocate Sandra Coetzee pronounced as the new acting head of the Independent Power the electricity sector, providing almost 30% of concerted government policy
Producer Office (IPPO). power demand in 2023, up from 24% in 2017. efforts. Solar PV accounts for 60% of
■ September: Eskom releases a tender for a 1.4 GWh flagship battery storage project in 2020/21. During this period, renewables are forecast to the rise. The share of renewables in
■ October: IRP 2019 officially approved by Cabinet; meet more than 70% of the global energy global power generation is set to
■ October: Department of Public Enterprises (DPE) announces official plan for the unbundling of demand, i.e. for power, heat, and transport fuels,
rise from 26% today to 30% in 2024
Eskom into three separate entities, i.e. generation, transmission, and distribution, by 2021; led by solar PV and followed by wind, hydropower,
■ November: Eskom appoints Andre De Ruyter as new permanent CEO. and bioenergy.
(Renewables 2019).
■ December: A request for information issued for short-term supply capacity of approximately
3 000 MW. A key driver behind this global shift has been
■ Rolling blackouts (load shedding) continue as Eskom is unable to match current demand with government policy support and procurement
available supply. programmes, which most recently include The South African renewable energy market is
countries such as Mexico, Egypt, Morocco, following a similar trend. Solar PV and wind are
This MIR updates 2019 report highlights: Zambia, Ethiopia, Saudi Arabia and Rwanda, with dominating the market, backed by a growing
$0.016/kWh (R0.24/kWh) in Portugal’s first solar small-scale embedded generation market (mostly
Changes in opportunity drivers/enabling environment: auction under competitive processes (Parikh solar for commercial and industrial businesses).
■ Updates on the state of the REIPPPP and IRP 2019 2019).
■ The utility unbundling plan and its impact As shown in Figure 1, the introduction of
■ The opportunities for players within the distributed generation market (1 to 10 MW) For the first time, renewable capacity additions of renewable energy in the South African context
178 gigawatt (GW) accounted for more than dates back to 2003 with the delivery of the White
Emerging opportunities: two-thirds of global net electricity capacity Paper on renewable energy policy. However, only
■ Renewable energy IRP 2019 allocations growth in 2017. Solar PV capacity expanded the with the release of the Integrated Resource Plan
■ Bid window 5 of the REIPPPP most (97 GW) (IEA Renewables, 2018). Meanwhile, (IRP) 2010-2030 in 2010 did the renewable energy
■ Manufacturing potential (i.e. blade, panel and tower manufacturing) onshore wind additions declined for the second framework really start to take shape. The purpose
■ Municipalities exploring the option to procure directly from IPPs year in a row, and hydropower growth continued of the IRP 2010 was to determine the preferred
■ Optimising of the early bid window rounds (i.e. BEE, refinancing, reviewing O&M contracts) to decelerate. Led by commercial and industrial energy mix over the next 20 years. It included
projects, followed by residential applications, the determinations for renewable energy amounting
expansion of distributed generation stimulates to 14 725 MW, coal-fired plants of 6 250 MW, and
almost half of global PV capacity growth in the gas-fired power plants of 3 726 MW.
period 2018 to 2023.
3 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 42
Sector overview
In order to aid the uptake of renewable energy in 1 professional advisory services;
Accounting for nearly 9% of installed capacity, the South African utility-scale
South Africa, the Renewable Energy Independent 2 procurement management services; and
Power Producer Procurement Programme 3 monitoring evaluation, and contract renewable energy sector is showing growth and potential with more than 3.9
(REIPPPP) was established. The Independent management services. GW of utility-scale projects connected and operational.
Power Procurement Office (IPPO) was created to
fulfil three specific duties for the REIPPPP:
South Africa’s nominal capacity is dominated by Power Producer Procurement Programme
coal-fired generation stations with an installed (REIPPPP), with 3 976 MW generation capacity
2003 2010-2030 2010 2018 capacity of 36.5 GW. It represents more than 83% added to the national grid (IPPO 2019).
Procured 6.3 2018 IRP 2019 IRP
White Paper on RE IRP Energy Mix Establishment
of IPP office GW of RE 22.4 GW RE 24.4 GW RE of the country’s total installed capacity of over 44
(17.8 GW RE)
GW. Nuclear generation capacity comprises 4% The growth of SA’s RE industry in recent years is
of generation capacity, and comes from the the result of several factors:
Figure 1: Commencement and timeline of REIPPPP in South Africa Koeberg power station, the only nuclear
■ Establishment of the REIPPPP, and offtake
generation facility on the African continent.
guarantees by government backed by the
Treasury;
In October 2019, the IRP 2019 with the preferred In what follows: Although renewable energy in the South African
■ Proactive government policy in procuring RE
energy mix up until 2030 was released. The plan Section 2 gives an overview of the market, and context dates back to 2003 with the delivery of
capacity;
includes determinations for additional renewable describes market size and key players. the Energy White Paper, it is still a relatively new
■ Increases in electricity tariffs charged by the
energy amounting to 20 400 MW (excluding Section 3 details the general legislative and market in SA with the first commercial utility
national utility, Eskom;
distributed generation of 4 GW), coal-fired plants of regulatory framework governing renewable energy. projects coming online in 2013. At the time of
■ Wind and solar energy competing on a
1 500 MW, and gas-fired power plants Section 4 highlights emergent opportunities and writing, 6 422 MW of RE had been procured
levelised cost of electricity basis with coal and
of 3 100MW. barriers to growth in the market. through the Renewable Energy Independent
nuclear;.
Section 5 addresses market uncertainties that may
Given this context, there are a number of affect the industry.
opportunities for potential investors in the Section 6 focuses on funding and incentives. Figure 2 overleaf illustrates some of the key utility RE developments in SA to date, with additional
renewable energy market in South Africa. This Section 7 gives an overview of the Western Cape as drivers affecting the market listed in Table 2.
market intelligence report (MIR) provides potential Africa’s growing greentech hub.
investors in the utility-scale renewable energy Section 8 focuses on the services that GreenCape
space with a greater understanding of market provides to its members.
opportunities in South Africa, taking into account
the size of the opportunities and the level of risk Note: GreenCape’s 2020 Energy Services Market
involved. The MIR is compiled for foreign direct and Intelligence Report explores the energy services
local investors (persons or organisations) that are market, including the embedded generation
looking to invest directly in the utility-scale renewable energy market (generation of less than
renewable energy market through project 1 MW), and energy efficiency. The energy services
development, asset management, equity, debt, market is thus not covered in this Utility Scale
equipment manufacture, or support services. Renewable Energy Market Intelligence Report.
For enquiries or to access GreenCape’s services,
contact the Renewable Energy Sector Desk at
energy@greencape.co.za.
4 As illustrated through the Chemical and Waste Operation Phakisa
5 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 6Key events Gas
Determinations determination
Signing events 600 MW
Minister appointments
Coal plants
Cross border coal schedule for
3 750 MW shutdown and
maintenance
Signing of PPA
BW 3.5 Koeberg
maintenance –
approximately 1
Mmamoloko
year 1.8 GW
Nkhensani
Solar parks Kubayi
determination appointed
1 500 MW Energy Minister
Koeberg
maintenance –
Submission Date BW 2 approximately 1
Acting Eskom
COGEN bids due year 1.8 GW
CEO Koko Jeff Radebe
suspended appointed
Energy Minister
Signing of PPA BW 1 Submission date
BW 3.5 Preferred Advocate
bidders Sandra Coetzee
Acting Eskom CEO
COGEN replaces Karen
Johnny Dladla Signing of 27 IPP
2nd RE Breytenbach as
White paper on appointed
13 preferred projects from BW head of IPPO
RE policy of RSA determination
Tina Joemat- bidders 4 and BW 3.5
3 200 MW
Peterson appointed announced –- 2 coal projects
Energy Minister BW 4 announced
863 MW Release of IRP 2019:
Central Energy 14 400 MW wind,
Renewable energy Coal domestic Signing of PPA Fund expected
1st RE 6 000 MW solar,
feed-in-tariff determination Release of IRP
determination BW 2 13 additional to oversee IPPO 1 860 MW nuclear;
(REFIT) 2018: 8 100 MW
3 725 MW 2 500 MW Eskom CEO Brian 3 000 MW gas/diesel;
consultation paper Submission date bidders – BW 4
Molefe resigns gas/diesel 8 100 4 000 MW
BW 4
MW wind, 5 670 distributed
MW solar, 2 400 generation
Submission date Announcement to
MW distributed
COP 15 – reduce Launch of Gas BW 3 2nd RE sign BW 3.5 and 4
generation
SA’s carbon REIPPPP through determination Imported hydro by end Oct.
determination
emissions by 34% submission date 3 126 MW Submission date Projects under
3 200 MW determination
by 2020 Bid Window – small IPP 77c/kWh
2 609 MW
(BW) 1 Medium-term
Power requirement Power Purchase
for 2019 scheduled Procurement
COGEN Coal domestic David Mahlobo maintenance. (MTPPP) – Risk
IRP 2010 to 2030 determination Signing of PPA determination Coal RFP issued appointed Energy Coal and nuclear mitigation
800 MW BW 3 2 500 MW Minister stations programme
Figure 2: Key utility RE movements in South Africa to date
7 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 82.1. The Renewable Energy Independent Power Producer
Procurement Programme
Beyond these key milestones in the South African utility renewable energy market, Table 2 below details
Table 3: Key policy movements in the establishment of the renewable energy sector in SA
additional drivers that have moved the market forward.
Market
Table 2: Additional drivers in the South African RE market Initiation Transition Consolidation
Development
Pivotal RE policy Programme Bid Window 1-2 [nascent Bid Window 3-4
Date Movement movements uncertainty development market – high returns] [competitive market]
December CSIR Energy Centre Report highlights the actual tariffs from REIPPPP and coal IPP,
Timeline 1998 – 2008 2009 – 2010 2011 – 2013 2014 – present
2016 showing how cheap RE builds have been: solar – R0.62/kWh; wind – R0.62/kWh;
coal – R1.03/kWh
1998 White 2009 – 2011 – Department of Nuclear debate
January 2017 Reason for not signing IPPs announced by the Minister of Energy – decreased growth Paper on Renewable Mineral Resources and
below 2%, resulting in lower demand for electricity. Energy energy feed-in- Energy (DMRE) abandons
tariff (REFIT)2 REFIT for competitive
April 2017 Western Cape High Court Judgement nullifies government’s nuclear agreements phase 2 tender process
for failing to consult public and undertake due processes. Minister of Energy launched by
decides to review all determinations after nuclear judgement. This is one of the NERSA
main reasons for no response on municipal section 34 requests.1
2003 White 2009 – COP 15 2011 – 1st determination: Delay in Bid Window 4
July 2017 City of Cape Town files court application to purchase from IPPs. Paper on RE commitments 3 725 MW (BW4) announcement –
job losses as a result
Sep/Oct 2017 Public consultations for Atlantis Special Economic Zone (SEZ) for Green 2007/08 load IRP 2010 – 2030 Aug 2011 – Issue of April 2018 – Sign BW4
Technologies to inform best business practice frameworks for local manufacturing shedding REIPPPP RFP
facilities keen to launch within the zone.
2008 – REFIT 2010 – Nov 2011 – Bid submission August 2018 – Updated
Dec 2018 Launch of Atlantis SEZ for Green Technologies, with national Department of Trade, draft Establishment period IRP released for public
Industry and Competition (dtic) encouraging greentech investment through guidelines of IPP office comment
incentives. issued by
NERSA
October 2019 Department of Public Enterprises (DPE) announces official plan for the
2008 – Eskom Dec 2011 – Preferred October 2019 updated
unbundling of Eskom into three separate entities, i.e. generation, transmission,
Government solar hot bidder announcement IRP released
and distribution, by 2021 -
water rebate
programme
The biggest development and driver of the utility-scale renewable energy market in South Africa was 2008 – Energy 11 Dec 2011 – COP 17 in Expected in 2020:
the establishment of the REIPPPP in 2011. Act enacted Durban • Determination based
in new IRP
- • Bid Window 5
announcement
• Issue of REIPPPP RFP
• Bid submission
2008 – 2012 – 2nd determination Expected in 2021/22:
Commissioning – 3 200 MW • Signing of PPA BW5
of Darling Wind - • BW 5 commissioning
Farm
Nov 2012 – Signing of PPA
- - BW1 -
May 2013 – Signing of PPA
- - BW2 -
1 A Section 34 request entails a request to the Minister of Energy to make a determination against the IRP for the procurement 2 REFIT (renewable energy feed-in tariff) programme was a renewable energy programme launched by NERSA in 2009, that
of energy generation as detailed under section 34(1) of the Electricity Regulation Act 4 of 2006). was later revised (with developers, lawyers and funders input) to the REIPPPP, launched in 2011.
9 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 10The REIPPPP came about after a number of White Paper on RE, by which the government set The major goal with the establishment of a Independent Power Producer (IPP) office. In 2016,
policy movements and programme refinements. a target of 10 000 GWh renewable energy renewable energy programme was to ensure fair the MoA was extended for a further three years,
These include the IRP 2010-30, the establishment consumption by 2013, and in 2009 when NERSA competition and independence, free from undue and then again in April 2019 for another year.
of the IPP office and ultimate cancellation of the approved the policy and tariffs for a REFIT influence. With all previous generation,
renewable energy feed-in-tariff (REFIT) programme. transmission, and share of distribution managed The IPP office is housed in the DBSA, which
programme. by Eskom, the programme had to have a clear oversees staff, operations and procurement of
Nevertheless, the 2011 promulgation of the IRP separation of powers. consultants, goods and services. Initial funding
The introduction of RE into national energy 2010 – 2030 Policy Adjusted Plan issued by the was provided as a loan recoverable once an IPP
planning extends as far back as the 1998 White Department of Energy (DoE) had the greatest Central to SA’s RE programme was the project reached its financial close stage. The
Paper on the Energy Policy of South Africa. The impact on the RE sector. Government set a target establishment of the Independent Power office is now funded from IPP project fees. The
policy committed to encouraging private sector of 17.8 GW of new power generation capacity Producer Procurement Programme (IPPPP) by office is an agent of the DMRE and is mandated
participation, competition, and open, non- (Table 4) to be delivered through RE technologies, the former Department of Energy (DoE) (now to implement the IPPPP, whilst National Treasury,
discriminatory access to the transmission system. and abandoned the REFIT programme for a DMRE) (see Figure 3), National Treasury (NT), and through the Government Technical Advisory
The sector was further supported in 2003 by the competitive RE tender approach. the Development Bank of Southern Africa (DBSA) Centre, manages the IPP office account. National
in 2010. A memorandum of agreement (MoA) was Treasury also provides a guarantee to back
concluded between the parties, and the DBSA the obligations of Eskom in terms of the Power
was directed to support the establishment of the Purchase Agreements (PPAs) with the IPPs.
Table 4: IRP 2010, IRP 2018, IRP 2019 determinations to date in MW
IRP 2010 – 2030 progress
IRP 2010 – 2030 Policy
2018 updated plan 2019 updated plan
Adjusted Plan
Solar 8 400 7 958 6 000
Wind 8 400 11 442 14 400
CSP 1 000 600 0
4 000
Distributed generation - 2 400
(+ unallocated)
RE goal 2030 17 800 22 400 24 400
Determinations to date
1st Determination 3 725
2nd Determination 3 200
No determinations have been made to
3rd Determination 6 300 date on the IRP 2019
Solar Parks
1 500
Determination
Determined to date 14 725
Figure 3: Governance structure of IPPO3
3 DoE (Department of Energy) is now known as the Department of Mineral Resources and Energy (DMRE),
established in June 2019 as a merger between the Department of Energy and Department of Mineral Resources
11 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 12Solar PV Onshore WInds Solar PV Onshore WInds
RFP Preferred 2018 Grid connection 4
Bid 3.65 1600
(request for bidder Procured 6.3 Financial close + commercial
submissions 3.5
proposals) announcement GW of RE operation 1400
3 1200
2.5 1000
2.35
Figure 4: IPPO procurement process 2 800
1.51
1.5 600
1.12 1.57 0.95
1 400
South Africa’s renewable energy market has electricity to date (IPPO 2019). This has been 0.97 0.62
0.5 200
grown exponentially over the last few years since managed through six bid windows (BW)4 in the 0.75
0
the inauguration of the Independent Power large-scale REIPPPP, and through two bid rounds 0
Round 1 Round 2 Round 3 Round 4 Expedited BW 1 BW 2 BW 3 BW 4 BW
Producers Office (IPPO) in 2010. The IPPO, with the in the small REIPPPP. At the utility scale, IPPs are
Expedited
support of the Department of Mineral Resources the mechanism through which renewable energy
and Energy (DMRE), has procured 6 422 MW of is currently added to the SA energy mix. Figure 5: Tariff decline and MW awarded for solar PV and onshore wind across all bid windows
Figure 5 illustrates the average tariff decline in To date, 6 422 MW has been procured in the
REIPPPP highlights to date: Energy supply capacity impact of the the wind and solar PV sector over the four bid large- and small-scale IPP programmes
REIPPPP (by March 2019): windows, plus expedited rounds that have been combined with the status of the un-concluded
■ In the large-scale REIPPPP, 90 projects initiated, together with the capacity awarded for projects shown in Table 5 below.
have reached financial close; ■ 6 422 MW of utility-scale renewable energy each bid window.
■ The last BW4 project reached financial has been procured from 92 renewable
close on 15 December 2018; energy Independent Power Producers
■ A remaining BW3.5 project is scheduled to (IPPs) in four bid rounds; Table 5: As of end of 2019, the breakdown of the large-scale and small-scale REIPPPP procured,
reach financial close by end 2020, while ■ 3 976 MW of electricity generation determined and operational capacity allocations across all renewable energy technologies
financial close for a BW3 project still capacity from 64 IPP projects has been
needs to be determined. Scheduled connected to the national grid; and Programmes Large-scale IPP Small-scale IPP
commercial operations for these projects ■ 38 184 GWh of energy has been generated Technology Procured Operational Determined Procured Operational Determined
will commence from late 2019 to 2022; and by renewable energy sources procured
Wind 3 357 1 980 6 360 9 0 400
■ The small programme and future bid under the REIPPPP since the first project
windows are currently on hold, pending became operational in 2014. Solar PV 2 292 1 474 6 225 80 - -
the release of the new IRP2019 Concentrated
determinations. 600 500 1 200 0 - -
solar power
Landfill gas 13 22 540 0 - -
Small hydro 19 - - 0 - -
The REIPPPP has been lauded globally for its The impacts of the REIPPPP have included the Biomass 42 - - 10 - -
clear mandate, growth path and independence in following (IPPO 2019): Total 6 323 3 976 14 325 99 0 400
its procurement approach. This is clearly
illustrated through a tariff decline of more than ■ Investment (equity and debt) to the value of R209.7
150% over six years, with the levelised cost of billion, of which R41.8 billion (20%) is foreign
electricity for wind and solar in the expedited investment, was attracted;
round coming in at less than R0.62/kWh (see ■ Created 40 134 job years to date;
Figure 5). Each bid window has also seen a major ■ Socio-economic development contributions of
oversubscription in tender submissions from R860.1 million to date; and
numerous local and international developers and ■ Enterprise development contributions of R276.7
investors. million to date.
4 Determinations were made for 6 bid windows – 1, 2, 3, 3a, 4 and the expedited round. Energy has only been
procured from 4 bid windows – 1, 2, 3 and 4.
13 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 142.2. 2019 Integrated Resource Different scenarios that led to the new It includes only technology choices that represent
Plan (IRP 2019) As indicated in the preceding section, a total of 6 IRP 2019 can be seen below: the least cost to the country, and increased
The integrated resource plan is a national 422 MW under the REIPPPP has been procured, ■ The least-cost scenario, dubbed IRP1 allocations as prices decrease. By forcing annual
government document that aims to provide a with 3 976 MW operational and made available to ■ IPR2 – including annual build limits build limits on PV and wind, i.e. the maximum limit
clear indication of South Africa’s electricity the grid. In addition, IPPs have commissioned ■ IRP 2019 – the policy adjusted scenario of a specified technology that can be built in a
demand and how this demand will be supplied 1 005 MW from two open cycle gas turbine given year, the plan brings procurement of
and at what cost. (OCGT) peaking plants. Under the Eskom build The least-cost scenario, dubbed IRP1 renewable energy closer to 2024 and creates a
programme, the following capacity has been (see Table 6), outlined in the draft IRP 2018 market for local manufacturing of RE components.
Section 34(1)(a) of the Electricity Regulation Act 4 commissioned: 1 332 MW of Ingula pumped document, envisages no yearly limits on the The impact of adding build limits to the least cost
of 2006 (ERA) allows the Minister of Energy, in storage, 1 588 MW of coal (Medupi), 800 MW of integration of variable renewable energy to 2030. scenario can be seen in Table 7. The annual build
consultation with the NERSA, to make Ministerial coal (Kusile) and 100 MW of wind (Sere Wind limits bring forward PV procurement from 2027 in
Determinations for new generation capacity if Farm). In total, 18 000 MW of new generation Table 6 (no build limits) to 2024, Table 7.
they believe that it is required to secure the capacity has been committed to (See Table 8).
continued, uninterrupted supply of electricity. Besides capacity additions, a number of
assumptions have changed since the Table 7: Capacities for least-cost plan by 2030 with annual build limits on renewable energy
The Ministerial Determinations may also outline
promulgation of IRP 2010–2030. Key assumptions (DoE 2019)
the type of energy sources from which electricity
must be generated. These decisions are based on that changed include theelectricity demand
projection (decreased by 0.6% since 2010), Gas (CCGT/CC-GE/ Landfill gas
the most up-to-date Integrated Resource Plan. Year PV (MW) Wind (MW)
Eskom’s existing plant performance (ranging OCGT (MW) (MW)
between 68% and 72% in 2019), as well as new 2024 1 000 - - -
In May 2011 the then Department of Energy – now
the Department of Mineral Resources and Energy technology costs. 2025 1 000 1 600 - -
(DMRE) – released the Integrated Resource Plan 2026 1 000 1 600 2 380 -
2010-2030 (IRP 2010) in respect of South Africa’s Since 2010, there have been several draft
revisions of the IRP that have been distributed for 2027 1 000 1 600 1 650 -
forecast energy demand for the 20-year period
from 2010 to 2030. The IRP 2010 was intended to public comment. In 2018 an updated 2018 IRP was 2028 1 000 1 600 1 950 -
be a ‘living plan’ that would be reviewed by key released for public comment and National
2029 1 000 1 600 3 000 250
stakeholders at least every two years. However, Economic Development and Labour Council
(NEDLAC) consultations. The IRP generally 2030 1 000 1 600 1 800 -
this was never done and resulted in an energy
mix that failed to adequately meet the constantly considers several scenarios, with the policy Total 7 000 9 600 10 780 250
changing supply and demand scenarios in South adjusted IRP being the primary plan.
Africa. Since the promulgation of IRP 2010–2030,
the following capacity developments have taken The policy adjusted scenario is shown in Figure 6. Some of these adjustments include increased
place: below (the final IRP 2019). For the period ending build limits to smooth the rollout of renewable
2030, a number of policy adjustments are energy, which will help sustain the industry, and
proposed to ensure a practical plan that will be the inclusion of 1500 MW of coal-to-power aimed
Table 6: Capacities for least-cost plan by year 2030 (DoE 2019)
flexible to accommodate new, innovative at minimising the impact of job losses resulting
technologies that are not currently cost from the decommissioning. These policy
Gas (CCGT/CC-GE/ competitive. It will minimise the impact of adjustments will be retained, pending a report on
Year PV (MW) Wind (MW) Landfill Gas (MW)
OCGT) (MW) decommissioning of coal power plants and the the just transition strategy5.
2025 - - 2 380 - changing demand profile.
2026 - - 750 250
2027 2 290 - 1 480 -
2028 1 640 2 500 2 200 -
2029 2 180 2 800 2 200 -
2030 1 710 3 700 1 930 -
Total 7 820 9 000 10 940 250
5 Just Transition is a report to be drafted by the National Planning Commission (NPC). It aims to develop pathways and inform a strategy
to transition to a low carbon society that also addresses the triple challenge of reducing poverty and inequality, and create jobs
15 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 16Other
(Distributed
Cost GAS/ Generation,
Coal Nuclear Hydro Storage PV Wind CSP
(Decommissioning) Diesel Cogeri,
Biomass,
Landfill
Current 31715 1860 2100 2912 1474 1980 300 3830 499
2019 2155 -2372 - - - - 244 300 - Allocation to
2020 1433 -557 - - - 114 300 - - the intent of
2021 1433 -1403 - - - 300 818 - -
the short term The other technology category includes 2.3. Key market players
capacity and distributed generation, co-generation, biomass, Stakeholders in the REIPPPP are best categorised
2022 -344 513 400 1600 energy gap and landfill. The 2019 IRP increased the renewable
755 - - - - according to the project development phases
1000 energy capacity, not including distributed that the programme follows: development,
2023 750 -555 - - - 1000 1600 - - 500 generation, to 33% by 2030. It also makes a construction, and operation and maintenance.
2024 1 000 - 1660 - - - 1600 - 1000 500 strong statement towards encouraging new Accordingly, the key players or company types
2025 7 000 - - - - 1000 1600 - - 500 industries, job creation and localisation across involved in this market are described in Figure 7,
2026 - -1734 - - - - 1600 - - 500 the value chain (IRP 2019). with an indication of the project development
2027 750 -547 - - - - 1600 - 2000 500 phase in which they are typically involved.
2028 - -475 - - - 1000 1600 - - 500
2029 - -1654 - - 1575 1000 1600 - - 500
2030 - -1656 - 1500 - 1000 1600 - - 500 Independent power producer. It is responsible for project inception and
Total Installed development, land acquisition, finance sourcing, and bid submission. It may
Capacity by 33164 1660 4600 5000 8288 17742 600 6380 - sometimes be a project sponsor or may submit a bid with the backing of such an
2030 (MW) IPP entity.
% Total
Installed Project stages involved: Project development, project construction, project
Capacity 43 2.36 5.84 6.35 10.52 22.53 0.76 8.1 - operation and maintenance.
(% of MW)
% Annual
Energy 58.3 Original equipment manufacturer. Suppliers of key technology, e.g. the
4.5 0.3 1.2 6.3 17.8 0.6 1.3 -
Contribution manufacturer of the selected turbine in a wind farm. This company will play a
(% of MWh) major role in determining the technology partners that will constitute a project,
OEM and may also play the role of O&M (see below).
Figure 6: Policy adjusted plan IRP 2019
Project stages involved: Project construction, project operation and maintenance.
Table 8: New additional capacity by 2030 based on IRP 2019 Operation and maintenance company. It is usually the main equipment supplier
or a technical entity well-versed in the specific technology.
O&M
Technology IRP 2019 Provisions by 2030 (MW)
Project stages involved: Project construction, project operation and maintenance.
Coal 1 500
Nuclear 1 860
Hydro 2 500 Engineering, procurement and construction. Typically, this player is responsible
Storage 0 for managing the various sub-contracts in the construction phase of a project. It
EPC may also be involved in the design and development phase of the project.
PV 6 000
Wind 14 400 Project stages involved: Project development, construction and O&M.
CSP 0
Gas/Diesel 3 000
Figure 7: Typical company types involved at different stages of project life
Other 4 000
17 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 182.4. REIPPPP market size 2.4.1. Economic value of renewable
The REIPPPP has attracted investment from energy facilities
prominent global renewable energy project
developers and Tier 1 component manufacturers. A Council for Scientific and Industrial Research
Debt (R Millions) Equity (R millions)
It has done so because of the growth potential, (CSIR) study (CSIR 2015) demonstrates that
localisation requirements, the programme’s between January and June 2015, REIPPPP
transparency, and strong government support. projects with some 800 MWp and 1 GWp of wind USA 5617 547
Global leaders such as Abengoa, Mainstream and solar PV respectively, generated up to R4
Renewable Power, Jinko, and Canadian Solar, as billion more in financial benefits than their cost.
well as South African developers such as Pele As projects from more recent rounds of the Great Britian
5167 18 546
Green Energy, Aurora Power Solutions and programme come online, the installed capacity and Europe
Biotherm Energy, have entered the market. and financial benefits realised will continue to
increase as these projects offer much lower 128
tariffs and costs (IPPO March 2017) than their Asia (China, Japan,
The REIPPPP has attracted investment (equity 8014
predecessors (see Table 9). Singapore, Korea)
and debt) to the value of R209.7 billion, with
foreign investment constituting R41.8 billion (20%)
814
of total investment attracted into SA. Some of the Middle East
main contributing countries are Germany, 1842
(Saudi Arabi, India)
France, Italy, Spain, and the USA.
1377
Africa 265
Table 9: Tariffs offered by solar PV, wind, and CSP projects over bid windows [R/kWh]
Small-scale 5 000 10 000 15 000 20 000 25 000
Programmes Large IPP
IPP
Figure 8: Countries from which private investments in the REIPPPP were made
Rounds Round 4
Round 1 Round 2 Round 3 Round 3.5 Expedited S1 S2
(AVG R/kWh) a, b
Wind 1.51 1.19 0.87 - 0.75 0.62 1.15 Allocations of generation capacity Table 10 presents final capacities per round, including the small IPP
Solar PV 3.65 2.18 1.17 - 0.91 0.62 1.22 1.01 programme. As the table shows, wind and solar PV are the dominant technologies in terms of actual
capacity procured. Later rounds of the programme will have to adjust their allocated technology
Concentrated -
3.55 3.32 1.93 1.8 - - - because of favourable bid prices as well as high (over-) subscription rates.
solar power
Landfill gas - - 1.11 - - - - -
Small hydro - 1.36 - - 1.24 - - - Table 10: Actual procured generation capacities per REIPPPP bid window6
Biomass - - 1.65 - 1.61 - 1.65 -
Small-scale
Programmes Large-scale IPP
IPP
Rounds Round 1 Round 2 Round 3 Round 3.5 Round 4 a,b S1 S2
Wind 639 555 785 0 1 363 5 5
2.4.2. Investments made to date The programme has been successful not only in
Solar PV 625 414 435 0 813 30 50
Total investments made in the programme (debt attracting investments, but also in attracting
and equity) over the procured bidding windows, them from a wide variety of investment sources Concentrated solar
150 50 200 200 0 0 0
excluding the expedited round, totalled more (see Figure 8.) power
than R209.7 billion as of June 2019 (IPP Office). Landfill gas 0 0 13 0 0 0 0
This is split between domestic (80%, R167.9 billion) Small hydro 0 14 0 0 5 0 0
and foreign (20%, R41.8 billion) investments.
Biomass 0 0 17 0 25 10 0
6 Determinations were made for 6 bid windows – 1, 2, 3, 3a, 4 and the expedited round. Energy has only been procured from 4 bid
windows – 1, 2, 3 and 4
19 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 20In the large scale REIPPPP, 90 of the 92 projects 2.4.4. Future pipeline based on IRP 2019
have reached financial close. The last BW4 allocations Table 12: Economic development through the REIPPPP BW 1 – 4
project reached financial close on 15 December Using an indicative R/MW overnight capital cost
2018. The remaining BW 3.5 project is scheduled to per technology, an approximate market value per Bid Windows BW 1 BW 2 BW 3, 3.5 and 4
reach financial close by end 2019, while financial technology based on IRP 2019 allocations is
Min% Target% Min% Target% Min% Target%
close for the remaining BW 3 project still needs to depicted in Table 11 below. The renewable energy
be determined. Scheduled commercial operations potential market is valued at R 418 billion. Job creation
for these projects will commence from early 2020 SA citizens 50 80 50 80 50 80
to 2022. The small-scale programme and future
SA citizens who are black 30 50 30 50 30 50
bid windows are currently on hold, pending a
determination by the Minster of Mineral Skilled black SA citizens 18 30 18 30 18 30
Resources and Energy based on the IRP 2019. SA citizens from local communities 12 20 12 20 12 20
Local content
Table 11: Future pipeline based on IRP 2019 allocations
Onshore wind, CSP with storage, small
25 45 25 60 40 65
hydro, landfill gas, biomass, biogas
Indicative ZAR IRP 2019 new
Technology Potential market value Solar PV and CSP 35 50 35 60 45 65
(million/MW cost) capacity (MW)
Solar PV R16.5 million 6 000 R99 billion Ownership
Wind R18.8 million 14 400 R271 billion Shareholding by black people and/or black
12 30 12 30 12 30
enterprises in the seller
SSEG R12.0 million 4 000 R48 billion
Shareholding by local communities in the
3 5 3 5 3 5
seller
2.5. Economic development ■ Ownership: advancing ownership by black Shareholding by black people and/or black
through the REIPPPP South Africans and local communities; enterprises in the construction contractor
8 20 8 20 8 20
Energy security and investment aside, the Management control: increasing the presence
■ Shareholding by black people and/or black
REIPPPP contributes directly to South Africa’s of black South Africans in management of the 8 20 8 20 8 20
enterprises in the operations contractor
broader national development agenda. This is economy;
both by design and through the willingness of Management control
■ Preferential procurement: empowering black-,
industry players who recognise the South African women-, youth-owned, and small enterprises; Black top management 0 40 0 40 0 40
socio-economic context in which they are ■ Enterprise development: developing small Preferential procurement
developing projects. businesses in local communities, and
BBBEE procurement spend – 60 – 60 – 60
stimulating the local economy;
The REIPPPP’s economic development (ED) ■ Socio-economic development: addressing SME and QME (QSE and EME) procurement – 10 – 10 – 10
component comprises a 30% qualification some of the socio-economic needs of Women-owned vendor procurement – 5 – 5 – 5
criterion for each tender proposal, while the tariff communities local to projects. Enterprise development
price accounts for 70%. As the REIPPPP
progresses, the tariffs are becoming increasingly Enterprise development contributions – 0.6 – 0.6 – 0.6
Over the six bid rounds there has been little
competitive, with the range and impact on the change between the minimum and target Adjusted enterprise development
overall tender becoming less significant. It is – 0.6 – 0.6 – 0.6
development objectives, with contribution to the contributions
therefore becoming more important to improve ED scorecard shown below. The only major Socio-economic development
the economic development objectives listed change has been the local content requirements
below in order to be more competitive. Socio-economic development contributions 1.0 1.5 1.0 1.5 1.0 1.5
in bid windows 1, 2, 3, 3.5, and 4, and expedited
round shown in Table 12. This is expected to Adjusted socio-economic development
1.0 1.5 1.0 1.5 1.0 1.5
■ Job creation: focusing on South African continue to increase or at least remain the same contributions
citizens, black South African citizens7, and in future bid windows.
those local to projects;
■ Local content: capturing as much of the local
project spend as possible;
7 “Black people is a generic word which means African, Coloured or Indian, who are citizens of the Republic of South Africa by
birth; who became citizens of RSA by naturalisation before 27 April 1994; on or after 27 April 1994 and who would have been
entitled to acquire citizenship by naturalisation prior that date” (dtic, November 2018)
21 Utility-Scale Renewable Energy: Market Intelligence Report 2020 Utility-Scale Renewable Energy: Market Intelligence Report 2020 223
The ED objectives are expected to change in
future bid rounds as a result of local communities
within a 50 km radius of the project site receiving The IPPs and local communities
Policies and regulation
delayed income8, and local content rules being partnerships have created 40 134
open to exploitation. job years for South African
citizens to date; socio-economic
In future rounds it is expected that there will be a
development contributions of
number of improvements, including:
R860.1 million and enterprise Policies and regulatory frameworks provide regulatory certainty to the market
■ Redefining a local community or clarity on the development contributions of
definition of ‘a local community;
and guide the development of the renewable energy sector in South Africa
R276.7 million. Qualifying
■ ensuring that local communities receive early,
communities will receive
efficient and equitable benefits; 3.1. Guiding policies
■ a focus on technology-specific items for R29 billion in income over the According to the national Department of sustainable value for the local communities, and
localisation – laminating of panels, project’s 20-year lifespan as a Economic Development, South Africa’s economic ultimately South Africa’s economic development;
construction of towers, blades, etc. have to be result of the minimum ownership growth is guided by several key policies, as shown through revenue obligations to which the IPPs
done locally; have committed. The design of the REIPPPP takes
requirement of 2.5%. in Figure 9. Of these, the policies highlighted relate
■ more stringent burdens of proof, for instance, directly to REIPPPP procurement into account all these policies, making it a
CFOs will require signed certificates (Figure 10). The economic development highly strategic infrastructure and
supporting accurate financial reporting from component ensures the REIPPPP creates development programme.
auditors.
To truly demonstrate the impact and future
To date there are 62 community trusts
benefits of the programme, it is necessary to
implementing numerous economic development
look at programmes on the ground. One such
activities across SA. Many of these projects are
example is the South African Renewable Energy
supporting communities in rural locations, where
Technology Centre (SARETEC) at the Cape National
community resourcing is scarce. As with many
Peninsula University of Technology (CPUT) Development Plan
local development initiatives, the upskilling and
campus in Bellville, Cape Town. As well as short
integration of new technology, and partnerships (NDP)
courses on solar PV systems and biomass
between international and local teams require
technologies, SARETEC now offers internationally
patience and consistency. Success stories are
accredited courses for wind turbine services
communicated by the various industry
technicians and solar photovoltaic service New Growth Plan
associations concerned, including the South
technicians. The institution was specifically
African Photovoltaic Industry Association
founded to cater for the REIPPPP’s skills
(SAPVIA) and the South African Wind Energy
requirements, particularly in the long-term Local Procurement
Association (SAWEA).
operation and maintenance phases of projects.
Accord
Among many others, highlights include more
than 40 134 job years created in construction,
and operation and maintenance (IPPO 2019), Green Economy
whilst numerous large investments have been Accord
made in manufacturing and assembly.
REIPPPP
Figure 9: Policies guiding South Africa’s economic growth trajectory
8 Price from the most recent bid window of South Africa’s REIPPPP puts the capital costs used for wind and solar PV in the
draft IRP 2018/19 at R18 847/kW and R16 555/kW respectively for large scale and R12 000/kW for small scale.
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