South Africa Renewable Energy Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The South African renewable energy market is expected to register a CAGR of 11% during the forecast period, 2022-2027, rising from 10.28 GW in 2020 to 22.3 GW in 2027. The COVID-19 pandemic did not have much impact on the South African renewable energy market apart from the temporary hiccups in project developments due to supply chain disruption issues. In terms of market growth, factors like the transformation of the energy model toward renewable sources, coupled with frequent power cuts and the pressure to reduce dependency on energy generation from fossil fuels, are expected to drive the market during the forecast period. However, South Africa continues to dominate the coal production in the region, providing an easy source of fuel to its large number of coal power plants, which may restrain the market in the coming years.

Key Highlights
South Africa has high solar irradiance, and as a result, solar energy is expected to dominate the market during the forecast period.
South Africa has great potential for renewable energy resources, especially solar and wind. South Africa’s Northern Cape is one of the most attractive solar resource areas globally, presenting several opportunities in the renewable energy sector.
The South African renewable energy market is expected to experience significant growth due to supportive government policies driving the market’s demand.

Key Market Trends

Solar Energy to Dominate the Market

South Africa is one of the leading countries in receiving sunlight. In most parts of South Africa, there is a presence of sunshine for more than 2,500 hours per year, with average solar radiation levels ranging between 4.5 and 6.5 kWh/m2 in one day. Furthermore, for South Africa, the annual 24-hour global solar radiation average is about 220 W/m2 compared with parts of the USA, which have around 150 W/m2, and the European Union, which has about 100 W/m2. This makes South Africa’s solar energy resource one of the highest globally. Moreover, solar energy is considered the most readily available resource in South Africa. This currently leads to several potential applications; solar energy is used for power generation and water heating. Furthermore, due to the rise in investment in solar-based energy in South Africa, the country’s solar-equipment industry is also witnessing development.?
The South African government aims to reach net-zero emissions in 2050. To achieve this ambitious target, the government is strategically investing in renewable energy projects, particularly solar and wind. In South Africa, solar energy is harvested by two methods, which are concentrated solar energy and photovoltaic power. As of 2022, the total installed capacity of concentrated solar energy is around 500 MW, and photovoltaic power installed capacity is around 2,885 MW. ?
In February 2022, Redstone concentrated solar energy project, a 100MW integrated CSP plant, secured financing of USD 764.63 million and the commitment of USD 151.95 million. Furthermore, the project has received financing from international and South African financial institutions, including ABSA Bank, CDC Group, Development Bank of Southern Africa (DBSA), Deutsche FMO Investec Bank, Nedbank Limited, Sanlam Limited, and the Industrial Development Corporation of South Africa. The project is anticipated to be operational by the end of 2023. ?
March 2022, Amazon launches a 10-megawatt solar plant in Northern Cape Province, South Africa. The plant is expected to generate more than 28,000 MWh of energy per year. The solar plant consists of over 24,000 bifacial solar panels and covers an area of 20 hectares in the Northern Cape.?
In March 2021, the Department of Mineral Resources and Energy has South Africa floated the fifth renewable energy bid to procure 2.6 GW of clean energy projects. In this process, the department received 102 bids for 2.6 GW of renewable energy projects, which includes 63 bids for solar projects. Of 2.6 GW, 1.6 GW was from wind, and 1 GW was from solar projects. Due to these factors, the solar energy segment is likely to grow with high CARG during the forecast period. ?
Therefore, owing to the above points, solar energy segment is expected to dominate the market duirng the forecast period.

Supportive Government Policies and Programs to Drive the Market

The South African government has taken initiatives pertaining to the energy market to achieve a range of objectives to ensure affordable access to electricity, encourage decarbonization of the energy systems, boost economic development, and improve energy security. In order to achieve clean energy transition goals, South Africa has implemented some support policies and subsidies for renewable energy.?
For instance, the South African government launched the South African Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), a competitive tender process designed to facilitate private sector investment in grid-connected renewable energy generation in South Africa. As of 2021, the REIPPPP program attracted about USD 13 billion of private capital to construct and operate 77 solar and wind facilities.?
According to the International Institute of Sustainable Development, South Africa’s Energy subsidies have tripled since 2017; in 2020, they valued at about USD 10.4 billion. In addition, the country increased fossil fuel taxes to keep pace with the growing demand and boost the investment in renewable energy. However, most of the subsidy was given to fossil fuels and coal-fired electricity.?
As of September 2020, the National Energy Regulator of South Africa issued a section 34 for the determination of the procurement of a further 11,813 MW of renewable energy between 2022 and 2027, of which 6,800 MW is allocated to wind and solar power and about 513 MW to capacity generated from storage. Further, it enabled the REIPPP Bid Window 5 on April 12, 2021, to conduct a bidding process for a new renewable energy project. ?
In addition, on October 28, 2021, the list of bidders preferred by the REIPPP Bid Window 5 was released for 12 onshore wind projects and 13 solar photovoltaic projects with capacities of 1,608 MW and 975 MW, respectively. ?
Overall, government policies, programs, and initiatives are expected to be significant drivers for the development of the renewable energy market in the country. According to the Climate Investment Funds, the capacity of new renewable power generation will reach about 20 gigawatts by 2030. ?

Competitive Landscape

The South African renewable energy market is moderately consolidated. Some of the major players in the market are Mainstream Renewable Power Ltd, Segen Solar (Pty) Ltd, EDF Renewables, Juwi Renewable Energies (Pty) Ltd, and Acciona Energia SA.

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