World-leading renewables companies are lining up to invest in South Africa’s energy sector and help remedy a chronic generation shortfall that pushed the continent’s most advanced economy into recession even before the COVID-19 pandemic struck.
However, their investment proposals are on hold as red tape and political considerations delay procurement, undermining a government pledge to prioritize wind and solar generation.
Indebted state utility Eskom’s coal-fired stations, which produce more than 80 percent of South Africa’s electricity, have long struggled to meet demand, culminating in rolling blackouts that last year hobbled industries central to the economy.
Power experts say that adding renewables would be one of the quickest and cheapest ways to end outages and reverse years of economic decline.
Based on the government’s plan to add 2.6 gigawatts (GW) of as yet unprocured wind and solar capacity in 2022, the next auction could attract more than US$2 billion in investment, an analysis of industry estimates found.
Billions more could flow if procurements happen regularly, contributing to much-needed economic development when the COVID-19 pandemic has exacerbated budget constraints.
“South Africa has a brilliant solar resource, and there is a lot of international and local interest,” said Wido Schnabel of Canadian Solar, which hopes to supply new projects. “Why are we still waiting?”
When it launched its first renewables auction in 2011, South Africa was at the vanguard of clean energy converts, University of Cape Town professor Anton Eberhard said.
Six years after the last procurement round, “South Africa is falling behind,” said Eberhard, who has advised South African President Cyril Ramaphosa on reforming Eskom.
“There is no question. Engie would bid for both solar and wind,” said Mohamed Hoosen, chief Africa power and gas officer for French power company Engie.
Italy’s Enel Green Power would also consider bidding if tender and market conditions are as favorable as in the past, a spokesman said.
In an energy plan in October last year, the government aimed to increase installed wind and solar capacity roughly sixfold to more than 26GW by 2030.
More than seven months on, none of the new capacity has gone out to tender.
South African Minister of Mineral Resources and Energy Gwede Mantashe in February said he was seeking the agreement of the National Energy Regulator of South Africa (NERSA) for procurements.
In March, NERSA said it needed about six months for its electricity subcommittee to make a submission and to consult the public before it could make a decision.
Even 2,000 megawatts (MW) of “emergency procurement” identified as a priority and given a green light by NERSA last month has yet to happen.
The Department of Mineral Resources and Energy said that the law was clear on how procurements should take place and it was following established procedure.
A spokeswoman declined to comment when asked whether red tape was holding up procurement, while a NERSA spokesman said its rules were designed to ensure installations were safe.
Mining companies, as major energy users and a plank of South Africa’s economy, have been lobbying the government through an industry association to ease regulations, so they can build their own large solar plants.
These could greatly ease the strain by ensuring power for their own operations, as well as generating surplus supplies for the grid, while appeasing shareholders concerned about the miners’ carbon footprint.
Companies, including Sibanye-Stillwater and Gold Fields, say regulations and uncertainty over costs are delaying their plans.
Although the department tweaked the rules for small generators in March, it maintained strict licensing requirements for plants over 1MW. Sibanye wants to add up to 150MW of solar capacity, while Gold Fields is aiming for 40MW.
The department said that the rules “effectively enable companies to generate their own power.”
A spokesman for industry group the Minerals Council said that the March amendment “was not intended to deal with self-generation on the scale that mines are seeking.”
Not all the obstacles are bureaucratic. Analysts blame the governing African National Congress’ (ANC) close ties with organized labor for its reluctance to unleash renewables.
Unions — heavily represented at Eskom and in the coal mines that fuel its power plants — have resisted renewables because they fear they could cost coal miners their jobs.
With unemployment at 30 percent even before COVID-19, the ANC is alive to those concerns.
“The renewable energy sector is allowed space as well to grow, but it’s allowed space to grow without killing coal,” said Sello Helepi, a senior adviser to Mantashe.
Helepi said that there had been few renewables projects in Mpumalanga province, the country’s coal-mining heartland and an ANC stronghold.
“Let’s say hypothetically we switch off coal-fired power stations, what are we saying to the people of Mpumalanga?” he said.
An ANC spokesman did not answer phone calls seeking comment.
Proponents of renewables say additional clean energy capacity would not threaten coal jobs directly and that the government’s reticence could stifle employment in a new sector.
Max Bogl, a German construction firm that manufactures wind towers, said it was interested in establishing production in South Africa that could create about 400 direct jobs.
It awaits the government’s next move, said Bruno Geadas, a company official who visited South Africa several times last year to evaluate investment prospects.
“We are waiting for another level of commitment,” he said.
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