25 October 2013 – The potential for renewable energy (RE) generation in South Africa is high, and the successful execution of the Renewable Energy Independent Power Producer Procurement Programme (REIPPP) has powered the growth of the RE industry in the country.
New analysis from Frost & Sullivan, South Africa renewable energy project tracker, finds that the REIPPP aims to generate 3,725 MW of the country’s total electricity from renewable sources. RE accounted for less than one per cent of the energy mix in South Africa in 2012 and this is expected to reach twelve per cent in 2020. The commercial and industrial RE segment will grow rapidly in the medium to long term.
“In the light of electricity and water scarcity, as well as rising coal prices, RE is becoming a preferred choice of energy generation technology in South Africa,” Frost & Sullivan energy and environmental research analyst Joanita Roos, says. “Additionally, South Africa is the 12th highest carbon-emitting nation, and the need to diversify industries and incorporate lower carbon-emitting technologies will spur RE development.”
Under the REIPPP, various renewable technologies have to meet minimum annual targets by the medium term to stimulate local manufacturing and services. However, the parameters for each technology will need to be defined individually, and the local industry may lose momentum if certainty over local requirements and capacity allocations are not provided.
Moreover, financial restraints owing to the steep initial capital, as well as legal and technical project costs, hamper RE industry expansion in South Africa. The shortage of skills and experience in the local RE industry adds to the challenge.
Further, the overtraded global market has slowed the industry down and increased the reluctance of manufacturers to start new facilities in South Africa. Only after the huge stock and inventory backlog of large global players has been released, and demand has caught up, can the growth of the local market improve.
“To gain credibility, domestic companies must partner with international firms that have the relevant RE experience and skills,” Roos concludes. “International suppliers too have expressed interest in beginning operations in South Africa, not only to establish a local footprint, but also to secure access to other emerging markets in sub-Saharan Africa.”