Shaping South Africa’s Energy Future

South Africa’s renewable energy sector is the largest electricity market in Africa and one of the top 25 largest in the world in terms of volume demand.  It is set to grow by nearly 50% over the next decade. This reflects a major shift in how we think about and use energy. Despite its long reliance on coal power, the country is looking to turn the corner and start embracing cleaner, more sustainable energy sources.

This will not happen overnight. The South African energy landscape has been dominated by coal. Approximately 87% of the nation’s 42,000 MW of electricity is generated by coal-fired power stations. The reality is that coal will continue to provide the majority of South Africa’s power for the next decade. However, the share from renewables will grow rapidly. The minister’s decision to procure another 4GW of photovoltaic (PV) and 10GW of wind marks the next step in meeting a target of 9GW of solar and 18GW wind capacity by 2030.

Adding complexity to an already challenging environment, Eskom is experiencing some challenges with financial and operational difficulties. Recognising the urgent need for diversification, the government has set ambitious targets under the Integrated Resource Plan (IRP) to increase the share of renewable energy in the national grid. This shift towards renewables represents a fundamental change in how South Africa will power its future.

Considering the available options

Fortunately, the country is blessed with abundant solar and wind resources. This provides a natural solution to our collective energy needs. The cost of electricity generated from solar PV and wind has fallen below the system value, making these technologies not only environmentally beneficial but also economically viable.

As a responsible corporate citizen, ENGIE has recognised these opportunities and has made significant investments in South Africa’s renewable energy sector. Our portfolio includes a range of projects that harness the power of the sun and wind. From the Kathu 100MW Concentrated Solar Power (CSP) plant in the Northern Cape to the Golden Valley wind energy facility, which generates enough power to supply over 104,000 households, these projects are proof points that generating clean energy at scale is possible.

These, and other projects, not only contribute to the national grid but also contribute to economic development and job creation, especially in rural areas.

The journey ahead

The South African renewable energy sector is poised for significant growth driven by government policies such as the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) which has successfully attracted private investment and fostered the development of large-scale renewable projects. Batteries will also play a major role in energy shifting, ancillary services and capacity provision.

Since 2021, the government has been making amendments that have made it progressively easier for private developers to sell power to private offtakers. This allows IPPs to sell power to one or more customers either on-site or wheeled across the transmission networks and without a licence, regardless of their size.

However, despite South Africa having some of the best wind and solar load factors in the world, the path to a renewable future is not without its challenges. There are lengthy and cumbersome administrative processes related to the requested licences and approvals as well as a lack of comprehensive wheeling framework.

Another constraining factor is the limited capacity of the transmission and distribution infrastructure in optimal locations . Eskom’s Transmission Development plan aims to solve this problem by building 14,000km and 37GW of connection capacity between 2025 and 2033, and considering the associated costs for new and upgraded existing transmission capacity and given Eskom’s constrained balance sheet,  the government is exploring models for private sector participation in transmission development.

Furthermore, the recent Electricity Regulation Amendment Bill is set to completely overhaul the electricity supply industry in the country by establishing a hybrid or multi-market market model that comprises market transactions, physical bilateral transactions, and regulated transactions.

ENGIE is committed to playing a significant role in this transformation. We are pioneering the development of the green hydrogen economy in South Africa. Our involvement in the Hydrogen Valley initiative and the Mogalakwena Hydrogen Plant signals our commitment to exploring future energy solutions that can decarbonise industrial processes and mining operations.

What makes the most sense

When factoring in these complexities, it therefore makes the most sense for South Africa to adopt a diversified energy mix that balances renewable energy with reliable, dispatchable power sources. This will ensure energy security, reduce transmission losses, and increase resilience against power outages.

ENGIE’s thermal generation plants, such as Dedisa and Avon, which provide critical peaking power, are essential components of this balanced energy mix. Additionally, the shift towards decentralised energy generation and distribution is a game-changer for the local energy landscape.

The emergence of decentralised distribution networks, including local grids and microgrids, offers improved reliability and efficiency in energy distribution. This is most significantly felt in remote or underserved areas. These systems empower local communities to become energy producers. In this way, these communities contribute to improving the country’s energy security while also becoming more active in economic development.

The ENGIE vision

One only needs to turn to the practical benefits of these projects. For instance, our projects are designed to benefit the communities in which we operate. The focus is on social inclusion and economic development. We actively work with local partners, stakeholders, and communities to ensure that these projects are as environmentally sustainable as they are socially inclusive.

By strengthening local energy expertise, employing local talent, and reducing inequality, ENGIE is making a meaningful contribution to South Africa’s sustainable development goals.

A transformative environment

South Africa’s renewable energy sector is on the cusp of significant transformation, driven by regulated transactions, decentralised generation, and more innovative approaches to power generation.

By embracing a diversified energy mix, investing in advanced technologies, and fostering collaboration between the public and private sectors, South Africa can build a sustainable and resilient energy future.

The private sector has a vital role to play in this regard. Through ongoing investments, partnerships, and innovative projects, companies like ENGIE and others can help the country successfully navigate the complexities of the current energy environment. It comes down to creating a cleaner, more sustainable world through the power of working together and benefitting the generations to come.