South Africa’s energy space has evolved over the past few years, but even more significant market transformation lies in the years ahead.
Regulatory changes, the separation of Eskom, decommissioning of coal power stations and the growth of renewable energy are all set to play their part. This is according to Katherine Persson, MD of SOLA Group, speaking to ITWeb TV this week.
“The energy system in South Africa is quite stable at the moment,” she said. “We haven't had load-shedding [for over a year] because there's enough energy to meet the demand. Whether that can stay sustainable over the long-term really depends on how quickly Eskom’s old coal plants get decommissioned and whether the amount of renewable energy is sufficient at that time to fill the gap.”
She added: “A lot of [independent energy] projects are ready and waiting. To put it in context, the South African grid has about 55 gigawatts of generation and there’s about 20 gigawatts of new generation projects, mostly renewables, that have registered and have shown the intent that they are planning to start construction over the next three to five years.”
A key part of this evolution has been the formalisation of electricity wheeling – the independent production of power in one location, added to Eskom’s network, and consumed by a third-party elsewhere that has paid the independent power producer (IPP) directly.
Gazetted in 2021, amendments to the Electricity Regulation Act of 2006 opened the doors to energy wheeling, something Persson calls “an accounting treatment, a reconciliation”, where the addition of power to the grid is metered and then its draw from the grid is also measured.
SOLA Group’s supply agreement with Amazon Web Services in November 2021 was the first solar energy wheeling project in the country.
Persson said that once the legal hurdle was removed, there were concerns about a lack of funding throttling the potential for renewable energy, but that hasn’t transpired.
“Our lenders in South Africa, all the big commercial banks, have got very strong lines of funding to be able to back these projects. About R60 billion, maybe more, was invested into renewable energy projects in the last year alone.”
SOLA Group is currently building a 300MW solar project in the Free State, which Persson said covers about the same area as 700 football fields (approximately five square kilometres).
While there’s a lot of enthusiasm about the production of energy, the major constraint she sees ahead is physically adding energy to Eskom’s national transmission network, which has seen limited investment over the past few decades.
“We're now reaching the point where it's getting trickier to find a place where you can inject new generation into the network.”
The separation of Eskom’s transmission network is now underway, with the National Transmission Company South Africa having been formed.
“That's the company that’s going to be working with the private sector to get more investment into building new transmission infrastructures so that more projects can connect.”
Persson sees a further evolution in the electricity market over the next two to five years. “We're moving away from the days where we would sell from one project to one buyer, or we would only sell to the government. There's going to be the introduction of the South African wholesale energy markets, which is really moving us towards having more sophisticated and advanced ways of selling and buying renewable energy, in fact any kind of energy.”
This will create a more competitive market.
“The days of Eskom producing all of the electricity for the country are now gone. Probably close to 30% of the electricity that's produced in the country is from renewables and a big chunk of those are now selling to private buyers. That adds competition, in the ability for any consumer, be it a big industrial or a domestic user, to be able to choose where they want to buy their electricity; it's definitely coming and the wholesale market will really support that.
“In the next two to five years, we'll see the wholesale energy market completely established and up and running, which I think is a really big advancement and something that we've been preparing for over probably a decade. [There will be] a lot more competition, a lot higher representation of renewable energy facilities making our South African grid to be much cleaner…hopefully the future is a lot more dynamic, a lot more technologically-advanced and a lot greener.”
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