Time ripe for SA renewable energy investments

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The time is ripe for South African businesses to make applications for finance to develop renewable energy and energy-efficiency projects.

This is the view of the South African National Energy Development Institute (SANEDI) in the wake of load-shedding and energy price hikes.

SANEDI was established in 2011 under the National Energy Act, 2008. The Act provides for SANEDI to direct, monitor and conduct energy research and development, promote energy research and technology innovation, as well as undertake measures to promote energy-efficiency throughout the economy.

Financially-constrained Eskom, which supplies about 90% of SA's power, last month implemented stage four rotational load-shedding.

As the challenges at Eskom persist, SA has been making steady progress in incorporating renewables into the country's energy mix.

The South African government envisages that in 2030, the energy mix will consist of 34 000MW of coal, representing 46% of installed capacity; 11 930MW of gas, or 16% of installed capacity; 11 442MW of wind, or 15% of installed capacity; 7 958MW of photovoltaic (PV, or solar); and 4 696MW of hydropower, or 6% of installed capacity.

This was stipulated in the country's Integrated Resource Plan (IRP) 2018, a 20-year energy roadmap to meet SA's future power needs.

Electricity prices increased in SA from1 April. Last month, energy regulator Nersa said it had granted power utility Eskom the following tariff increases over the next three years: 9.41% or allowed revenue of R206.34 billion for 2019/2020; 8.10% or allowed revenue of R221.8 billion for 2020/2021, and 5.83% or allowed revenue of R233.1 billion for 2021/2022.

Green transition

SANEDI, which hosts SUNREF, an international lending programme that promotes green finance and energy innovation, has called on businesses to consider accessing SUNREF's green loans to develop renewable energy and energy-efficiency projects, in support of the country's efforts towards green transition.

SUNREF, developed by French Development Agency, is a programme relying on two pillars: a credit line to partner bank IDC, and a technical assistance facility hosted by SANEDI and funded by the State Secretariat for Economic Affairs in Switzerland.

The programme helps green projects become bankable and access financing from IDC. It is linked to a credit line with the IDC for around $60 million to fund projects that fit its mandate to promote energy-efficiency and renewable energy in SA.

Rob Short from SUNREF explains who can apply for the green loans: "It can be any business, in any sector, that wants to look at energy-efficiency or renewable projects in terms of its own internal processes or within its supply chain. As well as companies that provide manufacturing services or goods for the renewable energy and energy-efficiency sectors."

The types of projects which would be considered for funding comprise solar rooftop PV, biogas projects, biomass energy projects, but also any industrial projects that improve their processes to reduce carbon emissions.

The SUNREF credit line with the IDC is a debt fund, offered at a concessionary rate. Short adds that SUNREF's green loans can be combined with equity support from the IDC.

Stage two of this green programme builds on the successful initial stage implemented by AFD, SANEDI and three partner banks between 2012 and 2015, that allowed for the financing of 120 small-scale green energy projects, resulting in CO2 savings of 370 000 tonnes per year.

Time for change

Barry Bredenkamp, senior manager for energy-efficiency at SANEDI, says now, more than ever, is the time to invest in energy-efficient projects.

"Escalating electricity costs and energy security concerns, and the upcoming carbon tax, create a landscape which should see more businesses adopting clean energy projects to address these challenges. But there are also incentives being offered to businesses through, for example, the Section 12L tax incentive from government."

The 12L tax incentive, which SANEDI is responsible for implementing, encourages businesses to reduce their electricity bills and improve their carbon footprint, while at the same time providing a rebate on their tax return.

Meanwhile, Penny Herbst, director of strategy at Africa GreenCo, says business models for energy investment need to change.

"There are far too many players that are comfortable with the same structures for investment, selling to an SOE [state-owned enterprise] with a government guarantee. What we really need at present is for investors to have a stake where their influence contributes to improving the electricity supply industry as a whole.

"Both current investors familiar with the South African environment and those that wish to enter the market for the first time are awaiting the release of the revised IRP for their next move.

"What is clear though is there is a myriad of players lying in wait to capitalise on the gap that has been created by the unfolding Eskom financial and reliability challenge."

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