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A SENSE OF AFRICA
Lessons African countries can learn from the South African REIPPP
Celine Paton, Consultant for Energy & Environment, Frost & Sullivan Africa
F
ollowing global trends leaning to-
wards a more sustainable future,
governments in most African countries
have established increasingly ambitious
Renewable Energy (RE) targets for their
power sector. However, with the notable
exception of South Africa and the hydro
power sector, not much has materialised
thus far. The South African Renewable
Energy Independent Power Producer
Programme (REIPPP), implemented since
2011, has proven to be a large success for
the country, with 6,3 GW of RE procured
by Eskom since its inception. This totals
approximately 15% of South African in-
stalled power generation capacity. At the
end of 2015, more than 2,2 GW , of the 6,3
GW new procured power, had been com-
missioned and injected daily into the grid.
Design of SA REIPPP
Many best-in-class international advi-
sors were involved in the design of the
South African REIPPPP and assisted the
Department of Energy’s IPP office with im-
plementing global best practices. South
Africa has succeeded in creating a highly
competitive RE market; however, has tak-
en about 15 years to reach this goal. The
South African Government announced
its commitment to support and promote
the development of RE through a White
Paper on Energy Policy published in 1998.
Thanks to a large global uptake of solar
PV and wind projects, and a gradual de-
crease in their production costs, the com-
petitiveness of the RE power sector has
improved considerably. With South Africa
paving the way towards the inclusion of
RE power on a larger scale, other African
governments have started to show inter-
est in solar and wind power. Additional
contributing factors include: inefficiency
of hydro power in drought periods, the
need for greater power generation diver-
sification, energy security and urgency in
addressing a growing power gap.
The lessons
There are many lessons that can be
learned from the South African REIPPPP.
These will, however, require adjustment
in order to take into consideration the key
peculiarities of these countries. Compara-
tively, given their respective size, no other
countries in sub-Saharan Africa (with the
exception of Nigeria) can expect the same
economies of scale – in terms of new
power supply needs – as those required
in South Africa. Implementing project
finance structures into small RE projects
is a costly exercise and often non-viable.
Until recently, international private devel-
opers have been reluctant to implement
small- to medium-size solar and wind
power projects. This can attributed pri-
marily to lengthy negotiations, often tak-
ing place with utilities and governments,
combined with an inadequate legislative
framework. This has consequently led to
an increase in transaction costs that are
unsustainable. To address these issues,
new programmes supported by Develop-
ment Finance Institutions (DFIs), like the
IFC Scaling Solar Programme and the KfW
GET FiT Programme in Uganda, have re-
cently been developed. These DFI-funded
programmes are also offering the pos-
sibility to implement successive rounds
of competitive bidding – yet at a smaller
scale – as well as to bridge a capacity gap
at government level in order to negotiate
bankable power purchase agreements
with the private sector.
There is a plenitude of ‘small-
er’ opportunities across
the region, but investors
will need to find an ef-
ficient way to finance
them (e.g. portfolio
approach). Most sub-
Saharan African countries lack the local
funding resources to finance large-scale
RE power projects. There are a lot of in-
ternational funding sources available to
promote electricity access in sub-Saharan
Africa for example, especially for clean
technologies, but these are often tied with
constraining or costly conditions. How-
ever, the context is evolving positively
with new creative funding sources and
support offered by DFIs, such as the IFC
and KfW. Other key factors include:
• The need for a strong support from the
government at various levels towards
their (often poorly financed) state-
owned power utilities and through the
implementation of a clear and stable
legislative and regulatory framework
promoting private investment
• Insufficient grid capacity and lack of
financial resources from utilities to
strengthen and expand their power
network also creates a major stum-
bling block
• Governments should aim to align
electricity tariff affordability with the
economic benefits achieved thanks to
the new RE power projects
• There must be a buy-in from the local
community. For more successful RE
projects to be commissioned, strong
engagements between project devel-
opers and local communities living in
the vicinity of such projects must take
place
Conclusion
The technology that will be adopted must
be consistent with the needs and capaci-
ties of the country concerned, creating
a sustainable and affordable electricity
generation mix. Given their variable en-
ergy output, and until we find newways to
store it efficiently, RE technologies should
be accompanied by other (more conven-
tional) technologies like gas-to-power and
greater regional grid integration, a path
that South Africa will eventually follow
in the near future.
Enquiries:
Electricity+Control
May ‘16
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