EDITORIAL: Renewable energy snags risk stalling economic rebound

SA is betting big on the just energy transition being one of the main drivers of job creation, economic growth and industrialisation over the next 10 years. 

Energy has been one of a few sectors that kept the boat from sinking during the past two to three post-pandemic recovery years. Renewable energy projects accounted for much of the investment that occurred in 2022 and 2023, but there are now a few hurdles that can slow the pace of investment, just as the economy is starting to lift.

One of the biggest obstacles is the transmission grid. Eskom’s plans to expand the grid by 14,000km over the next 10 years or so started slowly. However, as Brian Day, the SA Independent Power Producer Association chairperson told Business Day, Eskom has recently made progress in prioritising the projects that will have the most impact. Within the next two to three years the pace at which new power lines are built can pick up, but SA cannot afford a three-year lull in renewable energy investment.

The installation of rooftop solar can continue because these embedded systems do not rely on the transmission network. The small-scale embedded generation sector can drive about R100bn in investment up to 2030, according to GreenCape. But the big money projects such as large wind and solar farms, which are essential if SA is to establish a renewable energy value chain, rely on more power lines being built in those parts of the country that have the best wind and solar resources — mostly the Cape provinces.

Eskom’s transmission build plan will require about R390bn in capital investment. The Energy Council of SA has done modelling that shows SA needs about R1.8-trillion in investment in the electricity sector over the next 10 years (that includes investment in the transmission grid) to achieve a renewables penetration rate of about 40% in the energy mix.

Unlocking this magnitude of capital investment can turn things around for SA’s stagnant economy. But for that to happen as quickly as possible the government and regulators need to show urgency.

Eskom is waiting for Nersa to approve a proposed curtailment regime that will allow for about 3,470MW of new wind power to be connected to the grid in the Eastern Cape and Western Cape. Approval would save bid window 7 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).

Potential investors are waiting for the Treasury to table its pilot proposal for how the private sector will be able to participate in the funding and building of new transmission grid infrastructure. At the February budget, the Treasury said the pilot would be launched in July. In July it said it would be launched “this year”. We wait.

The Treasury has made it clear that the state guarantees it has given until now for the REIPPPP projects are unsustainable, but it has not suggested an alternative. Everyone is waiting for clarity on future electricity tariff structures, while the minister of electricity and energy announced recently he would be reviewing SA’s electricity pricing policy.

Meanwhile, independent electricity traders are facing resistance from Eskom and municipalities who are losing large chunks of their paying customer base to private power companies.

None of this is helping unleash the billions of rand of much-needed investment that a fast-growing renewable energy sector can bring to SA.