South Africa’s highly successful renewable energy programme should not be stalled due to uncertainty.

2016-06-24 08:24

South Africa’s successful REIPPP (Renewable Energy Independent Power Producers Programme) has stalled because of uncertainty.  A combination of price competition, long-term contracts, good resources and financial de-risking measures is deploying opportunities in newer markets at lower costs and currently, there seems to be little appetite for Africa with major players looking to other emerging economies such as South America.

Africa remains a huge market as more than 600 million people in Africa remain without access to electricity and this is expected to grow to 700 million by 2030 if no action is taken.  Africa needs secure and affordable energy to secure economic growth and its renewable energy resources will be pivotal in achieving SDG 7 (Sustainable Development Goals).  Policy and institutional changes are needed to remove institutional, political, technical and financial barriers to the deployment of renewable energy technologies.

The South African government sees renewables as having a critical role in advancing the transformation of the energy sector and social equity.  Renewables will contribute towards creating green economy jobs, the diversification of its energy mix and universal access to modern energy services, which is an aspiration built on the express commitment to expand the current 85% household electrification rate to 97% by 2025.  Renewables are expected to contribute to both grid and off-grid electrification, transport fuels and electricity demand-side management through fuel switching, e.g from electric geysers to solar water heaters.

At the SAIREC conference in 2015, the South African Minister of Energy, Tina Joemat-Petterson, made bold statements about the expansion of the REIPPP especially into Africa.  However, little has come of this so far.  She also highlighted South Africa’s commitment to a new global treaty on climate change at COP21.  Upscaling renewable energy is a key strategy for South Africa in achieving its mitigation targets.

South Africa’s REIPPP programme demonstrates the importance of an effective regulatory framework.  In reviewing the progress made, it is also acknowledged that there are areas remaining which require additional support to catalyse development and/or unlock the full spectrum of potential benefits.  Initiatives such as biofuels, biogas, solar home systems (SHS) and the distribution of the renewable energy generated will be important focus points in the continuing journey towards sustainable energy access for all in South Africa.

However, the regulatory uncertainty has resulted in diminished investor confidence and costs to the private sector that will not be recovered.

One way in which the above negative effects could be counteracted and support provided to the Department of Energy in achieving the commitments and objectives stated at SAIREC 2015 is through Innovative Financing for Development (IFD)—a well-demonstrated revenue raising mechanism favoured by the United Nations, World Bank and International Monetary Fund (IMF) because it relies on domestic resources, has little impact on local populations and does not rely on increased external debt. Other African and emerging countries are using IFD mechanisms to fund their own socio-economic development—by placing micro-contributions on globalised activities such as telecommunications.  These are capable of generating significant amounts of revenue which could be ploughed into the renewable energy programme.

Renewable energy is crucially important for continued development in South Africa and Africa as a whole.  It will not run out.  Ever.  Other sources of energy are finite and will some-day be depleted.  Renewable energy investments are spent within the country which means energy Rands stay at home to create jobs and fuel local economies.

South Africa has done exceedingly well in renewable energy so far.  It would be a pity to allow policy uncertainty and a lack of funding or limited budget allocations to stall the progress when clearly the REIPPP could benefit from the enormous boost Innovative Financing could bring.

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