South Africa is the continent’s biggest economy and has enjoyed major success in promoting renewable energy to commercial investors through the Renewable Energy Independent Power Producer Procurement programme (REIPPP). The REIPPP emerged as a world-leading example of solar and wind energy procurement, with the goal of producing 17.8GW of energy from renewable sources by 2030. However, the South African picture has been clouded by major financial and governance problems for the state utility Eskom, and especially the procurement of huge new coal-fired power plants.
Despite these problems, South Africa has many strengths, including a conducive regulatory environment and strong domestic financial markets and banking sector. This has led to very large flows of private investment, which constitute the majority (79%) of SDG7-compliant investment recorded over the period 2014-2019, at EUR 5.7 billion, followed by ODA commitments by EU Institutions and Member States of EUR 1.2 billion (16%) and a further EUR 283 million (4%) by non-African multilateral institutions.
While large amounts of ODA loans, and to a much lesser extent grants, have been extended to the renewables generation subsector by EU Institutions and Member States, far larger amounts have been directed towards transmission and distribution – a sector which does not traditionally attract private capital. Unlike most LDCs and LMICs, the overwhelming majority of EI & MS funding for the T&D subsector has taken the form of concessional loans rather than grants, perhaps reflecting South Africa’s position as the most advanced economy in Sub-Saharan Africa. Also reflecting this economic status is the concessionality of European ODA lending. While only limited data is available, the grant element of ODA loans disbursed over the 2014-2019 period was 31%, which is significantly lower than the levels recorded for LDCs (53%) and LMICs (50%).
The results of European support for the renewables generation subsector are clear. Thus far, 6,329MW of solar and wind power has been procured via the REIPPP, of which 3,876MW is grid-connected. The REIPPP has been deemed the “the most successful public-private partnership in Africa in the last 20 years”, and has received EUR 11.4 billion of private investment commitments. Its success owes much to its well-structured bidding processes, which have become increasingly competitive in each of the four rounds of bidding so far. As a result of these processes, efficiency improvements and falling procurement costs, South Africa now boasts some of the world’s lowest renewable energy tariffs.