South Africa’s big power play is paying off
Africa is slowly but steadily improving its energy security, with South Africa emerging as a leader in the continent’s transition towards renewable energy development.
This is according to PwC’s Africa Energy Review 2024 report, which examines some of the key developments influencing change across Africa’s energy landscape, particularly with progress made towards a just energy transition.
Energy access is undeniably one of the most crucial components of modern-day living, but across Africa, approximately 600 million people do not have access to reliable power.
PwC emphasises that there has been a considerable shift in recent years in how actors are addressing these energy needs.
In 2023, clean generation capacity on the continent increased by 7.1%, fossil fuel generation by 0.1% and total generation by 1.8%.
Andries Rossouw, PwC Africa Energy Utilities and Resources Leader, said that they “anticipate that clean power generated in Africa will increase to 25% by 2025 as growth in solar, wind capacity, and hydro-generated power continues.”
“Power generated over the last decade has increased by 12.5%, which is four times less than the increased capacity… due to ageing fossil fuel plants—particularly coal-fired power stations—with declining availability factors and weather-dependent non-dispatchable solar PV and wind replacing that supply with lower efficiency factors,” added Rossouw.
Looking at some of the key developments across the continent, countries are increasingly embracing electricity liberalisation, opening the sector to private investment, participation and collaboration
between government and the private sector.
PwC said that Southern Africa is leading in renewable energy, particularly solar and wind, with South Africa at the forefront of investments, which accounts for nearly 90% of all renewable energy investments in the region.
Looking specifically at South Africa, PwC said that the country “has made considerable progress toward liberalising its energy sector, with a major update being the signing of the Electricity Regulation Amendment Act in August 2024.”
This act introduces sweeping reforms designed to create a competitive electricity market and modernise the sector.
South Africa’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) is boosting solar and wind energy deployment, driven by rising demand for independent generation amid intensified load-shedding and decreasing solar costs.
Key projects, like the Garbo, Karusa and Seriti wind farms, are pivotal. Recent regulatory relaxations have spurred private investment, with 105 new power plants registered in early 2024.
Wind farms in South Africa have drawn over R90 billion in investment – including the R25 billion project that’s the largest of its kind in the country.
A $6.3 billion Transmission Development Programme aims to extend 14,000 km of transmission lines, enabling 30,000 MW of renewable capacity in five years.
Despite these advances, South Africa’s reliance on coal remains significant, contributing 80% of the country’s electricity generation in 2023.
The bump in the road
“Despite significant advancements across these regions, challenges remain in infrastructure and financing, underscoring the need for continued investment and collaboration to meet growing energy demands and a transition to sustainable energy systems,” said Pedro Omontuemhen, PwC Africa Oil and Gas Leader.
This was recently echoed by South Africa’s Forestry, Fisheries and Environment Minister Dr Dion George, who said that if countries are to make good on their climate target objectives, annual climate financing commitments from developed countries needs to increase more than tenfold to “at least $1.3-trillion (~R23.02 trillion)” annually.
The funds discussed refer to the New Collective Quantified Goal (NCQG) for climate finance, where in 2009 at the Copenhagen Climate Summit, developed nations pledged $100 billion annually by 2020 to support developing countries meet climate targets.
It was only in 2022 when developed countries met the annual $100 billion goal for the first time provided, mobilising a total of $115.9 billion in climate finance for developing countries.
“It is very complicated, the developed countries were meant to contribute $100 billion, but they didn’t. Our view is that $1.3 trillion is required,” said George.
“But getting developed countries to make this contribution is hard because there has been a (political) shift to the right, and it’s more difficult to get countries to contribute. We have said, let’s have some honesty, say if you are going to contribute or not, so we know,” he added.
PwC said that “the capital investment required to address the South African energy challenge of trillions of Rand requires significant collaboration between the public and private sector to provide generation, grid and gas infrastructure.”
“No one entity has the resources, funding or execution capability to do this on its own.
The collective strengths of the public and private sector through collaboration are essential to effectively deliver energy infrastructure to achieve energy security at best cost [and] such a collaboration will provide the necessary momentum to support energy market liberalisation,” added PwC.
Driving factors taking Africa’s energy sector forward
PwC emphasises that while a just energy transition is also the direction in which we should all be moving, for Africa, it must learn to maximise its value from fossil fuels while this transition happens.
“The recent gas and oil discoveries in Namibia and Mozambique are poised to boost economic growth by creating jobs, enhancing energy security and attracting foreign investment,” said Roelof van Huyssteen, PwC South Africa Energy Law and Strategy Senior Manager.
“At the same time, we need to continue with the momentum we have gained on the renewable energy front, capitalising from the continent’s vast natural resources, which will help reduce our reliance on fossil fuels and promote sustainable growth.”
The full report can be found below:
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