Financing strategies for renewable energy expansion in South Africa

Abstract

South Africa faces an energy crisis caused by its underperforming coal power stations and, therefore, needs to solve the maintenance challenges at these coal power stations to address the current energy shortages. In the long term, the country plans to expand its renewable energy procurement from the private sector through the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), which depends on the private sector's ability to secure fi nance for plant construction. During the REIPPPP bidding window (BW) 5 of 2021, it was confi rmed that the average cost of renewable energy generation from solar and wind alternatives was cheaper than coal-based energy. In addition, these projects have a shorter construction phase, often reaching the operational phase within two years after concluding a Power-Purchase Agreement with Eskom or a municipality. However, significant fi nancing is required to achieve the 2019 Integrated Resource Plan's (IRP) renewable energy targets, given that the Industrial Development Corporation (IDC) estimates the country needs to allocate ZAR 8,9 trillion to achieve its 2030 targets.