South Africa’s renewable energy sector is the largest electricity market in Africa and one of the top 25 largest in the world in terms of volume demand. It is set to grow by nearly 50% over the next decade. This reflects a major shift in how we think about and use energy. Despite its long reliance on coal power, the country is looking to turn the corner and start embracing cleaner, more sustainable energy sources.

This will not happen overnight when the South African energy landscape has been dominated by coal. Approximately 87% of the nation’s 42,000 MW of electricity is generated by coal-fired power stations. The reality is that coal will continue to provide the majority of South Africa’s power for the next decade. However, the share from renewables will grow rapidly. The minister’s decision to procure another 4 GW of photovoltaic (PV) and 10 GW of wind marks the next step in meeting a target of 9 GW of solar and 18 GW of wind capacity by 2030.

Adding complexity to an already challenging environment, Eskom is experiencing some challenges with financial and operational difficulties. Recognizing the urgent need for diversification, the government has set ambitious targets under the Integrated Resource Plan (IRP) to increase the share of renewable energy in the national grid. This shift towards renewables represents a fundamental change in how South Africa will power its future.

Fortunately, the country is blessed with abundant solar and wind resources. This provides a natural solution to our collective energy needs. The cost of electricity generated from solar PV and wind has fallen below the system value, making these technologies not only environmentally beneficial but also economically viable.

The South African renewable energy sector is poised for significant growth driven by government policies such as the which has successfully attracted private investment and fostered the development of large-scale renewable projects. Batteries will also play a major role in energy shifting, ancillary services and capacity provision.

Since 2021, the government has been making amendments that have made it progressively easier for private developers to sell power to private offtakers. This allows IPPs to sell power to one or more customers either on-site or wheeled across the transmission networks and without a license, regardless of their size.

However, despite South Africa having some of the best wind and solar load factors in the world, the path to a renewable future is not without its challenges. There are lengthy and cumbersome administrative processes related to the requested licenses and approvals, as well as a lack of a comprehensive wheeling framework.

Another constraining factor is the limited capacity of the transmission and distribution infrastructure in optimal locations. Eskom’s Transmission Development Plan aims to solve this problem by building 14,000 km and 37 GW of connection capacity between 2025 and 2033. Considering the associated costs for new and upgraded existing transmission capacity and given Eskom’s constrained balance sheet, the government is exploring models for private sector participation in transmission development.

Furthermore, the recent is set to completely overhaul the electricity supply industry in the country by establishing a hybrid or multi-market model that comprises market transactions, physical bilateral transactions, and regulated transactions.

When factoring in these complexities, it therefore makes the most sense for South Africa to adopt a diversified energy mix that balances renewable energy with reliable, dispatchable power sources. This will ensure energy security, reduce transmission losses, and increase resilience against power outages.

The emergence of decentralized distribution networks, including local grids and microgrids, offers improved reliability and efficiency in energy distribution. This is most significantly felt in remote or underserved areas. These systems empower local communities to become energy producers. In this way, these communities contribute to improving the country’s energy security while also becoming more active in economic development.

South Africa’s renewable energy sector is on the cusp of significant transformation, driven by regulated transactions, decentralized generation, and more innovative approaches to power generation.

By embracing a diversified energy mix, investing in advanced technologies, and fostering collaboration between the public and private sectors, South Africa can build a sustainable and resilient energy future.

By Lea Giroux, Head of Business Development—Renewables at ENGIE