In a bid to avoid a massive energy shortage in South Africa, which has been brought on by significant expansion of the local economy and the rising cost of commodities, such as oil and coal, the South African Department of Energy (DoE) has turned to renewable energy sources as a solution.
According to the UN Environment Programme, South Africa recorded $5.7bn in renewable energy investments in 2012 alone, particularly for solar power projects.
In 2009 and as part of its contribution to supporting a growing economy, the DoE announced plans to award the first licenses to independent power producers (IPP) by early 2011 to create clean energy projects, with additional licenses being awarded in 2012 and again through its third IPP Bid Round in 2013.
Solar Capital, a local solar energy company, was the only company in South Africa to win tenders in both Bid Round 1 and Bid Round 2 to develop one of the largest solar farms in the world, which will be situated in De Aar.
“The investments in large-scale solar power projects will transform the African continent, where rising populations and six of the world’s 10 fastest-growing economies have resulted in ever growing energy deficits. The DoE has realised that in order to keep up with an ever growing demand for electricity, more needs to be done to develop alternative energy sources. Their plan, with the backing of the South African National Treasury, to develop an 18GW renewable energy programme over the next 20 years is well on its way to meeting this need,” states Paschal Phelan, Solar Capital president.
The majority of electricity in South Africa is currently generated from burning fossil fuel, with only one nuclear power plant in the Eskom fleet, with approximately 75% of all electricity in Southern Africa being generated from coal-burning power plants. The plan by the DoE, known as the South African Integrated Resource Plan (IRP), aims to find alternative forms of energy, particularly within the solar energy sector.
The potential for renewable energy generation is high and the successful execution of the Renewable Energy Independent Power Producer Procurement Programme (REIPPP) has powered the growth of the country’s renewable energy industry. The REIPPP aims to generate 3 725MW of the country’s electricity from renewable sources. Renewable energy accounted for less than 1% of the energy mix in South Africa in 2012: it is expected to reach 12% in 2020.
The first phase of the Solar Capital De Aar Northern Cape project will generate enough electricity to power approximately 35 000 South African homes every year, with the intention of delivering the first 75MW of solar energy generated electricity into Eskom’s power grid.
The company’s 94.5MW first phase project is the largest solar farm in South Africa and with the completion of the second phase in 2016, totaling a combined 200MW, will make this the largest in the Southern Hemisphere.
The DoE’s commitment to grow the renewable energy market in South Africa extends beyond just increasing the supply of electricity to the country’s energy grid. A study by the Development Bank of Southern Africa and Economic Research Institute Trade and Industrial Policy Strategies supports the government’s ambitions, estimating the potential in the formal sector of the green economy at roughly 462 000 possible jobs by 2025.
The Solar Capital De Aar Northern Cape project is an example of the DoE’s commitment to revitalising and uplifting the communities in which their renewable energy initiatives are being implemented.
A Community Trust has been formed, which will own 8% of the project and as significant shareholders in the project, will ensure dividends in excess of ZAR350 million over the 20 year period.
Through Solar Capital, a guaranteed 10% of the project’s income will go to the community’s social and economic initiatives, which will amount to over ZAR46 million in the first five years alone.
The company has also committed to spending ZAR191 million of its total income on social-economic development and ZAR76 million on enterprise development over the 20 year lifespan of the first phase of the project.
Janice Finlay, Head of Social Economic Development for Solar Capital says that the development of renewable energy sources creates new economic opportunities through job creation, improved education and various other social development programmes in the rural towns of South Africa.
“We have exceeded the goal of meeting the DoE’s target of a minimum local employment on the initiative, with approximately 90% of the workforce coming from the local community. Of the 2000 employed by the Solar Capital project, over 90% are locals from previously disadvantaged backgrounds.”
Outside any commitment from the DoE, the company has also donated over ZAR2 million to the Foundation for Alcohol Related Research (FARR), which is heavily involved in the De Aar community.
“The South African Government is now more than ever committed to embracing and developing the benefits that clean energy offers. As one of the biggest players within the solar energy sector, we are excited about the growth and positive impact that solar power is having on the country and communities we work in,” he concludes.