South Africa’s hopes of becoming one of the world’s top renewable energy hubs are dimming due to poor infrastructure and delays as cash-strapped state utility Eskom is distracted by a scramble to keep the lights on.
Chronic electricity shortages are one of the biggest brakes on growth in Africa’s most developed economy as regular blackouts strangle industries from mining to manufacturing and pile pressure on President Jacob Zuma’s government.
Zuma laid out ambitious goals last month to increase power generation capacity, including plans to boost installed renewable energy capacity to 9,600 megawatts (MW) by 2030 from just 1,600 MW now, out of a total capacity of 44,175 MW.
Upgraded technology and lower costs have enhanced the appeal of clean energy in Africa, as firms such as Enel Green Power and E.ON eye the relatively untapped region to help offset lagging growth in mature European markets.
With year-round sunshine and thousands of miles of windswept coast in South Africa, investors are warming to the renewable energy potential, with 66 projects completed or underway since the government launched a first bid round four years ago.
Yet, developers are becoming impatient over delays and a lack of infrastructure to connect privately-run power stations (IPPs) to the national grid, with the risk that investors might switch to rival markets such as Mexico and Brazil.
“There is a growing sense of frustration among developers as we negotiate with Eskom and government on grid upgrades and how it is financed,” said Jack Zhao, deputy general manager for Africa at Goldwind, a Chinese wind turbine maker.
“If everybody has to wait for three to five years for a grid connection, South Africa will lose investment. The longer you wait the more expensive it becomes,” he told Reuters.
Firms such as Spain’s Abengoa, which is building South Africa’s first two concentrate solar power stations, are ready to investment more, but the government needs to upgrade substations and install thousands of kilometres of high voltage transmission lines to deliver the new energy supplies, industry experts say.
Sutherland, an inland mountainous region with huge wind power potential, does have existing transmission lines but the absence of a 200 million rand ($17 million) substation is holding back the development of 1,000 MW of wind power.
“There are a variety of challenges in the way of South Africa entrenching its place as one of the world’s top clean energy markets,” said Johan Muller, energy analyst at Frost and Sullivan consultancy. “If Eskom does not get its house in order soon, then there are real risks that could deter investors.”
Cash-strapped Eskom has other problems it may consider more pressing as it tries to limit power blackouts by repairing and building more coal-fired plants, which supply the bulk of South Africa’s electricity.
The country is experiencing its worst blackouts since 2008 as Eskom regularly cuts power to preserve a national grid teetering on collapse. The Treasury said last month South Africans should brace for three years of power disruptions.
The utility says it needs 149 billion rand through 2022 to upgrade its transmission network but the government said it had already “exceeded” its limit, and only allocated 2.3 billion rand to strengthen the network in the last bid round.
“Eskom is being squeezed from all sides,” said Eric le Grange, an energy lawyer at ENSafrica.
“We need to be realistic as to where the resource allocation goes to, and at the moment this is not grid expansion but keeping the lights on.”