South Africa

Electricity constraints over the year of 2023 and the beginning of 2024 drove a large uptake of small-scale embedded generation at household and commercial level, the result of this was a boom in the solar photovoltaic (PV) and battery industries; having a knock on effect of technology innovation, as well as a positive effect on cost reduction particularly for batteries.  While there may not be policies that are specifically conducive to driving alternative energy uptake, outside of grid, there are no policies prohibiting this, therefore when the need arose, industry and the general public were able to harness current innovative technologies available in the market and drive these forwards.  In the midst of this, government implemented beneficial systems such as tax rebates for those that opt for alternative energy technologies.

Government’s policies are designed to ensure energy supply diversity within a primarily fossil fuel reliant electricity mix.  A number of policies support this drive towards an energy mix, including alternative energy technologies, not least of these is the Integrated Energy Plan (IEP) and the Integrated Resource Plan (IRP 2023) for the country.

South Africa has several policies to support solar photovoltaic (PV) energy, including tax incentives, the Solar Exclusion Norm, and other regulations.  The Solar Exclusion Norm exempts certain PV facilities from environmental authorization in areas with low or medium environmental sensitivity.  The policy aims to speed up project approvals, reduce costs, and increase investment in solar energy.

In the beginning of 2023, the Minister of Finance introduced a PV panel tax rebate during the annual Budget Speech.  It was designed as a financial incentive for individual taxpayers who choose to privately install solar panels.  The rebate applied to qualifying PV panels brought into use for the first time during the period March 2023 to 29 February 2024.  Therefore this rebate concluded at the end of February 2024, and saw some market uptake.

In July 2024, on the heels of the above, it was announced that an income import tax of 10% would be levied on all PV panels brought into South Africa.  This was credited with having been an initial step towards the execution of support to solar PV through the South African Renewable Energy Master Plan (SAREM).  This bold move was designed to drive towards creating a localisation potential for the renewable energy industry in South Africa.  However, although the rapid uptake of solar PV with battery backup supported energy security and alleviated some demand on the grid, this announcement was met with mixed responses.  It was felt that, with the very small capacity of PV assembly and/or manufacture in South Africa, the panels did not meet desired quality or performance.  At this point less than 10% of households were making use of PV technology to meet the energy requirements.

The knock-on effect of this is that there is a growing potential for local industry and market development and growth around providing, installing, operating and maintaining these technologies and systems.  This, to date, has been an untapped potential in South Africa due to the competition with cheaper products that are imported from overseas.  However, should the demand and market grow enough to reach critical mass, South Africa’s own manufacturing and value chain support structures would then be able to compete in this space and match the lower prices.

At present, although there is a lot of research taking place at lower technology readiness levels and a few performance testing centres are actively providing data, there is not a large output from the renewable energy PV research space.  This is largely due to the facts listed above, that importing panels is a lower cost with less risk involved, particularly for project demonstration purposes. Having stated this, micro demonstration projects targeting technology performance under specific conditions suited to South Africa are underway.  One of these forms part of the research being conducted by the South African national energy development institute (SANEDI) in order to determine how the technology performs under extreme and harsh environmental conditions in mining and high temperature areas of South Africa.

Battery technologies allow for balancing of supply and demand particularly in grid scenarios where a consistent electrical supply is required in order to maintain stability.  Current battery technologies are innovating in a number of areas with a number of different approaches.  However, all of these include an increased longevity and energy density focus point, particularly when one considers the cleaner mobility sector and the requirement for batteries that can provide longer range for vehicles of all types.  The mobility sector stretches across all spheres, including air and water travel, not only land travel and it is against this scenario that one must begin to consider a shift towards sustainable fuels in the industrial sector.

It is also exciting that larger capacity wind turbines are being installed, therefore supplying electrons to the grid to support supply during energy constrained periods.  Over and above this, South Africa is currently initiating battery energy storage systems at grid scale, the current bidding window that has seen the award of several large-scale projects that will provide energy storage to the grid in order to balance the supply and demand during periods of intermittency from renewable energy resources.  Battery storage technologies also seem to have taken an innovative leap forward in terms of energy density, depth of discharge and longevity.

Decarbonisation of heavy industry poses a number of different challenges in the South African context, not least of which is the relatively low cost of fossil fuels and therefore conventional electrical technology applications.  It is important to remember that alternative technologies will need to compete with those currently in place and make financial sense through either penalty, carbon credit considerations or bottom-line profit margins in order for industry to be convinced to shift towards a lower carbon technology application.

Energy security remains paramount to daily life functions.  Therefore, ensuring sustainable energy, that is environmentally considerate, should be at the forefront of any initiative.

Heavy industry processes are often very reliant on heat, making solar energy a very attractive option to consider for South Africa.  However, although the resource is free, the technology is not and therefore the business case for down time on systems and a full system technology switch with associated skills and technological hardware requirements would need to make business sense for industry to consider this shift.  At present this is not always the case particularly in the large steel, cement and mining industries of the country.  The primary driver for these industries to shift towards alternative energy resources will probably be the constrained electrical grid, as it stands and into the future, when one takes into account the decommissioning of the older power stations that must occur.

At present the capital expenses required to implement alternative energy technologies including backup storage, is quite significant compared with the current fossil fuel based alternative.  However, in the interests of energy security, many companies (and even down to the household level) are indeed making the strategic decision to shift towards a diversified energy mix in order to ensure productivity continues even during periods of constrained energy supply.  At present government has a number of initiatives in place in order to support companies that are moving towards either energy efficiency, and therefore a lower energy demand for their same processes, or implementing of an alternative energy technology, these include a number of tax incentives.