By Andre Nepgen, CEO, Discovery Green
South Africa’s electricity challenge isn’t just about keeping the lights on; it’s about growing the economy. Growth needs electricity – without reliable, affordable power, productivity slows, businesses can’t scale, and jobs don’t get created. It is widely evidenced that economic growth, and the affordability and availability of electricity, are inextricably linked. In addition, there is the challenge of competing on a global stage with the dirtiest electricity mix of any country.
And yet, the solution is literally all around us.
South Africa boasts some of the world’s most abundant solar and wind resources – an untapped advantage that could supercharge our economic growth and accelerate our decarbonisation goals. We get over 2 500 hours of sunshine annually and rank among the top 10 sunniest countries globally – far outpacing Europe, for example, which averages just 800 hours. Our wind potential is equally impressive, with consistent speeds of six to eight metres per second, placing us in the upper tier globally for onshore wind. Also, renewables are now cheaper than fossil fuels, plus the cost of renewable energy projects has fallen.
So, the question isn’t why we should transition. It’s why we haven’t done it faster?
Despite the clear economic and environmental incentives, only around 6 500 MW of installed renewable energy capacity, including solar, wind, and other renewable technologies, is connected to the national grid. Meanwhile, electricity costs have increased by over 4 times in 14 years, compared to just under 2 times for general consumer prices. This alone should have been the catalyst for rapid change, but structural challenges continue to slow progress.
The first challenge is limited grid access. South Africa has not invested in its transmission infrastructure, particularly in areas with the strongest renewable energy potential. This means that many well-developed projects simply can’t connect. While grid expansion is now a national priority and steps have been put in place, the process is complex and will take time.
The second is that most renewable energy projects aren’t making it to financial close. The 2024 South African Renewable Energy Grid Survey found that of the 133 GW of projects in the development pipeline grid access or contracted at various stages of development, fewer than 1% typically close in a year. That’s not just a grid problem; it’s a market design problem. Standard renewable contracts, which often span 15 to 20 years, do not align with how businesses operate. They are rigid, shift too much risk to the client and leave little room for flexibility. Then, on top of that, large-scale renewable energy projects are inherently complex and capital intensive. They require technical expertise, regulatory understanding and financial resources- things that many businesses, especially SMMEs, either do not have access to or cannot prioritise.
The third constraint is the regulatory uncertainty. We’re only in year one of a truly liberalised electricity market. While this is a critical first step, the system is still finding its footing. Rules and mechanisms are evolving and while there’s reason to be optimistic, stability will take time.
But, as we address the technical and regulatory challenges, we must acknowledge the social factors. The draft 2024 Integrated Resource Plan envisions around 44.7 GW of new wind capacity by 2042. These are bold moves towards sustainability. However, a reduction in fossil fuel use, while necessary, must be managed responsibly. Communities built around generation operations face a real risk of economic decline. That’s why the transition to renewable energy must be a just transition – we need to invest in reskilling and supporting local economic development, so these communities are not left behind in the emerging green economy.
Read the full article in the 8th edition of ESG: The Future of Sustainability
