Integrated Resource Plan: South Africa

Overview

The government of South Africa updated its Integrated Resource Plan (IRP) in 2019, outlining annual auction and decommissioning plans until 2030. The plan aims to alleviate severe electricity supply shortages, which has led to frequent loadshedding (planned outages) in the country.

The 2019 IRP involves installing over 25GW of renewable energy capacity and 3GW of energy storage by 2030, procured through regular auctions. The government has already made steps toward delivering this. In October 2021, it awarded PPAs to 2.6GW of clean-energy capacity through its auction program, and in June 2022 it opened bids for an increased volume of PPAs for 5.2GW of wind and solar projects.

Impact

South Africa demonstrates the importance of consistent procurement opportunities to drive investment into new clean energy capacity. Over the last decade, policy instability and lack of consistent procurement have led to highly variable investment flows to projects in South Africa. For example, the government refused to sign PPAs won under the fourth round of its Renewable Energy Independent Power Producers Program for two years, delaying financing decisions for projects. The government also waited four years after announcing its fifth auction round to actually hold it in 2021. Because South Africa’s auction program is the primary route to market for new renewable energy projects and the power sector is highly regulated, the lack of auction rounds over 2015-2021 severely limited the options for developers to build new projects, damping investment.

BloombergNEF estimates that South Africa’s 2020-30 allocation of 14.4GW of new wind capacity and 4GW of new PV capacity under the 2019 IRP presents an investment opportunity for a cumulative $30 billion into new wind and solar assets by 2030. The IRP and its long-term schedule for new capacity deliveries can be a key instrument to addressing South Africa’s energy crisis. Loadshedding could be significantly reduced before 2025, provided that the government follows the 2019 IRP.

Opportunity

Other countries can learn from South Africa’s successes and challenges over the last decade. Since South Africa revamped its 2019 IRP schedule and scheduled more auction rounds, developers have been active in seeking investment for new projects.

Reliable opportunities for investors to support clean energy projects through regular, centralized procurement programs can be highly effective. These mechanisms are best designed when they are made open to independent power producers and award long-term offtake contracts on a competitive basis. Alongside a robust auction contract design, the consistency of procurement mechanisms can help to build and maintain investment confidence in both nascent and mature renewable energy markets.

Source

BloombergNEF and Bloomberg Philanthropies report: Scaling-Up Renewable Energy in Africa