Weekend Read: Blackouts trigger a PV pivot

From pv magazine Global 02/24

The dire electricity supply situation in South Africa has been the driving force behind a massive uptick in solar-plus-storage hybrid installations by businesses and homeowners alike. This development was boosted by the relaxation of generation license requirements in August 2021, for arrays of up to 100 MW of generation capacity, and by falling solar module prices. While the pivot to solar power demonstrates the way in which solar technology can step in quickly to alleviate an energy crisis, there has been very little uptake of local solar manufacturing opportunities.

A recent grid survey study carried out by the South African Photovoltaic Industry Association (SAPVIA) and its partners revealed that a little over 13 GW of pure solar, and almost 20 GW of solar-plus-storage projects were “shovel ready” or close to that stage.

Eskom data from July 2023 show that registered rooftop solar installations have quadrupled. Some 4.4 GW of rooftop solar had been installed in South Africa, 3 GW of which had been installed over the previous 12 months alone. To meet the surging demand, imports of solar equipment have sharply increased.

Chinese customs data compiled by UK-based decarbonization thinktank Ember Climate show that South Africa imported more than 5 GW of solar panels from China in 2022 and 2023, worth $1.1 billion. Some 3.7 GW of that total was imported in 2023. Analyst BloombergNEF has predicted more than 3.5 GW of residential and commercial solar capacity will be added annually from 2023 to at least 2025, or until the ongoing electricity supply crisis ends.

Given that the country’s total energy demand hovers at around 30 GW, solar is beginning to make a sizable contribution to the nation’s power needs. Part of solar’s value has been its impact in different economic segments, including the agriculture, retail, and mining industries. A rising number of South African businesses are trying to become completely independent from the unreliable Eskom grid.

Farming uptake

In 2023, a group of farmers started to install a large solar-powered water pump system in the Brede Valley region of the Western Cape to ensure water security and support farming operations. The project involved the construction of up to 3 MW of additional solar generation systems alongside almost 2 MW that were already operational. The project also deploys microgrids with transformers and transmission lines to ensure the efficient operation of the energy system.

In September 2023, retail property owner Resilient announced that it plans to substantially reduce its reliance on Eskom. To do so, the company will integrate solar, battery energy storage, municipal power, and backup generators at its shopping malls. The aim is to roll out 84 MW of solar at Resilient malls by the end of 2024.

Resilient is not alone. Redefine Properties also announced plans in September 2023, for a massive 5.5 MW solar rooftop in Cape Town. The city has played a role in the project’s execution, mainly through its wheeling program, which allows commercial PV installations to feed electricity into the grid network for transmission to consumers.

Mining moves

South Africa’s mining industry is a major electricity consumer and is shoring up operations with solar. Anglo American Platinum announced three embedded PV projects in July 2023, including a 100 MW array at its Mogalakwena Mine, a 125 MW project at the Amandelbult complex, and a 35 MW project at Unki Mine. Those sites are in various stages of development and are expected to be operational by the end of 2025, with some due as early as the fourth quarter of 2024.

Harmony Gold Mining Company has followed other major solar project announcements, such as those made by coal miner Exxarro. Harmony is commissioning a 30 MW solar plant as the first of two phases at its operations in the Free State. The second phase will add 137 MW of solar capacity to the gold miner’s operations in two construction stages. Construction is also under way on a 132 MW solar plant at the platinum mining operations of African Rainbow Minerals (ARM) in North West province. This project, and two others currently under construction in the province by ARM, will reach a combined total of about 300 MW of capacity.

Local manufacturing

With sustained demand visible over the next four years in South Africa, and growing demand in broader sub-Saharan Africa, it remains unclear why a local manufacturing industry for PV components has not been established at scale.

South Africa has three solar panel companies whose total annual production capacity is well below current demand. ART Solar and Seraphim Solar both have 300 MW of module assembly capacity and Ener-G-Africa recently upped its production line capacity to 500 MW, mainly for small- to medium-sized panels.

There are several small-scale inverter assembly plants, which add final assembly to foreign-supplied components, but there is currently no local manufacturing at scale for inverters across the sector. The same goes for battery storage units and solar panel mounting structures.

Policy inconsistency

Ebrahim Patel, South Africa’s trade, industry and competition minister, said in August 2022 that winners in the fifth window of the country’s Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) would only need to buy 35% of their solar modules from local suppliers. Previously, the requirement was 100%. That left losing bidders dumbfounded and angry. To date, less than half the projects that won preferred bidder status in bid window five have reached financial close.

Such inconsistent government policy regarding local content quotas, and a shortage of suppliers, has prompted independent power producers – who are facing tight engineering, procurement, and construction timelines, and margins – to resort to procuring most of their plant components from foreign suppliers. One example is that 300 MW cluster of ARM projects. Ideematec, a German tracker company, was appointed as supplier. In total, those projects consumed around 15,000 tons of steel tubing and open sections which could have been manufactured locally by a steel component producer. Instead, the three projects opted to import the mounting structures as “complete machines,” to avoid import duties.

Andy Smith, managing director at Barnes Tubing Industries – a local supplier to the solar industry – said the South African tube and pipe sector has invested billions of rand into the South African economy.

“It is very important that the local manufacturers get the support needed against imports,” he said. “Tracker companies have very high standards and we and other tube companies have invested to meet those standards and all I ask is that we get the opportunity to quote on equal terms.”

Black empowerment

Another possible reason why foreign companies are reluctant to set up manufacturing plants in South Africa is the nation’s broad-based Black economic empowerment (B-BBEE) requirements, which set criteria for foreign and local companies (see table below). The B-BBEE Act was introduced by the government to redress the socioeconomic imbalance left by the apartheid racial-segregation regime. The goal is to give equal opportunity to those who were discriminated against and still suffer under the legacy of apartheid.

While the country does need to redress the negative effects of the past, multiple billion-dollar companies do not want to be dictated to or give away 25% of their equity to a local person or company that may not bring equivalent function or value to their business operation.

Political instability

Perhaps the overarching deterrent for foreign investors into major manufacturing operations is uncertainty about which political direction the country will take. South Africa has had a democracy in which one party – the African National Congress – has been effectively unrivaled since the end of apartheid. This has seen political elites accrue tremendous power, wealth, and influence through corruption, patronage, and clientelism. As a result, there are fears that South Africa is teetering on the brink of a debt crisis.

This comes at a time when the country is facing a general election in 2024 which could worsen the fragile stability of the state. It is widely expected that the country will end up governed by a coalition government, a situation that has had disastrous results on a municipal level in South Africa.

Amid such uncertainty, foreign companies in the solar value chain that might want to set up manufacturing plants in South Africa may be adopting a wait-and-see stance. The general election must be held within 90 days of the end of the term of the current parliament, in mid-May 2024.