South Africa Approves 200MW PV Under New Distributed Generation Rules

The Cape Town-based renewable energy developer Sola Group has been approved by the National Energy Regulator of South Africa (Nersa) to build two 100MW solar power plants. The two projects will be located in the north west province of South Africa. They will sell electricity through power purchase agreements (PPA) to Tronox, a US based titanium products supplier, which operates several mines and smelters in the region.

"The significance of this first step is that it will pave the way for more large-scale private projects to be approved, so that they can contribute to the power generation capacity of the grid." This has sent a clear signal to the market that private electricity can be realized, and some private investors are willing to provide financial support for this market. " said Sola Group CEO Dom Wills. This is a clear signal to the market that private power is achievable and there are private funders that are excited to finance this market.

In August 2021, government of South Africa raised the threshold of distributed solar power generation to 100MW and exempted developers from applying for power generation licenses to improve the whole permitting process. The new regulations also imposed a wheeling fee to be paid to national state-owned utility Eskom for the maintenance and upkeep of its infrastructure for energy transmission. Sola Group said: "under this mechanism, IPPs can produce electricity in one Eskom connected area and then sell it to their customers in other Eskom connected areas. The company expects to achieve financial close of the two projects in July and plans to complete the construction within 14 months.

The Department of Mineral Resources and Energy (DMRE) launched the sixth round of REIPPPP in April this year, which plans to allocate 1GW PV and 1.6GW wind. The fifth round of bidding was originally scheduled to be held in 2018. However, due to the poor financial situation of the state-owned utility Eskom, the bidding was postponed many times and finally held in March 2021, which awarded 2.6GW of renewable energy among 25 projects, including 1GW PV projects, with the capacity of projects ranging from 75MW to 140MW.

The Department of Mineral Resources and Energy (DMRE) issued the Request for Proposals (RFP) for the Risk Mitigation Independent Power Producers Procurement Program (RMIPPPP) on the August 2020. Since Eskom was facing serious financial and operational difficulties and was unable to meet the country's power demand. The target of RMIPPPP is not only to alleviate the power supply restrictions at that time, but also to reduce the utilization of diesel peak shaving generators. The program sought to generate 2GW of electricity from a range of energy and technologies, which allocated 1996MW power in March 2021. The selected projects must achieve financial close before the end of July 2021, due to the urgency of connecting to the grid, and the first batch of power generated by these projects will be connected to the grid from August 2022.

The PV market in South Africa has shown strong growth in the past three years. According to the customs data, South Africa imported 1GW PV modules from China in 2021, and the development of large-scale and commercial segments are good. The government of South Africa has launched a series of large-scale tenders and advantageous measures (such as simplifying the project licensing process) to vigorously promote the development of the PV industry. We expect that the annual installed capacity of the South African PV market will be 1-2GW in the next few years.