The Renewable Energy Independent Power Producers Procurement (REIPPP) program, which was launched in 2011, is South Africa’s master plan for mobilizing power generation from renewable energy (RE) sources.
South Africa aims to have installed solar photovoltaics (PV) generation capacity of 7,958 MW by 2030 and concentrated solar power (CSP) capacity of 600 MW by 2030.
As such, by 2030, PV will account for 10.5 percent of the country’s electricity generation mix while CSP will account for 0.9 percent.
According to the Council for Scientific and Industrial Research (CSIR), South Africa at the end of 2020 had a total installed power generation capacity of 51,600 MW, of which 2,032 MW was solar PV capacity and 500 MW was concentrated solar power (CSR) capacity (CSIR, 2021).
The REIPPP program is credited with mobilizing massive local and foreign investment into South Africa’s RE industry.
For many foreign investors the program was their first foray into RE investments in Africa and their launch pads for RE investments in other parts of Africa.
Two of such investors are Norwegian renewable energy development company, Scatec, and Norwegian development finance institution (DFI), Norfund.
Scatec Solar
Scatec Solar is the leading non-institutional investor in solar REIPPP projects, with 448 MW in operation comprising the following PV plants in Table 1:
Table 1. Scatec Investments In the REIPPPP
| Table 1. Scatec Investments In the REIPPPP | |
|---|---|
| Investment | Shareholding |
| Kalkbult (75 MW) | 45% |
| Dreunberg (75 MW) | 45.00% |
| Linde (40 MW) | 45% |
| Sirius (86 MW) | 46% |
| Dyason’s Klip I (86 MW) | 45.50% |
| Dyason’s Klip 2 (86 MW) | 45.50% |
Scatec is targeting further opportunities totalling 1,338 MW of solar, solar-plus-storage, and wind power in South Africa.
These opportunities include the much anticipated Round 5 of the REIPPPP, which the Department of Mineral Resources and Energy launched in March 2021. Round 5 seeks to procure 1,000 MW of utility-scale PV and 2,600 MW of wind power.
The first power from Round 5 projects are expected to be connected to the national grid from August 2022.
Recently, however, Scatec was unsuccessful in another opportunity it targeted, which was the Risk Mitigation Independent Power Producer Procurement Program (RMIPPPP).
South Africa launched RMIPPPP in August 2020 to “alleviate the electricity supply constraints and to reduce the extensive utilisation of diesel-based peaking electrical generators in the medium-to-long-term.”
Scatec was one of 28 bidders but not one of the eight successful preferred bidders announced in March 2021.
According to the September 2019, “Scatec Capital Markets Update 2019”, investor presentation, Scatec solar targets an average nominal after-tax return (IRR) on equity of 12 -14 percent on its projects.
The company has a self-funded growth capacity of 300-400 MW per year.
In 2019, Scatec Solar introduced a new business model and growth platform called Release.
Release is a mobile and scalable containerized solar power or hybrid solution primarily for commercial and industrial (C&I) customers who are heavily dependent on diesel in remote operations.
Release targets an annual installation volume of 300-500 MW from 2022.
For the African market, Release is to be a partnership with Norfund.
Norfund
In South Africa, Norfund has invested in the REIPPP program through the platforms in Table 2:
Table 2. Norfund Current Investments In the REIPPPP
| Vehicle | Type | Stake (%) | Financing | Committed Amount (MNOK) | Investments |
|---|---|---|---|---|---|
| Evolution Fund II (EVII): The Evolution fund is managed by Cape Town-based private equity firm, Inspired Evolution Management. | Fund | 14 | Equity | 30 | Red Rocket Holdings (70% owned by EVII): Kruisvallei Hydro plant (4 MW) Roggeveld Wind farm (147 MW) REISA Kathu Solar PV plant (75 MW) Mkuze Biomass plant (16.5 MW) |
| FEI (Facility for Energy Inclusion) On-Grid Fund: The FEI is a fund managed by UK-based Lion’s Head Global Partners Asset Management | Fund | 18 | Debt | 2.7 | Unknown |
| Metier Sustainable Capital Fund II: The fund is managed by South African private firm, Metier. | Fund | 17 | Equity | 59.8 | Broadreach Energy: Steynsrus PV1 (5 MW) Steynsrus PV2 (5 MW) Heuningspruit PV1 (5 MW) |
| Globeleq | Company | 30 | Equity and Debt | 720.3 | Aries Solar PV (11 MW) Boshoff PV (66 MW) De Aar PV (50 MW) Droogfontein PV (50 MW) Konkoonsies I PV (11 MW) Soutpan PV (31 MW) Jeffreys Bay Wind farm (138 MW) Klipheuwel Wind farm (27 MW). |
| Scatec Solar Upington | Company | 30 | Equity and Debt | 89.3 | Sirius PV (86 MW) Dyason’s Klip 1 PV (86 MW) Dyason’s Klip 2 (86 MW). |
| rAREH (responsAbility Renewable Energy Holding) Ltd. | Company | 26 | Equity | 26.2 | Sol Plaatje Hydro plant (3 MW) Merino Hydro plant (4 MW) Stortemelk Hydro plant (4.5 W) Boston Hydro plant (4.5 MW). |
| Renewable Energy Holdings (REH) Group | Company | Unknown | Debt | 25.5 | Stortemelk Hydro plant (4.5 MW) |
| Sources: Norfund and Norfund 2019 Report on Operations |
From inception in 1997 to 2019, Norfund returned an annual average of 6% (IRR) on its invested capital – in the investment currency. However, its clean energy portfolio, which is the largest component (48 %) of its overall portfolio, returned 7.0 percent IRR over the same period.
REFERENCES
IRENA (2020), Renewable capacity statistics 2020 International Renewable Energy Agency (IRENA), Abu Dhabi.
Calitz, J.R. & Wright, J.G. 2021. Statistics of utility-scale power generation in South Africa in 2020. http://hdl.handle.net/10204/11865.
Norfund 2019 Report on Operations.
