29 October 2024 – According to the Standard Bank / Cresco Energy Market Report released today, South Africa will only hit 2024’s current energy demand requirement by 2040.
South Africa’s privately procured energy market is currently projecting green energy supply to hit 20% to 35% of its decarbonisation target that will last until 2026 on the back of rapid increases in installation of utility-scale wind and solar photovoltaic (PV) generation.
“From 2025 to 2030, power decarbonisation is projected to escalate above 50% as more solar photovoltaic and wind power is harnessed and Battery Energy Storage Systems (BESS) provide additional dispatch options during non-photovoltaic generation hours,” said Robert Futter, Executive Director at financial advisory services firm Cresco Group
A full market assessment of South African energy supply indicates solar photovoltaic and wind-installed capacity (utility and rooftop) is likely to improve from around 10GW generation capacity in 2024, to 37GW by 2030 and 77GW by 2040. Meanwhile, power decarbonisation is forecast to rise from c.15% in 2024 to 60% by 2040.
Coal & Green Hydrogen power has a Role in Maintaining Power Supply
However, as many as 27% of coal-fired power stations will still be present in the country’s energy mix in 2040. Large scale green hydrogen generation is however expected to enter the mix to increase energy diversity but this is only anticipated to happen post-2030.
This also falls in line with the planed Green Hydrogen Commercialisation project that was approved for development in September 2023. production capacity planned to be rolled out in South Africa, and is anticipated to be produced at a cost lower than global prices that would enable a lower cost of energy production than the current coal generated power.
Renewables set to Increase Dramatically Post 2030
Renewable energy generation is set to increase to 97 TWh (30% of total 2024 generation) by 2030 and to 179 TWh (50% of total 2024 generation) by 2040, with the implication that demand is likely to continue to outstrip supply even under the conservative projections of South Africa’s 2023 Integrated Resource Plan.
Robert Futter, Executive Director at Cresco Group, comments: “Meeting the goal of carbon-neutrality in generation by 2050 will be challenging – if not impossible. The recent reduction in load shedding is partially attributable to decreased demand and we do not yet know if this is a temporary or permanent change. With generation projected to only meet 2024’s demand by 2040, renewable energy implementation in South Africa needs to increase at a dramatic rate. If the embedded market were to grow or if selling excess energy back into the grid became a reality, it could play a significant role in meeting national demand.”
The report, Energy Market Projections, explores, in detail, the risks and opportunities in South Africa’s current and future energy market, provides a market forecast, and analyses the development of the country’s decentralised power market.
Rentia van Tonder, Head of Power at Standard Bank, said: “Structural change is paving the way for a more secure and sustainable power landscape, but the reality of the South African energy market today is coal-fired plants trying to run efficiently to keep up with demand, while private sector-led investments in solar and wind power enter the generation mix. Clients are adopting a cleaner and more cost-effective approach to address power needs, however we still anticipate green hydrogen adoption will gain momentum closer to 2030 or beyond, rather than by 2025, and its primary applications initially may not be for electricity generation.”
Power modernisation – a global opportunity
Standard Bank and the Cresco Group will be presenting the report findings at the Africa Investment Exchange: Power & Renewables 2024conference, hosted in London. The event brings together key stakeholders across Africa’s energy landscape, from investors to project developers, and will see Rentia van Tonder of Standard Bank share insights on the modernisation of Africa’s power markets and the regional and global opportunity for investors.
Standard Bank’s van Tonder added: “While all eyes have been on the challenges and rapid power modernisation in South Africa, this is only one element of the region’s wider story of transformation, with similar market liberalisation underway in Kenya, Zambia and Namibia. The bottleneck caused by insufficient power supply across the continent has put a hand break on growth, but levelling up energy infrastructure is the catalyst required to unlock serious economic development and social impact. African markets bring both challenges and opportunities for international investors, but capital investment combined with innovative financing solutions can not only tap growth at scale but also play an important role in the global energy transition.”