High costs stall urgently needed renewable energy projects

June 22, 2023 Siyabonga Mtangana

South African renewable energy projects selected over a year ago to add generation from private producers and help end electricity shortages are struggling to reach financial close due to an escalation in costs, according to one of the developers.

A dozen projects, with a combined capacity of more than 1GW, remain hamstrung because of increases in financing and other charges, said Globeleq CEO Mike Scholey. The government announced the preferred bidders in October 2021 in the nation’s fifth bid round.

“In South Africa we’re struggling to deliver due to costs,” he said in an interview on the sidelines of the Africa Energy Forum in Nairobi.

The delays come as the country suffers from record power cuts due to breakdowns of state-owned Eskom’s mainly coal-fired generation units. Performance has deteriorated even as the government outlines measures to improve the situation.

Projects have also been sidelined due to a lack of connections to the national grid. Wind stations were spurned in the sixth round, limiting projects advancing to the next stage as a lobby for the technology warned that the problem could limit investment.

For Globeleq, selling the electricity to private consumers rather than Eskom is one potential solution, Scholey said. “In the short term, this is the way forward: allow direct sale to end-use customers.”

The company won the preferred bids in the fifth round as the majority partner in the Ikamva Consortium, which includes Mainstream Renewable Power, Africa Rainbow Energy & Power and H1 Holdings. — David Herbling, with Mike Cohen, (c) 2023 Bloomberg LP