take note
ENERGY + ENVIROFICIENCY
N
ot only are companies seeing opportunities beyond the REIPPP
programme, but they are looking beyond South Africa as they
investigate other promising sub-Saharan African markets.
With a total target of 9 770 MWworth of PV deployments by 2030
following the policy-adjusted Integrated Resource Plan (IRP), and with
the rollout of the Renewable Energy Independent Power Producer
Procurement (REIPPP) programme, South Africa’s PV market has
shown tremendous growth potential for developers, manufacturers
and service providers.
According to the results of a new PV Insider survey which in-
terviewed more than 100 leading professionals, nearly half of the
participants have witnessed a revenue increase in the South African
PV market over the past year, while about 42% said their revenue
streams had remained constant.
This is evidence that the profits of the REIPPP are seeping through
to the budgets of those active in the market, driven by the undersup-
ply of power in the market and the guarantee of the government
procurement programme, which to date has awarded 33 PV projects.
Overall, more than 1 GWof PV has been deployed in South Africa.
However, as the production deficiency void shrinks, firms will have
to be increasingly competitive to secure consistent revenue streams.
Underlying concerns
Throughout the survey, it became evident that there was an underly-
ing concern within the market over the commercial sustainability of
the current development process.
Although 65% of respondents said they saw the market as fairly or
totally sustainable over the next three to seven years – which shows a
good degree of confidence in growth prospects – about 24% said they
were unsure about how the market would evolve over this period.
In addition, 10% believe that the development pattern is slightly or
very unsustainable.
Moreover, half of the respondents acknowledged that their business
was too dependent on the REIPPP, and that this was the biggest cause
of uncertainty for them. Another 30% revealed that price levels were
dropping too low for them to stay competitive.
The report highlighted that: This fear is certainly backed up by the
figures, with the average price of awarded projects in Round 1 of the
REIPPP around 270 cents and the average price in Round 3 about 95
cents. It added that if price levels drop any lower, it is clear that some
in the industry would no longer be able to be competitive.
Consequently, companies may begin to start taking steps to miti-
gate against the risk by sourcing a private client base. Meanwhile,
the lack of domestic manufacture development, the limited supply
of long-term finance for non-REIPPP projects and the ongoing prob-
lems with small-scale feed-in domestic and commercial installations
were highlighted as other substantial problems by the rest of the
respondents.
What regulators can do
In examining what can be done by South African regulators to facilitate
the development of a sustainable solar industry over the next three
to seven years, the majority of respondents – around 56% – believed
that a decrease in bureaucracy was the answer.
About 20% said a change was needed in the way the REIPPP was
administered, while 19% felt that higher local content requirements
would be a beneficial measure.
Only 5% cited restrictions on foreign companies entering the
market as advantageous to the development of the industry, which
indicates that South Africa will continue to benefit from keeping its
doors open to foreign investment and expertise.
Additional responses revealed that many companies are craving
specific legislations which provide a clear framework for the growth of
rooftop PV or an effective framework to conclude private power deals.
Revenue growth
Confidence in South Africa’s PV market in the mid-term was once
again evident when a staggering 87% of respondents said they were
expecting an increase in their business development budgets over the
next three years. About 40%went as far as saying they were expecting
a substantial growth in their budgets over this period.
Where is the South African
PV market
heading
?
By H Hashem, CSP Today
A recent survey by PV Insider on the commercial development and sustainability of the South African photovoltaic market revealed some surprising
results on the near-term expectations for revenue growth, market drivers and business development strategies.
• Renewable energy resources must be exploited.
• PVs can play a significant role in the future energy mix
of this economy.
• The South African PV market is on a steep upward curve
of project development.
Electricity+Control
July ‘14
42
