Private power and Independent Power Producer (IPP) investments are pivotal for Africa’s energy future if it is to improve energy access and end energy poverty on the continent. The procurement of new, often renewable sources of energy, is a way for countries to improve energy supply but also meet transition goals.
During a panel discussion titled ‘Maintaining the Momentum for Private Power Provision’ that formed part of African Energy Week (AEW): Invest in African Energies 2024 ‘Powering Africa Summit’ South Africa’s IPP procurement program was highlighted as a benchmark on how to successfully develop private, independent power generation capacity in Africa, which is challenged by a lack of generation capacity, aging power plants and poorly run state-owned utilities and a lack of affordable capital.
Bernard Magoro, Head of South Africa’s Independent Power Producers Office said that although the country has overcome the challenge of loadshedding, it needs to decommission 15-20 GW of coal-fired power by 2035, half of which will be replaced by renewables which requires between four and five times the baseload capacity that you are replacing.
The IPP program, which has been running for 14 years, has delivered over 8 GW of capacity, 7.2 GW of renewable energy and 1 GW of open cycle gas turbine capacity, Magoro pointed out. This equates to about 10% of South Africa’s energy from IPPs on an annual basis, he added.
The enabling environment that Magoro referred to as “the IPP energy ecosystem” that was created in South Africa to support IPP integration is what has supported the success of the program, the learnings of which he said was being shared with the rest of the African continent.
Panel moderator, Hasnayn Ebrahim, Managing Director of management consultancy Africa International Advisors noted the important aspect of cross-border collaboration, knowledge sharing and capacity support as a potential enabler to advance private power provision in Africa, a sentiment echoed by Mirlan Aldayarov, Infrastructure Program Leader at the World Bank who said the South African Power Pool (SAPP) exists as a good mechanism that can help to leapfrog some of the IPP development challenges in Africa.
This idea was supported by Simphiwe Jantjies, Head of East, Central and West Africa at development finance institute the Development Bank of Southern Africa who said the existence of regional power pools, in addition to liberalizing the energy market can play an important role in extending the role of IPPS in providing power.
“Development finance institutions can…play a meaningful role in the entire project development value chain…pulling the entire financing structure of a project together and ensuring it is bankable,” Jantjies said.
Aldayarov highlighted the pace of reforms to support IPPs in South Africa as “phenomenal” noting that the Bank is involved in long term energy planning, policy and regulatory reforms, energy offtake and supporting the development of a pipeline of bankable projects to create an enabling environment going forward.
In trying to maintain the momentum of the IPP program in South Africa, where there is over 100 GW worth of energy capcity at different readiness stages waiting to be developed, the country is faced with needing to expand the energy grid. “We have run out of grid capacity,” he said.
“Between now and 2032 we need to build 14,000 km of transmission lines,” which Eskom cannot do alone, Mogoro said, noting that the private sector, like the role it is playing in the IPP space, would need to assist in expanding the strained transmission network.
Distributed by APO Group on behalf of African Energy Chamber.
