South Africa's PV firms eye Sub-Saharan markets for growth
Almost all of South African solar firms could now be considering expansion into other markets on the continent, said Pierre Doutreloux, managing director of Exosun Pty, tracker manufacturer Exosun’s South African subsidiary.
A sluggish home market and the prospect of rapid growth in other African nations is leading South Africa-based solar players to expand into neighboring countries.
“All big EPCs [engineering, procurement and construction contractors] are now in South Africa to try to win projects [abroad],” Doutreloux said. “South African companies now try to do the same, with or without success.”
Scatec Solar, for example, has extended its African operations into Rwanda and West Africa after entering the South African market in 2010, where it has won 448 MW of projects.
Similarly, leading South African renewable energy developer BioTherm Energy has been awarded preferred bidder status on four PV projects in Zambia and two in Burkina Faso, as well as expanding into Uganda and Morocco.
Many South African developers are expanding outside the country because they are finding the local market restricted, said James Hunt, Africa director at OST Energy, a renewable energy technical consultancy.
In contrast, African PV markets outside South Africa are expected to grow rapidly over the coming years, according to Hunt.
Hunt said there is an estimated project pipeline over the next few years of more than 1 GW in Egypt, more than 500 MW in Nigeria and more than 100 MW across other African countries, including Kenya, Namibia, Botswana, Mozambique, Ghana, Zambia, Zimbabwe and Senegal.
Hunt’s predictions are higher than estimates in GTM Research’s June 2015 Global PV Demand Outlook 2015-2020 report, which projected annual PV demand at 1 GW for the whole of Africa in 2016, rising to 2 GW in 2017 and 3 GW in 2018.
“If these pipelines get realized, then we could see several gigawatts of PV being constructed in Africa in the next few years,” Hunt said.
Meanwhile, up to around 700 MW of capacity is predicted for installation in South Africa in 2016.
The South Africa pipeline estimates include up to 200 MW of commercial and industrial solar and up to 500 MW to be auctioned under the fifth bid window of South Africa’s Renewable Energy Independent Power Producer Procurement Program (REIPPPP).
A request for proposals (RFP) under the REIPPPP’s fifth bid submission is expected in the second quarter of 2016, according to South Africa’s Department of Energy, though some industry sources fear it may face delays.
“The Department of Energy is always late,” Doutreloux said.
A hold-up in the next REIPPPP RFP could significantly alter South Africa’s short-term solar market potential compared to that of other African nations where interest in PV is on the rise.
South Africa installed more than 1.5 GW of solar in 2015, according to figures from the International Renewable Energy Agency.
This represented around 65% of the more than 2.3 GW installed across Africa and dwarfed the volumes in other leading regional solar markets, such as Algeria with 299 MW, Reunion with 180 MW and Egypt with 45 MW.
Another driver for South African solar players to seek business abroad is that the number of projects offered under the REIPPPP is quite low in each round, with a total of 45 adjudicated across 4.5 rounds so far.
Moreover, the prices being offered for power have dropped sharply. In the first REIPPPP bidding round, for example, the average price paid for solar PV was ZAR2.76 ($0.19) per kWh. By the third round this had dropped to ZAR0.88 ($0.06) per kWh.
REIPPPP competitiveness. Source: Barclays.
Elsewhere, the tariffs are slightly more attractive because nobody has done these projects before, said Raymond Carlsen, chief executive of Scatec Solar, a Norwegian developer with a significant presence in South Africa.
Having South African solar experience can help in winning bids in other sub-Saharan markets, but the advantage is only minor and is mostly limited to markets close to South Africa, according to some experts.
“I wouldn’t say it’s a massive competitive advantage, but it does help,” said Johan Kapp, senior manager for risk assurance services at business advisory firm PwC, “There is a perception of an advantage.”
In particular, in markets neighboring South Africa, project developers may be able to take advantage of existing links with South African lenders such as Standard Bank, which has operations in 17 markets across the continent, including Nigeria, Kenya and Namibia.
Across most emerging African markets, however, companies need to have a relationship with development banks to secure funding at good rates, Kapp said. South African developers would also still need to build up a network of local contacts within any other African market.
“It’s all very politically driven in Africa, all about who you know,” he said.
There is also a danger that some developers could put a lot of effort into building a presence in markets that end up being significantly smaller than South Africa.
“The other countries haven’t the same level of maturity in terms of renewable energy capacity on the grid,” said Exosun’s Doutreloux. “If you inject more than 20%, you will kill the grid.”
By Jason Deign