South Africa
With a cumulative score of 1.72, South Africa ranks number 25 among emerging markets and number 54 in the global ranking.
- Emerging markets
- Middle East & Africa
2.19 / 5
Power score
0.61 / 5
Transport score
Buildings score
Only 56 markets (28 emerging markets) are scored on the Buildings sector. See the full list on the methodology page.
Low-carbon strategy
Net-zero goal and strategy
The government of South Africa has proposed a net-zero emissions reduction target to be achieved by 2050.
Nationally Determined Contributions (NDC)
South Africa has signed and ratified the Paris Agreement. The government has set a peak emissions target in its Nationally Determined Contribution (NDC) to the Paris Agreement. South Africa aims for emissions to follow a peak-plateau-decline trajectory: peaking between 2020 and 2025, plateauing for about a decade, and declining thereafter. South Africa’s updated NDC, submitted to the UNFCCC in 2021, states that the country’s annual greenhouse gas emissions will be in the range of 398-510 MtCO2e from 2021 to 2025, and 398-440 MtCO2e from 2026 to 2030.
Fossil fuel phase-out policy
South Africa does not have a fossil fuel phase-out policy. However, there is a soft schedule for the closure of some of its coal power plants, with 7GW of retirements expected between 2021 and 2030 and the bulk of the remaining fleet – 25GW from 2031 to 2050, detailed in the government’s 2019 Integrated Resource Plan.
Power
Power policy
South Africa has finally revived policy support for renewable energy projects to deploy capacity quickly and alleviate severe supply shortfalls, which are resulting in frequent load shedding, or rotating blackouts. The government’s Integrated Resource Plan (IRP) was updated in 2019 and has set capacity allocations for at least 20GW of new wind and solar by 2030, alongside additional thermal generating capacity and storage. The government also plans to procure 1.5GW of new coal between 2023 and 2027, and 3GW of new gas between 2024 and 2027. After a six-year hiatus, with no auction rounds under its Renewable Energy Independent Power Producer Program (REIPPP), the government awarded contracts to 2.6GW of utility-scale wind and solar projects in its fifth renewable energy auction in October 2021, to begin implementation of the 2019 IRP. This follows an ‘emergency’ auction for firm capacity held earlier in 2020 (known as the Risk Mitigation IPP program, or REMIPPP), which awarded 20-year offtake contracts to a range of co-located projects – totaling 2.7GW of PV, wind, battery storage and diesel generators, plus 1.6GW of gas including power ships. Auctions are the primary route to market for utility-scale renewable energy projects in South Africa’s regulated energy sector. The sector suffered setbacks due to policy instability in the late 2010s. The government awarded PPAs to more than 6.4GW of renewables capacity across 102 projects in the first to fourth REIPPP rounds from 2011-15. However, political fallout resulted in three years of delays to the government signing PPAs from rounds 3.5 to 4. The situation went unresolved until 2018, when PPAs were finally signed.
Power policies
Power prices and costs
As is common in the region, South Africa has no wholesale electricity market and the energy regulator (Nersa) determines final retail prices. Municipalities are responsible for retail of electricity in some areas – although the customer still has no choice of supplier. Eskom has repeatedly argued for substantial tariff increases to pay back its debts. Tariffs increased by an average of 13.7% a year between 2004 and 2018. Costs for renewables have also fallen. The LCOE for onshore wind in South Africa – at $59-96/MWh – falls in the middle of BNEF’s benchmark estimates in 2021, as its relatively low capex is counteracted by higher financing costs. It is a similar story for PV (without tracking), which has an LCOE of $49-60/MWh. The winning tariffs dropped significantly in each renewables auction round: wind and PV fell 27% and 30% between rounds 3 and 4, after adjusting the tariffs for factors such as inflation and merchant tail. In round 5, tariffs fell even further. Bid prices converged at their lowest and tightest spread of any auction in South Africa, with projects securing a capacity-weighted average price of $29.55/MWh for PV and $33.70/MWh for onshore wind. When levelized, these bid prices come in 11% lower than round 4 for PV and 31% for onshore wind.
Power market
Eskom, the state-owned utility, dominates South Africa’s power sector, although independent generators have started to capture some of the market, particularly in the renewable energy sector. The country regularly exports electricity to its neighbors through the Southern African Power Pool. However, meeting peak demand is a major challenge as the supply crisis worsens. South Africa has seen regular short-term load shedding (scheduled power cuts) return from 2019-2021 at rates worse than the previous height of load shedding in 2014-2015. Coal dominates the country's electricity mix, accounting for 73% of capacity in 2018. Coal’s share in generation is likely to be broadly maintained despite growth in renewables, as the Medupi and Kusile coal plants (at 4.8GW each) are fully commissioned under the government's IPP program.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Utility privatisation
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
Investors remain wary of future policy stalemates, and Eskom is in a weak financial position. Its financial challenges are continuing amid weak power demand, non-payment by municipalities and governance issues. A roadmap for unbundling the utility published in 2019 aims to resolve these challenges. Electricity consumption in South Africa has stagnated in recent years, declining on average 0.5% per year since 2006. The reduction has been mostly caused by heavy power users, due to factors such as economic slowdown, volatility in commodity markets and rising electricity costs. This trend has been reflected in peak demand, which fell for a third consecutive year in 2020. Regulatory approval for off-grid renewable energy projects below 100MW has become easier following revisions to regulator Nersa’s exemption policies, which bodes well for PV projects to supply industries. The main opportunity for off- or mini-grid projects in South Africa is in rural areas where electrification was at 66% in 2018, compared to 93% in urban areas. The Integrated National Electrification Plan includes initiatives to boost electricity access in rural areas – aiming to fund an estimated 723,000 grid and 49,650 non-grid connections to households by 2020. It is not clear if this target has been achieved, owing to the Covid-19 pandemic.
Currency of PPAs
Are PPAs signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Fossil fuel taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes?
Transport
EV market
The government has yet to implement any substantive policy support in this sector and the EV market remains at an early stage. There are no national subsidy programs such as capex grants for EV purchases or tax incentives. South Africa's Nationally Determined Contribution (NDC) to the Paris Agreement anticipates the country transitioning its transport sector as late as the 2030s. There are also significant barriers to EV adoption in South Africa. These include lack of charging infrastructure and high upfront cost. Many consumers may also not wish to rely on the grid to power their vehicles due to the high risk of load shedding, meaning that they might not be able to charge their car when needed.
EV policy
The government has yet to implement any substantive policy support in this sector and the EV market remains at an early stage.
Transport policies
Fuel economy standards
Does the country have a fuel economy standard in place?
Buildings
Buildings market
The government has yet to implement any substantive policy support in this sector and the low-carbon heat market remains at an early stage. However, South Africa does have some measures to support energy efficiency – including EPC issuance. There are an array of loans and grant options available to South African consumers to implement energy efficiency measures in buildings, but these mostly target commercial and industrial consumers. Funding is available via loans from many banks, via ESCOs, as cash grants and tax deductions.
Energy efficiency plan
Does the country have a national energy efficiency plan?
Energy performance standards
Are there minimum energy performance standards for buildings?
Buildings policy
The government has yet to implement any substantive policy support in this sector and the low-carbon heat market remains at an early stage.
