Mulilo eyes 5 GW of renewable energy by 2030

From the newsletter
The South African-based energy company secured five battery storage projects and a 240 MW solar PV project in South Africa's latest bid windows in 2024. It currently has an operational portfolio of 420 MW and a construction portfolio of 592 MW. It aims to achieve 1 GW of projects in 2025 & a 5 GW renewable energy portfolio within the next five years.

• Mulilo was established in 2008 and has since grown to become one of the major independent power producers in South Africa. It has concluded numerous power purchase agreements, including a recent one with Air Products South Africa for a 75 MW solar PV project in the Northern Cape.

• In 2023, Mulilo was acquired by Copenhagen Infrastructure Partners (CIP) for an undisclosed amount. This acquisition has enabled Mulilo to shift its strategy to become lead consortia in its projects, a departure from its previous practice of taking minority positions.

More details

• South Africa's grid is primarily powered by coal, accounting for over 80% of its energy mix. However, these coal-fired power plants have aged and become inefficient, with frequent shutdowns for maintenance causing a severe energy deficit. To address this, the government developed a Just Energy Transition plan that aims to shift South Africa towards reliance on renewables and reduce its carbon emissions.

• This demand for renewable energy, coupled with the need to address the energy deficit, has attracted several energy companies to South Africa. Among them are Mulilo Energy (wind, solar, and battery storage); SolarAfrica (a large-scale solar PV developer); BioTherm Energy (wind and solar); Global Renewable Energy Solutions (wind, solar, and biomass); and Scatec, a Norwegian company with a strong presence in South Africa's solar market.

• The renewable energy market in South Africa is growing rapidly. Over the last five years, over 6 GW of solar PV and around 3 GW of wind energy capacity have been installed. This growth is reflected in the expansion of companies like Mulilo, which increased its workforce from about 45 people in July 2023 to 140 currently, with plans to further expand to more than 200 people by the end of 2025.

• South Africa needs approximately 70 GW of renewable energy connected to the grid by 2030 to achieve its carbon reduction targets outlined in its Nationally Determined Contributions (NDCs). However, the country is currently far from achieving this goal. While progress has been made in awarding construction bids for renewable energy projects, the grid lacks sufficient capacity to evacuate the planned generation.

• The 2025 Grid Connection Capacity Assessment (GCCA) reveals that only 19.94 GW of grid capacity remains available. Moreover, this capacity is not located in areas with the most favourable conditions for wind and solar generation, such as the Northern Cape, Eastern Cape, Western Cape, and Hydra Central. This means new power plants built in these regions would be unable to transmit their electricity to the grid.

• The 2023 Electricity Regulation Amendment Act sought to open the market to private sector players in the generation, transmission, and distribution of electricity, as well as in electricity trading. This aims to create competition and development. However, the regulations governing these changes are still under parliamentary review and are expected to be finalised before the end of the year. 

• These regulations aim to provide more clarity on new market opportunities. For example, the Transmission Development Plan estimates that it would cost about $6 billion to construct 14,494 km of transmission lines and 210 transformers. This is a huge market opportunity and investors are keenly waiting for more guidelines to inform their investment decisions.

Our take

• Renewable energy opportunities are set to grow in South Africa. The Electricity Regulation Amendment Act (ERA Act) opens up investment opportunities not only in generation, transmission, and distribution, but also in electricity trading, where private companies can now buy and sell electricity to consumers, creating a more competitive and dynamic market.

• More foreign energy companies with huge financial resources are expected to enter the market and compete with local players. Last year, AMEA Power, a Dubai-based energy company, entered South Africa. More will follow, and competition will be stiff. Securing affordable financing will be key for local companies to compete effectively with these large players.

• Consumers will be winners at the end from this increased competition. It could lead to better deals for consumers as energy companies try to outbid each other to win tenders for energy generation and supply.