Sappi SA signs 175 GWh/y renewables PPA

February 13, 2025

From the newsletter

Sustainable wood fibre products company Sappi Southern Africa and energy trader Enpower Trading have reached financial close on a five-year renewable energy power purchase agreement (PPA). The deal will see Sappi procure 175 GWh/year of energy from SolarAfrica Energy's 1 GW solar PV project.

  • Sappi Southern Africa, a subsidiary of Sappi Limited, operates five mills in South Africa. It produces approximately 86,000 m³ of sawn timber, and 2.5 tonnes of paper, paper pulp, and dissolving wood pulp per annum.

  • The power supplied through the PPA will reduce Sappi Southern Africa's and the Sappi group's Scope 1 and 2 emissions by 6% and 4%, respectively.

More details

  • The South African market relies on over 80% on coal for electricity generation. As a heavily industrialised country, South Africa is the highest emitter of CO2 on the African continent and among the top 15 emitters globally.

  • However, South Africa exports many products to the outside world, with its biggest market being the developed countries in Europe. 2022 data shows that South Africa earned approximately $147 billion from total exports, making it the 34th largest exporter globally. But recent policy changes, especially those related to sustainable production, threaten its export ambitions. The Carbon Border Adjustment Mechanism (CBAM), which will take effect in 2026 in Europe, requires products from exporting countries to be produced using sustainable energy sources.

  • As such, South African industries are adopting renewables at a faster pace to retain their export markets. Richards Bay Minerals (RBM), a mining company,  last month signed a PPA with Red Rocket South Africa for 230 MW of wind power. This was RBM's third and largest renewable energy PPA, bringing its total renewable energy capacity to approximately 500 MW. This project will contribute to a 60% reduction in RBM's greenhouse gas emissions.

  • Air Liquide and Sasol, industrial gas and chemical companies, respectively, have signed four PPAs with Enel Green Power RSA to supply 690 MW of renewable energy to Sasol's Secunda site. This initiative aims to reduce Air Liquide's CO2 emissions by 40% by 2031.

  • This shift is not only happening with industrial customers. Even real estate companies are adopting renewables to switch from expensive and unreliable grid power. Growthpoint Properties, a real estate investment trust, signed a PPA with Etana Energy for 195 GWh of renewable energy annually. This will cover 32% of Growthpoint's total current annual electricity consumption and enable the company to offer tenants access to green energy.

  • South African electricity regulations, which have liberalised the market to allow the wheeling of electricity–transmission of electricity from a generator to a consumer located in a different area–are enabling many customers to switch to renewables. This has particularly led to more short-term PPAs, unlike in the past.

  • “As pioneers of the five-year PPA tenure, Enpower Trading is thrilled to lead the way with this project, which represents the largest private five-year PPA to achieve financial close in South Africa. This accomplishment demonstrates the viability and scalability of shorter-tenure utility-scale agreements in catalysing renewable energy development,” says Enpower CEO James Beatty. (pictured with Graeme Wild, CEO of Sappi Southern Africa)

  • Enpower notes that the five-year PPA model offers an alternative to traditional long-term agreements. It provides tenure flexibility that unlocks new opportunities for companies of all sizes to buy wheeled energy.

Our take

  • There is a growing need for sustainable energy consumption, from individuals in estates to large industries. Consumers are increasingly becoming aware of their carbon footprint and want to make conscious choices. Companies alike, especially those with a keen eye on their Environmental, Social, and Governance (ESG) goals. Thus the demand for renewable energy is getting higher every day.

  • The change in South Africa's electricity market, which creates a day-ahead market for electricity trading, will be a game-changer. Consumers can ideally see the prices a day ahead and bid for available power. This will alter the market for PPAs. Consumers will be keen to see how the day-ahead electricity market prices operate before committing to long-term PPAs. Ultimately, we will see more growth in short-term PPAs.

  • Increased competition is expected to arise from the open electricity market trading. More companies that trade in electricity, like Enpower Trading, are expected to emerge. This will likely create more competition and lower electricity prices. Consumers will be the ultimate beneficiaries of all this.