Two SA renewable projects get funding

From the newsletter

South Africa achieved a milestone this week by securing financing for two renewable energy projects. Red Rocket obtained funding for its 242 MW wind farm, which is set to be the country's largest privately developed single wind farm. Mulilo Energy also received financing for its 105 MW solar project in the Northern Cape.

• Private sector investment in renewable energy in South Africa is growing fast. Since January, projects totalling over 1,000 MW, including 300 MWh of battery storage, are in development, with the majority currently under construction.

• To support renewable energy investment, the government has launched initiatives like the Battery Energy Storage Independent Power Producers Procurement Programme (BESIPPPP). It focuses on procuring standalone battery systems to stabilise the power supply from intermittent renewable sources.

More details

• Red Rocket will construct the Overberg Wind Farm in the Western Cape. The 242 MW is the first phase of the 380 MW farm. Richards Bay Minerals (RBM), a subsidiary of the Rio Tinto Group, has already secured 230 MW of the first phase under a 20-year Power Purchase Agreement (PPA).

• The first phase is expected to generate approximately 750 GWh of clean electricity each year, resulting in a roughly 30% reduction in RBM's greenhouse gas emissions, equivalent to about 0.7 million tonnes of CO2. The project's financing has been secured through a consortium that includes Absa Bank, Standard Bank, and the Development Bank of Southern Africa, with commercial operations scheduled to begin in early 2027. The funding details, however, were not disclosed.

• Mulilo Energy will partner with H1 Holdings to develop the 75 MW solar project, with Etana Energy as the offtaker. Mulilo Energy has closed financing on 660 MW of renewable energy projects over the past year, in addition to its existing operational capacity of 420 MW. The financing round was a collaborative effort led by Standard Bank, which was the mandated lead arranger. Construction is set to begin in late April 2025.

• South Africa's energy space has undergone major changes in the last five years as the country moves to alleviate load shedding, which has badly affected the economy. Several policies have been implemented, including the unbundling of Eskom and the opening of transmission, distribution, and generation to private sector investment. The increasing policy certainty and a more streamlined regulatory environment for renewable energy development are giving investors confidence. The government also has clear renewable energy targets, as outlined in the Integrated Resource Plan (IRP), providing a clearer pathway for investors.

• South Africa's total investment in renewables stands at 11,129 MW, according to a report released this week by IRENA. Solar accounts for more than half of this, followed by wind. These two renewable energy sources received government support through the REIPPPP programme. Last year saw an addition of 1,100 MW of solar to the grid, down from 2,600 MW in 2023. However, the solar industry association SAPVIA projects an addition of between 2,500 to 3,000 MW of new solar capacity for 2025 and 3,500 to 4,000 MW for 2026.

Our take

• South Africa's economy is projected to grow by around 1.5% to 2.1% in 2025 after growing by less than 1% in the last two years. This growth will lead to increased electricity demand to power industries. Load shedding is already being implemented, which will motivate consumers to switch to self-generation for power security. We project overall solar installations in 2025 to exceed 3,000 MW.

• The policy certainty that has streamlined investments in the electricity sector is expected to attract more investors in 2025. With transmission line investment opportunities anticipated to begin in this financial year, investors can look forward to these developments.

• Though there is progress in terms of battery energy storage systems, South Africa needs to provide incentives to make it more attractive.