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News 22 Apr 2024

The evolution of energy funding in South Africa a new era post 2011

In a historic move that has forever altered the energy sector in South Africa, the year 2011 marked the dawn of a new era.

The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) was introduced, allowing Independent Power Producers (IPPs) to bid for power generation projects. This initiative broke the longstanding monopoly held by Eskom over its aging power networks, heralding a new age of competition, innovation, and complexity within the energy mix.

Since the inception of the REIPPPP, over R250 billion has been committed to the development of alternative and renewable energy sources. This commitment has reshaped the energy funding landscape in South Africa.

Standard Bank has played a pivotal role in this transformation, currently holding a market share of just over 30% of the funding. Zaid Moola, Head of Corporate & Investment Banking at Standard Bank South Africa, states, "Our unwavering commitment to our climate goals and a sustainable future is evident in our support for a Just Transition. We aim to achieve net-zero carbon emissions from our newly built facilities by 2030 and from our existing operations by 2040. By 2050, we plan to reach net-zero carbon emissions from our financed emissions portfolio."

In this year alone, Standard Bank has mobilised over R50 billion of sustainable finance for corporate clients and provided over R2 billion in loans to SMEs for alternative energy products. The bank has also disbursed over R145 million to homeowners and R840 million to businesses for solar installations, showcasing a strong dedication to renewable energy.

The funding landscape is currently experiencing a significant development through the market opening up towards new models towards decentralised power options. This transition requires funders to adopt more innovative approaches to finance in the energy market. Standard Bank has enabled clients to install 168MW of decentralised power in the last year (200MW in 2022) easing the burden of loadshedding and pressure on the national grid.

A shift towards portfolio supply models through a diversified risk adoption model are becoming increasingly essential, towards consolidated supply models providing more flexibility to industrial consumers, whilst facilitating access to reliable and affordable electricity.  These new market players will be important in scaling renewable energy solutions, ensuring energy security, and reducing carbon emissions, especially within the mining sector.

“As the funding paradigm continues to evolve, funders are not only competing on price and service but are also more innovative in developing new models, through partnering with clients. This evolution highlights the growing significance of the sector in enhancing market efficiency and driving the adoption of renewable energy in South Africa's energy mix.” Says Moola

The regulatory changes, which have removed the cap on the amount of energy that individual businesses can produce, have further emphasised the importance of new supply which could include a level of aggregation. With businesses now able to invest more in their own generation capacity, the need for more innovative models eg through aggregation is expected to grow, making them an indispensable part of South Africa's power context.