Renewable energy projects are, by their nature, capital intensive, since they include long-term infrastructure investments with fuel costs that are low to zero.
Achieving South Africa’s economic, climate and energy goals for renewables depends on attracting international and domestic investment into the sector, including strategic technology partners interested in producing renewables technology in South Africa as a base for export. It is estimated that approximately US$35 billion of new investment will be needed to roll-out renewables as envisaged in the IRP, with additional investment in manufacturing.
Overcoming the incremental cost challenge
While the cost of renewable energy has been falling, it remains higher than the alternatives; particularly coal. Currently 90 % of the country‘s electricity is generated from abundant supplies of cheap coal. The incremental cost between renewables and the underlying cost of electricity poses a major challenge to the successful implementation of clean energy technologies.
Pioneering renewable energy projects in developing countries, face high capital costs due to a combination of technology and country risk. A combination of sound domestic policies, low cost loans and other financial instruments – if these mechanisms are coordinated and scaled up together – can play a key role in bringing down the incremental cost burden.