Key View

  • We highlight South Africa and Kenya as our non-hydropower renewables outperformers in the Sub-Saharan Africa region. South Africa remains the leader in renewables growth in the region, while Kenya leads in terms of non-hydropower renewables.
  • Zambia is our renewables “market to watch” in the region, Zambia’s government is ramping up efforts to develop the solar sector as a result of the country’s high dependence on hydropower, which has made it susceptible to electricity supply shortages during the dry season.

We have identified two outperforming non-hydropower renewables investment destinations, and one key market to watch over the coming years in the Sub-Saharan region.

South Africa To Experience the Highest Non-hydropower Renewables Capacity Growth In SSA

South Africa will be the largest renewables market in SSA over the next decade, as we forecast that South Africa will account for 68% of the total renewables capacity of the region in 2023. This is due to the fact that South Africa has managed to foster an environment supportive of private sector investment in renewables through the Implementation of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). Over the next 10 years, we expect that non-hydro renewables will increase at an average annual rate of 22%, making up the vast majority of South Africa’s power capacity growth. Renewables will increase from 9.3% to 17.0% of the market’s total power mix during this time.

Solar will remain the primary source for renewables generation in the market, accounting for an annual average of 46.6% of total renewables generation between 2023 and 2032. Our outlook is further supported by South Africa’s Key Projects Data (KPD) as the market has over 10GW of solar and wind project currently in the preconstruction and in the construction stages. Over 65% of this is from solar power projects, we note that over the years the average size of solar projects has increased as the average size of completed projects is just over 60MW while projects in planning average at 170MW. We believe that South African system operators are adapting to integrating larger solar projects into the grid and see this as an upside risk to further solar development. Therefore, resulting in stronger investor and contractor confidence in the market.

Other drivers for renewables growth in South Africa that we highlight are:

  • As part of a broad range of measures to address load shedding and power outages in the nation, the South African government in January 2023 decreased the designated local content requirement for solar modules from 100% to 30%. This is set to speed up solar project deployment in the market. It has been reported by China’s General Administration of Customs In March that South Africa imported a total of 571 MW from China, three times more than in the same period last year. Our operational risks team believes that China’s exporting relationship to South Africa will remain positive and this will continue to be a key factor for the solar market growth.
  • The launch of the energy storage auction in March 2023 by Department of Mineral Resource and Energy (DMRE) of South Africa for six battery storage projects totaling 513MW is also an upside risk to the market’s renewables sector. As we expect batteries will continue to increase the integration of solar and wind projects in the market.
  • Through the Just Energy Transition Programme (JETP) which is a vision focusing on achieving net zero carbon emissions by 2050, South Africa has received R7.2bn for private sector renewable energy investment, for the generation of an additional 1,200MW of solar and wind energy. The plan entails the decommissioning of older coal-fired power plants while also investing in renewable capacity development and updating the overall grid network to facilitate the energy transition. Furthermore, the plan will also include a ‘just transition’ to assist workers employed in the coal sector to move away from the sector and be skilled for employment in other industries.

Kenya To Remain A Top Destination For Geothermal Investments

Up to 95% of Kenya’s increase in power capacity over the next ten years will come from non-hydropower renewable sources. We forecast that renewables will be the main engine of Kenya’s market expansion, with the implementation of an auction system ensuring that there will be more commercially viable solar power installations. Kenya’s non-hydropower renewable capacity will grow by just under 600 MW over the course of our 10-year forecast period, accounting for an average of 65% of the country’s total power mix each year. During this time geothermal will continue to be the leading renewables source in the market, contributing just over 70% of the market’s annual electricity generation. A sizable supply of geothermal generation that is continuously produced will ensure a steady baseload to support the market.

The Kenyan government’s pledge to establish a 100% carbon-free energy sector by 2030 and its goal of installing 100GW of capacity by 2040 indicate that there are significant upside risks for investments in renewable power. There have been several developments in Kenya’s renewables sector, specifically the geothermal sub-sector through the development of new plants, among the developments, we highlight:

  • In May 2023, Germany committed to funding the expansion of Kenya’s Olkaria geothermal station to increase capacity. Plans to install more generation capacity were made because studies revealed that Olkaria still has a significant amount of geothermal potential. When these are finished, the overall installed capacity in the Greater Olkaria zone will be close to 1GW.
  • Globeleq Geothermal Kenya, in partnership with Geothermal Development (GDC), has broken ground for a 35MW geothermal power plant in Nakuru County, Kenya. The USD108.0mn greenfield project is part of the 105MW Menengai complex. Kenya Power will purchase the output from the project under a 25-year power purchase agreement. Japan-based Toyota Tsusho is the engineering, procurement and construction contractor for the project, while Fuji Electric will manufacture and supply the steam turbine and generator. The project is expected to reach commercial operations in 2025.

Zambia’s Move From Hydropower Reliance Driving Renewables Growth

Zambia is highlighted as a market to watch due to the expansion its renewables sector will experience in the next decade. Following prolonged power cuts in the market at the start of 2023, the Zambian government and Zambia Electricity Supply Corporation Limited (ZESCO) announced plans to further diversify its electricity production sources by focusing solar power. Currently, the market generates over 80% of its electricity output by hydropower which has made it susceptible to electricity supply shortages during the dry season. Renewables only account for just under 2% of the total electricity generation currently in the market. We forecast that within the next decade the Zambia’s capacity will increase by slightly more than 1GW between 2023 and the end of 2032. Solar PV capacity will account for slightly more than 600MW of this increase, with the remainder coming from the completion of the Kafue Gorge power plant.

Policies that allow for private ownership of solar PV plants will be a key investment driver in the future, adding to the upside risk of new renewable energy project developments in Zambia. In January 2023, An agreement was recently signed between UAE independent power producer (IPP) Masdar and ZESCO. The partnership aims to co-develop solar projects with an overall investment of USD2bn over the next few years. While we await more concrete details before factoring it into our forecasts, this underlines our relatively bullish view for renewable power growth in Zambia as the market looks to diversify its generation sources. Our KPD currently captures 12 renewables projects at preconstruction stages totalling 1.5GW, of this 900MW are solar power projects and 130MW are onshore wind. The Solar PV and Wind Energy Hybrid Project in Solwezi is the largest project in Zambia’s renewables KPD and is expected to be commissioned in 2025.

This article has been sourced from BMI and can be accessed here