South Africa: Old Mutual’s AIIM renewable projects can help end Eskom load-shedding

By David Whitehouse
Posted on Tuesday, 5 July 2022 06:00

AIIM is a shareholder in the De Wildt solar field near Brits in South Africa's North West Province. Photo supplied.

A planned pipeline of renewable energy projects backed by African Infrastructure Investment Managers (AIIM) has the potential to help end South African load-shedding, joint managing director Vuyo Ntoi tells The Africa Report.

AIIM is part of Old Mutual Alternative Investments and manages private-equity funds that invest in African infrastructure. The firm, which has $2.4bn under management, recently upgraded its new project pipeline in South Africa from 2,000 to 5,000MW, which it aims to implement in the next three years. The pipeline can “greatly reduce the impact of load shedding,” Ntoi says.

The project pipeline, which AIIM has hired specialist teams to develop, will be made up of at least 100 different operations with average capacity of 50MW or less, Ntoi says. That kind of diversified portfolio will help to resolve the intermittency of solar resources, he says.

Rather than helping to meet peak demand, renewables will also be able to contribute to baseload. State-owned power utility Eskom, he says, is currently using plants designed to meet peak demand as baseload suppliers.

Freeing up “peakers”, to act as intended, will give the grid more stability. That process will also reduce the need to use gas in South Africa’s power mix, Ntoi says. “Renewables can make up the bulk of baseload generation. There will be a point where gas is not needed.”

AIIM says it has contributed to around 25% of the clean energy supplied to South Africa’s grid. Ntoi sees great potential in wheeling, under which Eskom’s grid is used to transport electricity from the point of generation to the end user.

  • South Africa is a “massive” potential market for wheeling solutions, Ntoi says.
  • AIIM in May closed the purchase of majority stakes in three new solar power plants totalling 30MW that will supply Harmony mining operations in the Welkom area. Commercial operation is due to start in March and April 2023.

Gridlock

Across Africa, Ntoi says, the biggest constraint on scaling up renewable energy is the lack of sufficiently large national grids. Covid-19 has added to the financial pressures on national utilities and weakened governments’ ability to support them. Those pressures have been compounded by higher oil and gas prices.

AIIM has reacted with a focus on solutions for commercial and industrial users. Ntoi calls it “a policy decision and a reflection of reality”. In countries that lack extensive grids, AIIM plans to concentrate on mini grids, he adds.

In South Africa, experts have argued that take-up of renewables could serve to weaken Eskom financially, as the new solutions will be used by industrial and affluent individual users who can pay their bills. Many poorer users, including some South African municipalities, cannot or will not pay.

Ntoi does not the impact on Eskom that way:

  • Eskom will still get paid for the transmission and distribution of electricity in the context of a national generating shortfall, he says. “If anything, it improves Eskom’s position.”
  • Still, plugging the holes in Eskom’s capacity will not be straightforward. The utility’s generation capacity may continue to decline as the oldest coal plants are closed, meaning new investment in Eskom will be needed. “We are not facing a stable situation.”

The bottom line

Stable electricity for South Africa is getting closer as renewable energy gains traction.

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