CAPE TOWN, SOUTH AFRICA: Despite the considerable potential that exists to produce electricity using renewable energy (RE) in Southern Africa, RE projects have been largely limited to off-grid, small-scale applications.
However, the renewable energy market in South Africa is expected to grow exponentially in the next few years, owing to the announcement of the renewable energy feed-in tariff made in March 2009.
New analysis from Frost & Sullivan, Southern African Renewable Energy Equipment Market, finds that the industry earned revenues of $28.4 million in 2008 and estimates this to increase nearly tenfold by 2015, to reach $262.3 million. This will include projects to develop energy from solar photovoltaic, solar thermal, wind power and biomass sources.
"The growth of the wind power market and large-scale solar concentrating projects will be driven by an increasing number of joint ventures," notes Frost & Sullivan Research Analyst Sipha Ndawonde. "Such ventures will be between project developers with local knowledge and private equity investment firms, backed by the support of international original equipment manufacturers."
With tightening sources of global credit and more countries reporting negative economic growth rates, private equity investment companies have become more selective and strategic about the sectors into which they invest.
Sustainable energy project portfolios have however bulged to more than $1 billion, dedicated to financing RE projects in Southern Africa.
"This is an indication that investors view RE and energy efficiency projects in Southern Africa as having favourable returns and representing a solid investment decision," Ndawonde says.
"An abundance of natural resources combined with a stable political environment, reasonable economic growth rates and growing interest from private equity firms means that large-scale RE projects are set to penetrate into the Southern African countries of South Africa, Botswana and Namibia."