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Bridging the renewable energy divide

4th July 2025

     

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South African manufacturers lag behind their mining counterparts in terms of renewable energy wheeling, presenting both opportunity and risk, writes Discovery Green Head Andre Nepgen.

South Africa is turning the corner in its energy transition, with the renewable energy sector poised to redefine the landscape for industries across the nation. South Africa’s mining sector, a pillar of the nation's economic development, has long been synonymous with progress and innovation. From the discovery of gold and diamonds to becoming a global leader in mineral production, our miners have consistently driven economic growth and created jobs, playing a key role in many of the nation’s successes. Today, despite facing a raft of challenges, this notoriously energy-hungry sector is once again at the forefront, this time leading the charge in renewable energy adoption.

Yet, as the mining and chemicals industries rapidly embrace renewable energy solutions, a glaring disparity has emerged. South African manufacturers are lagging well behind their mining peers. This gap presents both a challenge and an opportunity for the nation's manufacturing sector, which remains an economic powerhouse, providing over 1.6-million jobs and contributing 13% to the GDP.

Manufacturing malaise?

The manufacturing sector's electricity consumption accounts for about 20% of South Africa's total, a significant figure that highlights its importance as one of the more boisterous conversationalists in the energy dialogue. However, the mining and chemical industries together consume a more substantial 37%, and this dominance is reflected in the uptake of renewable energy wheeling Power Purchase Agreements (PPAs). These sectors have secured an overwhelming 91% of the 3.55 GW of known renewable energy wheeling PPAs, leaving manufacturers to content themselves with an estimated single digit per cent.

Is this gap purely down to political will? Well, several characteristics give the mining and chemicals sectors an edge in renewable energy adoption. Their large, stable, and predictable energy demands, coupled with long-term energy outlook and Eskom connectivity, make them ideal candidates for PPAs. Their financial clout, single connection points, and dedicated teams with renewable energy expertise only serve to sharpen that edge.

In contrast, manufacturers often face volatile consumption patterns tied to fluctuating consumer demand. Their energy use typically is not high enough to fully consume utility-scale solar and wind projects – and the situation is made more complicated by their location within municipal distribution networks. Perhaps most importantly, manufacturers often cannot commit to energy delivery contracts extending beyond a decade. Until recently, that is just not a suitable timeframe for long-term renewable projects.

As a result, manufacturers have been more welcoming of rooftop and onsite solar solutions. While this marks a positive step towards embracing renewable energy, it highlights a fundamental challenge: the primary reliance on dirtier electricity persists. This means that while manufacturers are starting to explore renewable options, they are still heavily dependent on traditional energy sources. To truly shift the balance, there needs to be broader access to wheeling and tailored renewable products that meet the unique needs of manufacturers.

Growing risk

The mining-manufacturing disparity is not just academic – it is a growing risk with very real consequences.

Grid capacity is tightening fast. According to the latest Generation Connection Capacity Assessment report by Eskom, the total remaining capacity nationwide is under 20 GW and the regions that are best suited for wind and solar, like the Cape, are already exhausted. Even for businesses that act now, renewable energy projects typically take 18 to 24 months to build. Add in negotiations, regulatory approvals and construction delays, and the full lead time from agreement to delivery can take over four years. As the best sites are taken up, developers are pushed into areas with weaker solar or wind resources where the cost to build will be the same, but the output is lower, making the return on investment less attractive. It is a tough equation for manufacturers already battling rising costs and tighter margins.

The broader economic impact could be serious. Manufacturers face exposure to inevitable utility price hikes and looming additional carbon taxes, set to be implemented in 2030 in South Africa. The scenario presents a set of economic challenges, especially for small businesses.

The backbone of the South African economy, SMMEs are shouldering a similar burden from the energy crisis: paying for generators, fuel and inverters, employing extra staff to work in less time, and having to turn away work. The unfortunate reality is that SMMEs in South Africa have a high failure rate: some 50% fail within 24 months of launch, while an astonishing 70% to 80% flounder within the first five years of operating. These valuable and vulnerable assets are in need of support.

Innovation in wheeling is crucial to unlocking the full potential of South Africa's manufacturing economy, especially given the nation's outstanding renewable energy resources, which offer a significant competitive edge. To truly safeguard this sector and its impact on employment and business growth, the renewable energy industry must develop highly flexible, lower-risk products. This means creating solutions with shorter terms and adaptability to changes in energy usage. However, innovation alone is not enough. We also need policy changes to make wheeling accessible to manufacturers, especially those in municipalities that currently do not facilitate it. By addressing these challenges – innovation and policy – we can ensure that the transition to renewable energy is not only successful but also equitable and advantageous for all South African businesses.

A virtuous cycle

For South Africa to move towards a future of abundant clean, green energy, it is crucial that all industries take part. There is a magical mathematical effect where the participation of more and more diverse industries lowers the risk for everyone. A larger ecosystem can ensure that no renewable kilowatt hour is wasted as each industry brings its own unique and often complementary energy needs. Diversification is the antidote to individual risk.  The consequence is that everyone benefits from more renewable energy, without the risk. Innovation and supporting policy will do this.

Edited by Creamer Media Reporter

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