South Africa – an investment hotspot for renewable energy

Of the G20 countries on renewable energy investment, South Africa along with India, Brazil and Indonesia have been identified as hotspots for renewable energy.

South Africa has a national strategy to tackle climate change. However, the country needs to increase its ambition level and put together a plan to decarbonise the electricity sector. The current auctioning system available in the country is insufficient to create a level-playing field for renewables compared to the fossil-fuel electricity infrastructure.

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The Allianz Climate and Energy Monitor 2017 ranked South Africa tenth among G20 countries for renewable energy investment conditions. It scored high for its depth of capital markets, even though a high inflation forecast brought down the overall score. The country has steadily increased its renewables capacity in the last years and has a relatively high presence of leading renewable energy business.

Germany, UK and France maintain the top three positions. China holds its place in this best-performers club, maintaining fourth position. With roaring renewable energy markets and a consistent policy push, China installed more solar photo-voltaic than the rest of the G20 combined in 2016.

India, South Africa, Brazil and Indonesia emerge as high-need hotspots owing to increasing demand for energy, sheer size and vulnerability of the existing power system to a changing climate. Emerging economies are increasingly taking on leadership roles and are credibly enhancing renewable energy financing frameworks. China, India and South Africa are keenly interested in improving their attractiveness for investors in renewable energy. Prospects are good if policy support and market capacities are maintained.

Most G20 states improved conditions for investments in low-carbon energy over the past year, with several emerging market countries rapidly catching up to the leaders. The rapid development of the renewable energy sector is a crucial success factor for meeting the Paris climate goals. The G20 countries need to roughly double their annual investments in renewable energy to align their power infrastructure with the 2°C pathway, fixed at the Paris COP 21 in 2015.

Renewables are now attracting the bulk of new power investments of the G20 growing by about 25% annually over the past five years. Continuously falling technology costs have supported this strong increase. In some countries renewables passed a tipping point, reaching cost-competitiveness with conventional energy sources. Even with falling prices, a supportive policy environment for future growth of renewables is needed to provide reliable legislation for investors.

With the first hurdle taken in cost competitiveness, governments now need to adjust their power systems and market design to cope with an increasing share of weather-dependent renewables.

This is an edited version of the original article by Allianz Climate Solutions, Germanwatch and The NewClimate Institute that contributed to the The Allianz Climate and Energy Monitor 2017.

 

 

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