Table of Contents        

Abstract

Introduction

Current Energy Landscape in South Africa

South Africa’s Just Energy Transition (JET)

The impact that the JET policy will have on local communities situated in mining regions

Strategies to mitigate the negative effects

Measures that the South African government should take to ensure an equitable, inclusive and beneficial energy transition

Prioritizing vulnerable communities

Promoting energy efficiency and renewable energy adoption

Fostering financing, innovation, and technology transfer

Expanding Renewable Energy Access in Rural Areas

Building Sustainable Human Settlements

Inclusive Environmental and Planning Policies

Government Policies and Financial Incentives

Strategic Partnerships and Collaboration between South Africa and Spain

The opportunities for collaboration between Spanish and South African companies in the renewable energy sector

Key Opportunities for Collaboration and Knowledge-Sharing

Technology Transfer and Innovation Sharing

Capacity Building and Skills Development

Local Manufacturing and Supply Chain Development

Project Financing and Investment

Renewable Energy Grid Integration

Regulatory Advocacy and Policy Dialogue

Cross-Border Renewable Energy Projects

Strategies to Facilitate Collaborations

How Spanish companies can navigate the regulatory landscape in South Africa

Key Regulatory Frameworks for Renewable Energy Projects in South Africa

Integrated Resource Plan (IRP)

Renewable Energy Independent Power Producer Procurement Programme (REIPPPP)

Local Content and Job Creation Requirements

Environmental Impact Assessment (EIA)

Water Use License

Grid Connection and Power Purchase Agreements (PPAs)

Energy Efficiency and Regulatory Compliance

B-BBEE (Broad-Based Black Economic Empowerment)

Tax and Fiscal Incentives

How Spanish Companies Can Navigate the Regulatory Landscape

Challenges that Spanish companies may face in the South African renewable energy market

Spanish Experience in Renewable Energy

The role Spanish companies can play in supporting the development of local manufacturing and job creation in the South African renewable energy sector

The potential risks and opportunities associated with the Spanish government’s financial support for Spanish companies investing in South African renewable energy projects

Conclusion

 Introduction

The transition to renewable energy has become a central priority for many countries around the world, driven by the need to mitigate climate change, reduce dependence on fossil fuels, and promote sustainable development. South Africa, one of the continent’s largest and most energy-hungry economies, is undergoing a significant shift in its energy sector, moving from a coal-dominated power generation system to a more diversified energy mix that increasingly includes solar, wind, and bioenergy sources. This transformation is not only essential for ensuring energy security and economic growth, but it also offers substantial opportunities for international companies, particularly those from countries with established expertise in renewable energy technologies, such as Spain. This paper examines the current state of South Africa’s energy sector, the policies driving its transition to renewables, and the specific opportunities that Spanish companies can exploit in this burgeoning market.

Current Energy Landscape in South Africa

South Africa’s electricity generation has been historically dominated by coal, with approximately 85% (42,000 MW) of the nation’s electricity coming from coal-fired power stations. Despite growing environmental concerns, coal is expected to remain a major part of South Africa’s energy mix for the next decade. However, the share of renewable energy is set to grow rapidly. According to the Integrated Resource Plan (IRP), an additional 8.7GW of renewable energy capacity is planned to be installed between 2023 and 2032, with solar energy taking the lead as the primary driver of this expansion. The South African government has also relaxed local content requirements for solar modules in a bid to accelerate the deployment of solar projects. [5]

Eskom, South Africa’s state-owned utility, plays a critical role in the country’s energy sector, generating about 95% of South Africa’s electricity. Eskom also plays a key role in the Southern African Development Community (SADC), where it provides a significant portion of the region’s electricity. Eskom is facing severe challenges in terms of capacity, aging infrastructure, and an inability to meet the growing demand for electricity. The country is also grappling with persistent electricity shortages, which have led to load shedding,  a situation where electricity supply is interrupted to manage demand. [5]

The South African government’s response to this crisis is embodied in its “Energy Action Plan,” which focuses on fixing Eskom, increasing renewable generation capacity, and encouraging private investment in the energy sector. The Just Energy Transition (JET) policy is another significant component of South Africa’s renewable energy strategy, aiming to balance the shift to clean energy with socio-economic goals such as job creation and community welfare. [3]

South Africa’s Just Energy Transition (JET)

The concept of a Just Energy Transition is central to South Africa’s renewable energy strategy. It is not merely about replacing coal with renewable energy sources, but also ensuring that the transition is equitable, inclusive, and provides sustainable economic opportunities for communities traditionally dependent on the coal industry. South Africa aims to achieve carbon neutrality by 2050, and the transition will be closely tied to the development of new industries and job creation in green sectors, such as renewable energy production, energy storage, and the development of electric grids.

The South African government has committed to increasing the share of renewable energy in the national grid and addressing the socio-economic impacts of the transition. This includes managing the closure of coal-fired power plants, supporting retraining and reskilling programs for affected workers, and investing in local manufacturing and job creation in the renewable energy sector. [3]

The impact that the JET policy will have on local communities situated in mining regions

The JET policy aims to reduce South Africa’s reliance on coal and transition to a more sustainable and low-carbon energy sector. However, given that coal is central to the country’s energy production and the livelihoods of many communities, especially in coal-dependent regions like Mpumalanga, Free State, Limpopo, and KwaZulu-Natal, the policy’s implementation will have a profound impact on local communities and workers in the coal industry namely through job loss, detrimental health impacts amongst other issues. [8]

A significant portion of the population in coal-mining regions depends on the industry for their livelihoods, with 61% of respondents either directly employed in coal mining (14%) or in related sectors (5%). The closure or reduction of coal mining could lead to widespread job losses, affecting not only miners but also workers in support industries like retail, healthcare, and transportation. Additionally, 57% of respondents are unemployed, highlighting the region’s economic vulnerability, which may worsen with the decline of the coal sector. The potential out-migration of workers (27%) seeking alternative employment further strains the social fabric. The transition away from coal also poses health risks, with 70% of respondents reporting coal-related illnesses, particularly respiratory diseases. Many households, heavily reliant on a single income (51%), are especially vulnerable to economic disruptions, and 58% fear job loss and relocation. The area’s limited economic diversification means that the closure of coal mines would also impact secondary industries, such as healthcare, education, and retail, which depend on the coal sector. [8]

Strategies to mitigate the negative effects

The JET policy presents a significant challenge for communities reliant on coal mining, but it also offers an opportunity for transformation and long-term growth. To mitigate the negative effects on local communities and workers, strategies must focus on reskilling through targeted training programs focused on renewable energy, technical maintenance, and green construction can help prepare displaced coal workers for new job opportunities in the growing green economy, particularly in industries like solar, wind, agriculture, and technical trades. [8]

Harnessing the entrepreneurial spirit, especially among small business owners and those in the informal economy, through targeted support like financial resources, business training, and market linkages, can foster local businesses, diversify the economy, and build resilience outside the coal sector. By strengthening non-coal industries like agriculture, tourism, and manufacturing, while supporting existing businesses and fostering new sectors, can help absorb displaced workers and ensure a smooth transition away from coal mining ultimately fostering job creation. Through community engagement we can bolster community development by improving community amenities like healthcare, education, and recreation in coal-dependent towns which can enhance quality of life, attract investment, and support the growth of alternative industries like clean energy, agriculture, and manufacturing.[8]

By investing in infrastructure, providing economic safety nets such as income support and/or unemployment benefits, and fostering collaborative partnerships between local stakeholders, the transition can be managed in a way that minimizes social disruption and maximizes long-term benefits for coal-dependent communities. Through targeted interventions and continuous dialogue, the JET initiative can contribute to the sustainable development of these communities, ensuring that workers are not left behind in the move towards a cleaner, greener energy future. [8]

Measures that the South African government should take to ensure an equitable, inclusive and beneficial energy transition

To ensure an equitable, inclusive, and beneficial energy transition in South Africa, it is of utmost importance that the government should take a series of strategic measures aimed at addressing the multifaceted challenges faced by vulnerable communities, as well as promoting sustainable energy systems, and fostering economic opportunities for all citizens. The transition to cleaner energy is not just about reducing reliance on fossil fuels however it is also about ensuring that all South Africans, especially those in underserved, rural, and historically marginalized areas, can access reliable, affordable, and sustainable energy sources. This section of the paper discusses some of the key measures that the South African government should prioritize to achieve a just and equitable energy transition as listed below.

Prioritizing vulnerable communities

The South African government must focus on vulnerable communities that have historically been excluded from access to reliable and affordable energy. This includes townships, informal settlements, and rural areas, where millions of people still live without electricity. To address this, the government should work with international partners, such as the United Nations in order to implement targeted policies that prioritize these communities in the transition to clean energy. [9]

Key policy instruments in this regard is the Climate Change Response Fund which is a fund created by the government in order to combat the severe effects of global warming and climate change as well as the Just Energy Transition Partnership (JET-P) which is a vast collaboration between multiple countries with South Africa, with aims to accelerate the decarbonisation of South Africa’s economy by focusing on the national electricity system. These instruments should be leveraged to ensure that the transition is inclusive. The government should ensure that programs, such as Technical and Vocational Education and Training (TVET), are expanded to equip youth, women, and other marginalized groups with the skills required to participate in the renewable energy sector. This includes training programs in off-grid energy technologies, renewable energy installations, and electric vehicle manufacturing. Additionally, supporting small and medium-sized enterprises (SMEs) in energy generation, distribution, and service provision will foster local entrepreneurship and create jobs in these communities. [7]

Moreover, the government should safeguard the livelihoods of workers who will be displaced by the shift away from coal and other fossil fuels. This can be achieved by implementing retraining programs and offering green skills development, therefore preparing workers for employment in the growing renewable energy and energy efficiency sectors. Partnerships with international organizations, such as the International Labour Organization (ILO), should focus on facilitating these transitions. [7]

Promoting energy efficiency and renewable energy adoption

To mitigate climate change and reduce dependency on fossil fuels, the government has to accelerate the adoption of energy-efficient technologies and renewable energy sources. The government should prioritize frameworks for decentralized energy systems, especially in rural and off-grid areas, to ensure equitable access to clean energy.

Initiatives such as those led by the United Nations Industrial Development Organization (UNIDO) on decentralized energy systems can be scaled up. These initiatives aim to reduce emissions, increase energy access, and enhance energy infrastructure across the country. The Minimum Energy Performance Standards (MEPS) for lighting, supported by the UN Environment Programme, have already been implemented to promote the use of energy-efficient LED lamps, and similar measures should be expanded to other sectors. South Africa’s leadership in the G20 Energy Transitions Working Group provides an opportunity to further promote energy efficiency and renewable energy globally, and the government should capitalize on this position to push for stronger climate action.

Fostering financing, innovation, and technology transfer

A critical challenge for South Africa’s energy transition is the availability of financing and the transfer of appropriate technology. In order to overcome this, the government should collaborate with international development institutions to secure concessional financing for clean energy projects and promote technology transfer. By working with entities such as the European Union, International Finance Corporation (IFC), and the African Development Bank (AfDB), South Africa can unlock the financial and technological resources needed to support its transition to a low-carbon economy by aligning with their respective policies and projects regarding energy and climate change.

The government should also foster innovation by supporting youth-driven initiatives and small businesses.  Programmes such as the AfriCircular Innovators Programme headed by the African Development Bank which helps small and medium enterprises to receive financing and technical assistance to scale up circular economy initiatives should go hand in hand with South Africa’s very own circular innovations programme. A circular economy focuses on reducing waste and making the most of resources by reusing, recycling, and refurbishing materials. It not only supports environmental sustainability but also drives economic growth by creating new industries and job opportunities. In South Africa, transitioning to a circular economy is seen as crucial for economic recovery, tackling climate goals, and advancing sustainable development. The Department of Science and Innovation plays a key role in this transition by applying science, technology, and innovation to help shift the country towards a more circular, low-carbon economy, which also promotes socio-economic opportunities and supports South Africa’s climate commitments.

Sentiments and ideas should be utilised from awareness festivals such as the Green Hustle where various climate and energy centred organisations gather to create awareness and to teach the community how to be more climate conscious and energy savvy in order to decrease the detrimental effects of climate change. These projects are aimed at empowering young people to create sustainable business solutions and should be expanded. The government can facilitate this by providing mentorship, knowledge exchange workshops, and access to funding for promising projects in the renewable energy sector.

Expanding Renewable Energy Access in Rural Areas

The energy needs of South Africa’s rural areas differ significantly from urban areas. Many rural communities are vulnerable to the impacts of climate change and face challenges in accessing basic services, including electricity and water. The government must prioritize the expansion of off-grid and mini-grid renewable energy solutions in these areas. In Africa, where 600 million people lack access to reliable electricity, mini-grids are emerging as a solution, especially in rural areas where the national grid is either non-existent or unreliable. Mini-grids are small-scale electricity networks that generate and distribute power to local communities. They often operate independently of the national grid and are typically powered by renewable sources like solar, wind, or hydro energy. Mini-grids are becoming increasingly important for providing affordable, reliable electricity to rural populations and businesses, replacing the need for polluting diesel generators. Currently, over 47 million people worldwide are connected to mini-grids, but to meet the goal of universal energy access by 2030 (SDG7), an estimated 180,000 more mini-grids are needed, particularly in Africa. These solutions are often more cost-effective and efficient than connecting rural households to the national grid.

The Integrated National Electrification Programme (INEP) which is an initiative of government to provide capital subsidies to municipalities to address the electrification backlog of permanently occupied residential dwellings, with the purpose of managing the electrification planning, funding and implementation process in order to address the electrification backlog. The INEP should be expanded to address the delivery backlog in dispersed rural settlements by using renewable energy solutions such as solar and wind power. These systems can provide reliable and affordable electricity, supporting key sectors like education, healthcare, and agriculture, which are vital to rural livelihoods.

Additionally, Waste-to-Energy (WtE) technologies which convert various types of waste, including semi-solid such as sludge and liquid such as sewage into energy, such as electricity or heat and bioenergy projects should be promoted to help address both energy and waste management challenges in rural communities. These technologies not only provide a clean energy source but also support local economic development by creating green jobs in waste management and energy production.

Building Sustainable Human Settlements

Sustainable development of human settlements is a cornerstone of the energy transition. Urbanization and densification present both opportunities and challenges in terms of resource management. The government should ensure that urban development is guided by principles of sustainability and energy efficiency. This includes promoting the construction of energy-efficient homes, implementing solar water heating in new developments, and ensuring that public transport systems are accessible, energy-efficient, and sustainable. In rural and peri-urban areas, the government should also invest in infrastructure that supports sustainable agricultural practices and community-based energy solutions. This requires a concerted effort to regenerate rural communities, focusing on land reform, gender equity, and improving access to resources for small-scale farmers.

Inclusive Environmental and Planning Policies

The government must create transparent and inclusive planning processes that empower communities to actively participate in the design and implementation of energy and sustainability projects. This includes developing Environmental Performance Indicators (EPIs) which are used to examine environmental issues such as pollution, climate and energy in order to assess local governments outputs, as well as to inform fiscal allocations and capacity-building efforts. By engaging communities in the planning process and making environmental and sustainability criteria relevant to their specific needs, the government can foster greater ownership and responsibility for the energy transition.

Furthermore, local governments should be empowered to take the lead in implementing waste management systems, energy efficiency programs, and the expansion of renewable energy solutions in their municipalities. The government should provide the necessary institutional support to replicate successful models at scale, particularly in cities and rural areas, to accelerate the process of sustainable service delivery.

To ensure an equitable, inclusive, and beneficial energy transition, the South African government must prioritize vulnerable communities, promote energy efficiency and renewable energy, foster financing and innovation, and build sustainable human settlements. These efforts should be guided by inclusive and transparent planning processes that empower communities to actively engage in the transition. By focusing on these areas, South Africa can build a sustainable, low-carbon economy that benefits all citizens, reduces inequality, and fosters social and economic transformation. Through collaborative efforts with international partners, local governments, and communities, South Africa can lead the way toward a just energy transition that leaves no one behind.

Government Policies and Financial Incentives

The South African government has introduced several policies aimed at encouraging investment in renewable energy, notably the Integrated Resource Plan (IRP) and the Energy Action Plan. The IRP lays out a roadmap for expanding the country’s electricity generation capacity, with a focus on renewables such as wind, solar, and storage technologies. Spain, with its long-standing experience in the renewable energy sector, is well-positioned to take advantage of these opportunities. [5]

Spain’s government has also shown a commitment to fostering international collaboration in the renewable energy space. In 2023, the President of the Government of Spain announced €2.11 billion in financial support for Spanish companies to participate in renewable energy and climate-related projects in South Africa. This funding is intended to help Spanish firms enter the South African market by offering financial instruments such as loans, grants, and subsidies. [2]

Strategic Partnerships and Collaboration between South Africa and Spain

For Spanish companies looking to enter the South African market, forming partnerships with local firms will be critical. South Africa’s energy transition is expected to be driven by independent power producers (IPPs), and Spanish companies can collaborate with local entities to navigate the regulatory landscape and secure funding. Additionally, Spanish firms can offer their expertise in areas such as solar PV, wind energy, and energy storage to support the development of South Africa’s energy infrastructure. [6]

Moreover, the South African government’s emphasis on private sector involvement in the energy transition opens avenues for Spanish companies to invest in grid modernization, energy storage solutions, and the development of microgrids to enhance electricity access in underserved regions.

The opportunities for collaboration between Spanish and South African companies in the renewable energy sector

Collaboration and knowledge-sharing between Spanish and South African companies in the renewable energy sector offer a wealth of opportunities that could significantly accelerate both countries’ energy transitions. Spain which happens to be a global leader in renewable energy technologies, finance, and policy, can complement South Africa’s growing demand for renewable energy, its abundant natural resources, and its robust policy framework that attracts foreign investment. This synergy offers a compelling opportunity to address mutual challenges and create sustainable, long-term solutions for the renewable energy sector in both countries. In this section the paper discusses key opportunities for collaboration and knowledge-sharing followed by strategies to fulfil these collaborations.

Key Opportunities for Collaboration and Knowledge-Sharing

 Technology Transfer and Innovation Sharing

Spanish companies including Iberdrola, Acciona, and Siemens Gamesa, are recognized leaders in renewable energy technologies, particularly in solar, wind, and energy storage systems. South Africa, with its high solar radiation and favourable wind conditions, stands to gain from Spain’s advanced expertise in these areas. For instance, Spanish firms can help South African companies adopt state-of-the-art solar panels and wind turbines optimized for local conditions. Additionally, energy storage solutions such as battery systems that stabilize the grid, are essential to managing the intermittent nature of renewable energy. Spanish expertise in energy storage could prove invaluable in addressing this issue. To facilitate this collaboration, joint research and development (R&D) initiatives and technology transfer agreements can be established. Creating innovation hubs or joint ventures would allow Spanish firms to transfer knowledge and technologies while fostering long-term partnerships with South African companies.

Capacity Building and Skills Development

South Africa faces a notable skills gap in the renewable energy sector. There is a pressing need for local technicians, engineers, and project managers who are capable of deploying and managing renewable energy technologies. Spanish companies, with their extensive experience in executing large-scale renewable energy projects, can play a crucial role in addressing this gap. Spanish companies can support capacity-building efforts by offering training programs, internships, and certification courses for South African workers. Collaborating with South African universities and vocational institutions to develop renewable energy-focused curricula would help foster the next generation of industry professionals.  Collaborations with local higher education institutions, or technical colleges, could provide both theoretical and hands-on training. Public-private partnerships (PPPs) could also be leveraged to scale up these training initiatives and ensure sustainability.

Local Manufacturing and Supply Chain Development

South Africa’s renewable energy policies require projects to meet local content regulations, which incentivize the use of locally sourced materials and components. This presents a significant opportunity for Spanish companies to contribute to the development of South Africa’s manufacturing capacity for renewable energy components, such as solar panels, wind turbines, and inverters. By forming joint manufacturing ventures, Spanish companies could help set up local production facilities, reducing reliance on imported goods and creating jobs. Furthermore, Spanish firms can work with South African suppliers to establish local sourcing networks that align with local content regulations, improving supply chain resilience and reducing costs. Facilitating these partnerships would involve engaging in technology and knowledge-sharing agreements with local manufacturers, as well as setting up supplier networks to integrate South African businesses into the renewable energy supply chain.

Project Financing and Investment

Spanish companies along with the support of financial institutions such as Compañía Española de Financiación del Desarrollo (COFIDES), have access to significant capital and financing instruments for international projects. This provides a valuable opportunity for collaboration on financing large-scale renewable energy projects in South Africa. Spanish firms can partner with South African companies to access green bonds or Environmental, Social, and Governance (ESG) investment funds, which are increasingly popular for renewable energy projects. PPPs also present a pathway for joint investment in renewable energy projects. Through these partnerships, both Spanish and South African firms, as well as government agencies, can help bridge financing gaps and ensure the financial feasibility of large projects. To facilitate this collaboration, investment forums or matching platforms could be established by Spanish development banks, international financial institutions, and local financial entities like the Development Bank of Southern Africa (DBSA).

Renewable Energy Grid Integration

South Africa’s renewable energy potential is vast, but the country faces challenges in integrating renewable sources into its national grid, particularly in remote areas where wind and solar projects are located. Spanish companies have significant experience in grid integration, energy management systems, and smart grid technologies, all of which could help address these challenges in South Africa. Spanish firms can partner with South African utilities, such as Eskom, to implement smart grid technologies that enable efficient energy distribution and the integration of renewable sources into the national grid. They can also collaborate on demand response and energy management systems to optimize energy supply and balance fluctuations in renewable energy generation. Facilitating collaboration could involve technical workshops, joint pilot projects, and capacity-building initiatives between Spanish firms, Eskom, IPPs, and South African municipalities.

Regulatory Advocacy and Policy Dialogue

Both Spain and South Africa are committed to accelerating the renewable energy transition and achieving their climate goals. Through sharing experiences and best practices, Spanish and South African companies can work together to advocate for stronger renewable energy policies, incentives, and a supportive regulatory environment. Spanish companies can collaborate with South African industry bodies such as the Energy Council of South Africa to contribute to the development of policies that encourage renewable energy growth. These might include incentives for private sector investment, grid modernization, and local job creation. Additionally, the two countries can align their regulatory frameworks in areas like energy storage, grid stability, and off-grid solutions. Collaborations can be facilitated through industry conferences, government-led policy workshops, and joint dialogues organized by Spanish and South African industry associations, aiming to engage policymakers in discussions about the future of renewable energy.

Cross-Border Renewable Energy Projects

Given South Africa’s strategic location in Southern Africa, Spanish and South African companies could collaborate on cross-border renewable energy projects that integrate regional energy markets. South Africa has the potential to supply clean energy to neighbouring countries, and Spanish expertise in cross-border electricity trading could help facilitate the creation of interconnectors and regional power pools. Spanish companies could collaborate with South African firms to develop renewable energy infrastructure that supports regional energy exports. Drawing on Spain’s experience with cross-border electricity trading within the European Union, this collaboration could offer valuable lessons in developing a regional energy market in Southern Africa. Facilitating these cross-border collaborations would involve working with regional bodies such as the Southern African Power Pool (SAPP) which involves member states of the SADC, thereby advocating for the integration of renewable energy grids across the region.

Strategies to Facilitate Collaborations

Spain and South Africa can foster renewable energy cooperation through bilateral agreements that set shared priorities, joint actions, and frameworks for technology exchange, funding, and policy dialogue. Spanish companies could form joint ventures with South African firms to pool resources, share risks, and meet local content and job creation requirements. Trade missions and investment forums would allow both countries to explore opportunities for collaboration, with Spanish businesses visiting South Africa and vice versa. Development cooperation programs, supported by Spanish agencies like COFIDES and ICEX, could provide financing and technical assistance for projects, while PPPs could fund large-scale initiatives. Industry associations and networking events, such as conferences and workshops, would further promote knowledge-sharing and partnership development between both nations.

In conclusion, collaboration between Spanish and South African companies in the renewable energy sector presents immense potential. By focusing on areas such as technology transfer, capacity building, local manufacturing, grid integration, and policy advocacy, both countries can contribute to a shared goal of accelerating the renewable energy transition. These partnerships will not only foster mutual economic growth but also play a vital role in the global effort to combat climate change, creating a sustainable future for both Spain and South Africa.

How Spanish companies can navigate the regulatory landscape in South Africa

Entering the renewable energy market in South Africa presents significant opportunities for Spanish companies, but navigating the regulatory landscape can be complex. The country’s evolving policies and procedures require a careful understanding of the legal frameworks that govern renewable energy projects. By engaging with local authorities, ensuring compliance with key regulations, and working within South Africa’s regulatory environment, Spanish companies can successfully invest in the sector. This essay provides an overview of the key regulatory frameworks and requirements that Spanish companies must navigate when entering South Africa’s renewable energy market.

Key Regulatory Frameworks for Renewable Energy Projects in South Africa

Integrated Resource Plan (IRP)

The IRP is South Africa’s long-term energy planning document that sets out the country’s energy mix and capacity needs. The IRP guides investment in renewable energy by outlining specific targets for the procurement of renewable energy capacity.

Spanish companies looking to invest in renewable energy must ensure that their projects align with the IRP’s goals. The most recent update, IRP 2023, includes ambitious targets for renewable energy procurement over the next few decades. However, companies must stay informed about future revisions to the IRP to ensure that their projects continue to align with South Africa’s evolving energy demands and policy priorities.

Renewable Energy Independent Power Producer Procurement Programme (REIPPPP)

The REIPPPP is a flagship program designed to encourage private investment in South Africa’s renewable energy sector. It is a competitive bidding process where IPPs are invited to submit proposals for renewable energy projects. Spanish companies must participate in the REIPPPP by responding to Requests for Proposals (RFPs) issued by the Department of Energy (DoE) and Eskom, South Africa’s state-owned electricity supplier. Compliance with the REIPPPP process requires meeting various criteria, including local content quotas, socio-economic development goals, and conducting Environmental Impact Assessments (EIAs). Additionally, the most recent rounds of REIPPPP include Power Purchase Agreements (PPAs) that govern the terms of electricity sales, including pricing, performance standards, and penalties for non-compliance.

Local Content and Job Creation Requirements

South Africa places great emphasis on ensuring that renewable energy projects benefit the local economy by creating jobs and developing local industries. As part of this, Spanish companies must meet local content requirements, which mandate that a certain percentage of materials, components, and services be sourced locally. Moreover, projects are expected to contribute to local employment through commitments to hire South African workers for the construction, operation, and maintenance of renewable energy facilities. To meet these requirements, Spanish companies should consider partnering with local suppliers and contractors and may even explore opportunities for local manufacturing investments.

Environmental Impact Assessment (EIA)

Before initiating large-scale renewable energy projects, Spanish companies are required to conduct an EIA. EIAs in South Africa, required under the National Environmental Management (NEMA) Act of 1998, assess the potential environmental, socio-economic, and cultural impacts of proposed developments. The EIA process predicts both negative and positive consequences of projects and suggests measures to mitigate or eliminate adverse impacts. It aims to ensure sustainable development by evaluating and managing direct and indirect effects on factors like human health, ecosystems, and resources. The findings inform decision-making on whether to grant or deny environmental authorization for the project. The NEMA) mandates that projects follow prescribed environmental management plans (EMPs), with public participation and stakeholder consultations being a critical part of the process, especially for larger projects like wind and solar farms. Depending on the project’s size and location, approval may also be required from local municipalities or provincial authorities.

Water Use License

For certain renewable energy projects particularly those involving concentrated solar power (CSP) or hydroelectric power, a Water Use License (WUL) may be required if the project involves significant water use, such as for cooling or storage. The Department of Water and Sanitation is responsible for overseeing water rights in South Africa. Spanish companies must submit an application for a WUL if their projects impact water resources. The approval process can be lengthy, and obtaining the necessary licenses is a prerequisite for project construction.

Grid Connection and Power Purchase Agreements (PPAs)

Connecting renewable energy projects to South Africa’s national grid requires collaboration with Eskom, the state-owned electricity supplier. The Grid Code established by Eskom outlines the technical and operational specifications for grid connection and energy distribution. Additionally, Spanish companies must enter into a Power Purchase Agreement (PPA) with Eskom or another buyer, which governs the terms of electricity sales, tariff structures, penalties for underperformance, and other operational terms. The PPA is essential for securing the financial feasibility of renewable energy projects, as it guarantees long-term revenue streams for project developers.

Energy Efficiency and Regulatory Compliance

South Africa also imposes energy efficiency regulations to ensure that renewable energy projects meet certain standards for energy consumption, grid stability, and operational efficiency. Spanish companies must ensure their projects comply with the Energy Efficiency Strategy and adhere to technical standards set by regulators like the National Energy Regulator of South Africa (NERSA), which oversees compliance in the energy sector. NERSA plays a critical role in regulating energy efficiency, grid stability, and setting operational standards for renewable energy projects. Compliance with NERSA’s regulations is key to ensuring the long-term sustainability of projects.

B-BBEE (Broad-Based Black Economic Empowerment)

The B-BBEE policy is designed to promote the participation of historically disadvantaged individuals and communities in the South African economy. It is particularly important in the context of procurement and business partnerships. Spanish companies must meet the B-BBEE criteria to engage with government or state-owned enterprises and participate in renewable energy initiatives. This may involve developing plans to support the economic empowerment of black South Africans, particularly through job creation, skills development, and local ownership in renewable energy projects.

Tax and Fiscal Incentives

South Africa offers a range of fiscal incentives to encourage investment in renewable energy, including tax credits for renewable energy assets. Under the Income Tax Act, there are provisions for accelerated depreciation allowances, which help reduce the upfront capital burden on renewable energy projects. In addition, Spanish companies must familiarize themselves with the Value Added Tax (VAT) implications for renewable energy projects, including potential rebates or exemptions for renewable energy equipment. Understanding customs and import duties is also critical, especially when importing technology or components for renewable energy projects.

How Spanish Companies Can Navigate the Regulatory Landscape

Spanish companies looking to navigate South Africa’s regulatory landscape should engage local legal and regulatory experts to ensure compliance with necessary permits and local content requirements. Partnering with South African firms can help meet job creation goals and provide insights into the legal and cultural aspects of the energy sector. Staying informed about regulatory changes through monitoring or expert consultations is essential, as the renewable energy environment is continually evolving. Additionally, joining industry associations like SAREC or SAPVIA can offer valuable networking opportunities and keep companies updated on policy developments.

Spanish companies aiming to invest in South Africa’s renewable energy sector must be proactive in understanding and complying with a wide range of regulatory requirements. From aligning with the IRP and participating in the REIPPPP to ensuring compliance with environmental regulations and grid connection standards, these companies must navigate a multifaceted regulatory landscape. By partnering with local stakeholders, working with legal experts, and staying informed about evolving regulations, Spanish companies can successfully enter and thrive in South Africa’s renewable energy market, contributing to the country’s transition to a more sustainable energy future.

Challenges that Spanish companies may face in the South African renewable energy market

Entering the South African renewable energy market offers both opportunities and challenges for Spanish companies. Key obstacles include regulatory and policy uncertainty, bureaucratic delays, infrastructure issues, financial risks, and intense competition. To navigate these challenges, Spanish firms should stay informed on policy changes, collaborate with local partners to ease bureaucratic processes, and invest in infrastructure upgrades or off-grid solutions. Financial risks like currency volatility can be mitigated through local partnerships, financial institutions, and hedging strategies. Spanish companies must also meet local content requirements by sourcing materials locally or establishing production facilities, while contributing to job creation through training programs. Social and environmental risks can be minimized through community engagement and adherence to sustainable practices. Additionally, understanding local cultural differences and market dynamics is crucial for successful market entry. By leveraging technological expertise, forming strategic partnerships, and adapting to local conditions, Spanish companies can effectively overcome these challenges and succeed in South Africa’s competitive renewable energy sector.

Spanish Experience in Renewable Energy

Spain has emerged as a leader in Europe’s renewable energy transition, having made substantial investments in solar, wind, and biomass technologies. Spain’s success in rapidly scaling up its renewable energy capacity offers a useful model for South Africa. In particular, Spain’s focus on solar energy has enabled it to become one of the largest solar markets in Europe, with an installed capacity of over 39 GW by 2030 [1]. Spanish companies such as Siemens Gamesa and Acciona are key players in the global renewable energy sector, with extensive experience in both technology development and project financing.

Spanish firms have also benefited from a supportive regulatory environment that has helped drive investments in clean energy. This includes tax incentives, government-backed financial mechanisms, and favourable market conditions for the development of wind and solar projects. The Spanish experience in renewable energy is not only relevant for South Africa but also offers valuable lessons for countries worldwide navigating their own energy transitions. [4]

The role Spanish companies can play in supporting the development of local manufacturing and job creation in the South African renewable energy sector

Spanish companies have significant potential to support the development of local manufacturing and job creation in South Africa’s renewable energy sector. By establishing local manufacturing and assembly facilities, they can meet local content requirements and reduce renewable energy technology costs, while creating direct employment in manufacturing and related sectors. Spanish firms can also invest in skill development programs to address the technical skills gap, ensuring a trained workforce for renewable energy projects. Additionally, they can facilitate technology and knowledge transfer, raising local technical standards and fostering global competitiveness. By developing local supply chains and partnering with South African suppliers, Spanish companies can boost the local economy and create resilient, independent supply chains. They can further contribute by creating green jobs in rural areas, promoting inclusive business models, and supporting local innovation through R&D hubs. Lastly, by facilitating access to finance for local entrepreneurs, Spanish firms can encourage innovation and help scale up renewable energy projects. In doing so, Spanish companies can play a transformative role in South Africa’s energy transition while enhancing their own global competitiveness.

The potential risks and opportunities associated with the Spanish government’s financial support for Spanish companies investing in South African renewable energy projects

The Spanish government has long supported the international expansion of Spanish companies, particularly in sectors like renewable energy, through financial mechanisms such as grants, loans, guarantees, and subsidies, facilitated by institutions like ICEX, COFIDES, and Cesce. This support is crucial for Spanish firms investing in emerging markets like South Africa, where the renewable energy sector offers both opportunities and risks. Government-backed financing provides access to low-cost capital, enhancing competitiveness in South Africa’s dynamic market, particularly through programs like the REIPPPP. Risk mitigation tools, including political risk insurance and credit guarantees, shield companies from political instability, currency fluctuations, and non-payment risks. Furthermore, government backing boosts credibility, helping Spanish firms secure partnerships, navigate tender processes, and align with global sustainable development goals. However, these advantages come with risks, including over-reliance on government support, currency volatility, political and economic instability, and changes in South African regulations, such as local content requirements. Companies also face the challenge of navigating complex international financing and regulatory landscapes, which can increase operational costs and complexity. Despite these challenges, by managing risks effectively and leveraging government support strategically, Spanish companies can contribute significantly to South Africa’s renewable energy transition, while advancing both local and global sustainability goals.

Conclusion

In conclusion, the renewable energy transition in South Africa offers a unique and transformative opportunity for Spanish companies to leverage their expertise, technologies, and resources to contribute meaningfully to a sustainable energy future. By fostering collaboration with South African firms, addressing regulatory challenges, and focusing on local capacity building, Spanish companies can play a pivotal role in advancing South Africa’s Just Energy Transition. This partnership not only holds the promise of economic and environmental benefits for both nations but also contributes to the global fight against climate change. A strategic and inclusive approach, rooted in innovation and mutual respect, will be crucial to ensuring that the transition is equitable, resilient, and beneficial for all stakeholders involved. Through joint efforts, Spain and South Africa can set an inspiring example of international cooperation in renewable energy development.