Dr Rethabile Melamu
THE YEAR 2023 has already seen the worst load shedding ever on record in South Africa, and as we grapple with the energy crisis, the renewable energy sector’s contribution towards energy security cannot be overstated.
One of the aspects garnering significant media coverage is that the massive roll-out of these technologies presents industrialisation opportunities through localisation of solar PV components.
We’ve been at the helm of the localisation imperative since the outset, seeking to localise the entire PV value chain wherever possible. Last year we commissioned an in-depth study to identify localisation potential. The localisation imperative is also a cornerstone of the new South African Renewable Energy Masterplan (Sarem), in which the South African Photovoltaic Industry Association (Sapvia) have played a pivotal role since the project’s inception in 2021.
The study was commissioned to enable and support evidence-based policy making and introduction of appropriate and progressive regulatory mechanisms. In our view, market dynamics and intelligence must be carefully considered when introducing any market interventions.
Sapvia wishes to contribute to the conversation, by sharing insights from their study. The findings suggest that a holistic approach, spearheaded by a focus on growing all solar PV markets is required to realise the solar PV industry’s full potential for localised production.
The study identified cornerstone prerequisites for achieving this:
Unlock all market segments and establish clear and consistent regulations for each.
Enable sustainable growth demand in these markets with capacity and training interventions.
Launch public sector procurement programmes across spheres of the government, alongside other initiatives, with localisation thresholds set out.
Introduce local procurement incentives for all market segments, with government decisively leading by example.
Design and implement fit-for-purpose industry incentives in collaboration with industry players.
And, lastly, to address testing and certification industry needs, as well as skills shortages.
We need to be avoiding mistakes that led to closures of local manufacturing facilities during the 2010s. In our view, the enabling environment we’d need to fully exploit the growing localisation opportunities is not yet fully in place.
One of the learnings from that era is that an enabling economic and regulatory landscape is necessary for expanding current local manufacturing capabilities, and for attracting new players to enter the industry.
Sapvia’s stance is that our immediate-term energy security should be our number one priority right now; especially given the imperative to secure a predictable, reliable supply of electricity as existing PV manufacture facilities are scaled, and as new factories and plants are established.
In the meantime, we advocate for support for speedy rollout of new generation across the utility, Commercial & Industrial and residential market segments. We have already seen exponential growth in solar PV installations across these segments, with solar PV installed capacity having exceeded 4GW according to our recent data collation.
We understand government imperatives to protect and grow local manufacturing industry. In doing so we suspect that some considerations could be explored, for instance, providing a set of incentives for local manufacturers, including the introduction of various duties and tax rebates.
We advise that any of these considerations need to be thoroughly ventilated with key stakeholders, to ensure alignment around important immediate, medium- and long-term socio-economic considerations facing the country.
For instance, while immediate implementation of duties may be of some help to local companies, they could negatively affect the speed urgently need energy security, especially for on-going projects, and therefore, may have unintended consequences in the current context.
This is especially true in when there is insufficient supply for a particular PV product, as in these cases, import duties wouldn’t necessarily safeguard local industries and could even run counter to domestic interests.
On the other hand, we are aware that the International Trade Administration Commission has applied for a tax rebate on imports of certain solar panel equipment to potentially mitigate against the inadequate supply, but only where the components are not available locally or within the broader Southern African Customs Union (Sacu) marketplace.
At Sapvia we recognise the public’s need for transparent, clear communications on these complex, sometimes contradictory trends affecting our burgeoning solar PV sector.
At this point, we know that local manufacturing capacity for solar PV components is presently well below the demand projected projects in the medium term. We find ourselves at an impasse where the localisation imperative needs to be balanced with the relentless growth in demand we’ve seen in recent quarters.
Making up 11% of the nation’s total installed capacity, and around 30% of the capacity added since the last quarter of 2022, the residential sector leads the charge in the latest wave of solar technology uptake.
We acknowledge the strident calls for protective mechanisms for local manufacturing but urge that these need to be harmonised with South Africans’ immediate need for energy security. And, while Sapvia agrees that efforts to bolster and protect local manufacturing are extremely crucial, in a time of energy crisis, a more nuanced, multifaceted solution is urgently needed.
If we’re not careful, it’s the people of South Africa looking to make their households resilient against load shedding, who could ultimately bear the additional costs.
Ultimately, the best solution is to support and empower the local manufacturing industry to the point where South African facilities are producing PV equipment with the latest technology price-competitively, rather than artificially protecting short-terms interests.
As such Sapvia calls for a stance of empathy for our local producers, but also a pragmatic approach that prioritises the immediate needs of the people for energy resilience. Furthermore, local producers of PV equipment themselves need to secure the power they need to maintain and scale operations.
The catch-22 is not intractable. With greater understanding, in-depth research, and comprehensive insights, we can arrive at a balanced multi-pronged solution to incrementally untangle the interlocking challenges facing our PV and battery energy storage system (BESS) sectors. The solutions we’ve identified include regulatory clarity, institutional capacity-building, government-led local procurement initiatives, and bespoke industry-specific incentives.
The building blocks for a thriving local industry with both supply- and demand-side growth are within our reach as outlined in the draft Sarem, but we need to address the systemic blockers like grid capacity constraints.
We also urgently need to codify a robust enabling policy and import-export framework that truly supports our local producers, but not at the expense of consumers, who in this case are not only South Africa’s businesses, but also families and ordinary people.
The only possible way forward is a collaborative approach involving all stakeholders: consumers, government, civil society, and industry. Issues surrounding duties, and rebates are not an either-or scenario but rather a complex reality rooted in a global economic arena, with various forces at play.
Sapvia is, therefore, driving a calibrated approach to finding solutions; one that balances the immediate needs of local businesses and households with the long-term national objectives for energy security and a just transition.
Dr Rethabile Melamu is the CEO of the South African Photovoltaic Industry Association.
BUSINESS REPORT