The Localisation Support Fund (LSF) has challenged the government to create clusters with existing suppliers within renewable energy components in order to deepen local manufacturing.
The LSF yesterday released a comprehensive report that analyses the local manufacturing capacity for essential components for three primary renewable energy technologies: solar PV, wind, and battery energy storage systems.
The report is aimed at supporting the South African Renewable Energy Masterplan (Sarem) process.
The study, conducted by BMA Analysts, unpacks the required value chains and technologies and then compares them to existing capability and capacity within South Africa, identifying the challenges and opportunities that exist to localise the manufacturing of renewable energy (RE) components in South Africa.
It determined the ramp-up curve that would be required for those components to meet the specification, demand, and competitive positioning of local manufacturers to supply against the anticipated requirements for both public and private sector energy programmes.
BMA Analysts executive designate Mbongeni Ndlovu said the suppliers of essential components for battery energy storage systems, for instance, including aluminium, steel, plastic compound materials, and electronic PC boards, were there, but were currently servicing other markets.
Ndlovu said the roll-out of the renewable energy programme presented a huge opportunity for the manufacturing sector.
“We need to make sure that we create linkages between them and the renewable energy manufacturers so we create deeper local content. That’s what we want in the short term. In the long term, we want to develop our own expertise and IP, so that we can actually control the entire value chain,” Ndlovu said.
“So what we want in the long term, for example, is to have our own cell-manufacturing capabilities, either independently or with the global multinationals.
“But what we’re trying to say is there’s demand now. That demand is inconsistent, but it’s there. Let’s try and leverage the opportunities to localise that demand, and then in the long term, let’s create the enabling environment in order to manage the value chain.”
Over the past year, there was a massive interest in South Africa’s renewable energy. The private sector registered a staggering 4.4GW of renewable energy in 2023; triple the numbers from 2022, and about 50 times the capacity in 2021.
By 2030, the total installed grid capacity is forecast to be 111GW, with coal still holding a substantial share at 31GW, and renewables with solar in the lead with 42GW, wind at 14GW, and batteries contributing 6GW, and the balance from other generation.
Notably, in the first nine months of 2023, South Africa spent an estimated $3.3 billion (R62bn) on importing solar components (panels, inverters, and lithium-ion batteries) and about $1.8bn in 2022 during the same period, raising concerns as most of these components could be manufactured locally.
Despite substantial investments, the lack of government support remains one of the biggest impediments to local manufacturing.
The report revealed that there were several local companies capable of contributing to three technologies – solar PV, wind, and Battery energy storage systems – across the value chain.
Local component manufacturers in attendance at the round table expressed apprehensions about the significant challenges posed by imports.
They emphasised that South Africa was strategically positioned to compete effectively. However, the lack of government support (protection and incentives) for local production remains a pressing concern.
This gap in support raises concerns within the industry, signalling a critical area that demands attention.
The study made it clear that if South Africa wants to re-industrialise by leveraging renewable energy opportunities, substantive changes will be necessary in the policy and regulatory landscape, along with the introduction of globally attractive manufacturing investment incentives.
The LSF is a network orchestrator within the localisation ecosystem facilitating the connection between supply and demand participants, enhancing the value of the interactions by funding industry research to accelerate or unblock opportunities for growth in the manufacturing sector.
LSF executive head Thami Moatshe said the study also showcased how the creation and expansion of new industrial value chains associated with renewable energy, and how this can become catalysts for supporting economic growth in South Africa.
“Without a doubt, such a development is well-poised to reposition the manufacturing sector, creating new industries and a pathway out of the country's costly energy crisis,” Moatshe said.
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