Developing countries that are the most vulnerable to climate change are angry about a new text released at COP29 on Friday, which says developed countries must pay $250 billion a year until 2035 for climate action.(Waldo Swiegers/Bloomberg via Getty Images)
As South Africa has started the next phase of its Independent Power Producer (IPP) programme, a crucial question arises: should the government initiate an all-encompassing mega bid for renewable energy projects, or opt for a series of smaller, more targeted ones that can be geographically tailored to support specific technologies?
With a target of procuring 10,000 megawatts of renewable energy capacity, the direction South Africa chooses will define the country’s energy landscape for years to come, affecting not only power generation but also industrial development, job creation and economic stability.
The case for a mega bid
One approach the government is considering is a large-scale, mega bid for renewable energy procurement. This would entail issuing a single, comprehensive bidding round aimed at quickly accelerating renewable capacity.
With load-shedding crises and limited grid capacity, consolidating projects into a singular effort could accelerate capacity additions. Furthermore, a mega bid of this size could attract major international and local investors, because it provides an attractive, high-visibility opportunity to participate in South Africa’s energy transition.
International success stories, such Saudi Arabia’s Al Shuaibah solar project, have demonstrated that large, concentrated renewable energy projects can foster economies of scale, lower costs and create market incentives for large investors. Another advantage is that a larger bid enables coordinated infrastructure upgrades such as grid expansions or energy storage solutions. For example, co-locating projects around existing grid access points, as seen in Australia’s renewable energy zones, could ease transmission bottlenecks and increase project viability.
But a mega bid’s size could deter smaller, local investors, potentially concentrating power in a few hands and raising concerns about equitable economic participation. Additionally, South Africa’s grid capacity, especially in high-resource areas, remains a barrier. For example, during bid window 6 in 2022, the lack of grid infrastructure prevented several wind projects. Large, consolidated bids could exacerbate these constraints without significant upfront grid investment.
The case for smaller, targeted bids
A series of geographically and technologically focused smaller bids could address specific regional energy needs and boost local economies. By regionally ring-fencing bids, the government could leverage the country’s diverse renewable resources more efficiently. For example, focusing wind power projects in the Western Cape and Eastern Cape, which have some of the continent’s strongest wind resources, while earmarking solar projects for the Northern Cape, where solar irradiance is among the highest globally, can optimise resource use and minimise transmission losses.
Smaller projects carry lower capital requirements, opening the door for more diverse players, including smaller investors. This approach has been successful in countries such as Germany, where smaller regional bids have fostered a community-owned energy movement, democratising the energy transition.
Furthermore, regional bids can stimulate local economies by focusing on tailored job creation. Studies show that localised renewable projects support more jobs in construction, maintenance and grid support than large, centralised projects do. For example, the Redstone concentrated solar project in the Northern Cape has directly benefited the local community through creating more than 2,000 jobs.
But managing multiple smaller projects may require more coordination between the government, investors and grid operators, potentially slowing project timelines. Without a centralised bidding structure, the government might face logistical hurdles that delay execution. Smaller projects often lack economies of scale, which could result in higher per-unit costs of energy and infrastructure.
In a hybrid approach, South Africa could introduce small, targeted bids within defined “energy hubs”, combining the scalability of mega bids with the inclusionary benefits of localised projects. This approach could support areas with high renewable resource potential while also addressing localised grid upgrades necessary to connect remote regions.
Regardless of the bid size, South Africa’s transmission grid remains a significant limiting factor. According to the National Transmission Company of South Africa (NTCSA), essential components such as large transformers face 24- to 36-month lead times, underscoring the importance of stable, long-term procurement plans. Minister of Electricity and Energy Kgosientsho Ramokgopa emphasised that a clear and consistent bidding pipeline would allow the department of trade, industry and competition to implement incentives for local manufacturing, potentially supporting an industrial supply chain that could decrease dependency on imports and stabilise costs over the long term.
These developments resonate with the broader goal of South Africa’s energy transition: not only to generate electricity but to stimulate local industry and build a sustainable economic framework. The IPP programme has already mobilised R272 billion in investments, with 82% sourced from domestic stakeholders. The decision between a mega bid and smaller, focused bids must consider how best to further the country’s economic and energy security objectives.
South Africa’s choice between a mega bid or smaller, focused bids carries weighty implications. Here’s what the government should consider:
1. Balancing economic and social goals: A mega bid might achieve quick gains in capacity, but smaller, geographically ring-fenced bids are probably more sustainable for long-term economic inclusion.
2. Infrastructure coordination: Given current grid limitations, a well-coordinated infrastructure plan will be crucial regardless of the bid size. Streamlining procurement and grid connection processes, as Ramokgopa suggested, would prevent the grid constraints seen in previous bid rounds.
3. Industrial policy alignment: Leveraging the IPP programme to stimulate local industry is essential. With regional bids, specific areas could benefit from targeted supply chain incentives, promoting local job creation and reducing reliance on foreign manufacturers.
South Africa’s decision between a mega bid and smaller, regional bids will shape its energy landscape for decades. Both paths have advantages, but a blended approach — one that taps into regional strengths while fostering local economic growth — may best serve the country’s multifaceted goals.
Karabo Mokgonyana is a renewable energy campaigner at Power Shift Africa focusing on renewable energy in Africa, just transitions and climate security.