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SSA Power Regional Overview: South Africa To Spearhead SSA Renewables Development


Fitch Solutions Sector Intelligence  

 

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    SSA Power Regional Overview: South Africa To Spearhead SSA Renewables Development

    • 24 Jan 2022
    • Sub Saharan (Region)
    • Power

    Key View

    • Investment in the development of new non-hydroelectric renewables capacity will be one of the primary forces driving power sector growth in the Sub-Saharan Africa (SSA) region.
    • South Africa will be SSA's solar capacity growth outperformer, accounting for over 40% of the region's total net growth in solar power capacity between 2022 and 2031.
    • Despite rapid proportional year-on-year growth in the sub-sector, the renewables segment will remain a minority contributor towards the region's overall power supply.

    We forecast significant growth in Sub-Saharan Africa's (SSA) non-hydroelectric renewables segment over the next decade, making it one of the primary forces driving growth in the region’s overall power capacity. Solar and wind power will attract the dominant share of non-hydro renewables investment, expanding by 6.0GW and 3.6GW respectively to make up a combined 36% of total net growth in power generating capacity across the region. However, many SSA markets will remain robustly supportive of new hydroelectric capacity development, with numerous projects scheduled to come online within our decade-long forecast period. As a result, we expect hydroelectric power to remain the top-performing sub-sector for net growth in capacity between 2022 and 2031, as highlighted in the graph below.

    Combined Renewables To See Significant Growth In SSA
    Sub-Saharan Africa - Net Change In Power Capacity By Type, MW

    e/f = Fitch Solutions estimate/forecast. Source: EIA, IRENA, National sources, Fitch Solutions

    We expect South Africa to be SSA's solar capacity growth outperformer, accounting for over 40% of the region's total net growth in solar power capacity between 2022 and 2031. The region's solar power capacity is set to more than double in the coming decade from an estimated 4.8GW in 2021 to 10.9GW by 2031, by which time it will make up 52% of the region's overall non-hydropower renewables capacity. A large part of this growth will be attributed to South Africa’s vast solar project pipeline, which will boost the country's solar capacity from 3.7GW in 2022 to 5.9GW in 2031. Nigeria will also see robust growth in the sub-sector amounting to more than 580MW, mostly coming from the 360MW Gezhouba Lagos Solar Park coming online in 2023. This will see Nigeria ranked as the region's third-largest solar capacity market by 2031, rising from 10th position in 2021. Overall, SSA’s solar capacity will grow at an annual average rate of 8.4%, from an estimated 4.9GW in 2021 to 10.9GW in 2031.

    South Africa To Dominate SSA Renewables Development
    Sub-Saharan Africa - Net Change In Power Capacity By Market, 2022f - 2031f

    f = Fitch Solutions forecast. Source: EIA, IRENA, national sources, Fitch Solutions

    Despite rapid proportional year-on-year growth in the sub-sector, we maintain our view that the renewables segment will make up only a small proportion of the region's overall power supply, even by the end of our forecast period in 2031. The map below illustrates that despite our bullish outlook on renewables growth in the region, we still expect that the sub-sector to remain a minority-contributor towards overall electricity supplies. The development of renewables in SSA is still in a nascent stage, with South Africa, Kenya and Ethiopia estimated to be the only gigawatt-scale renewables markets in the region by the end of 2021. While falling costs, scalability and relatively quick turnaround times will make renewable projects an attractive investment for frontier markets in the region looking to boost access to electricity and diversify their power mixes; we note that high risk operating environments, a lack of funding and underdeveloped energy policies will present an obstacle to more competitive growth. Nevertheless, we highlight that the rapid turnaround times for renewables projects and initiatives such as Scaling Solar can quickly attract sizable foreign renewables investment, presenting a strong upside risk for renewables development in the region.

    SSA Share Of Renewables To Remain Low

    Sub-Saharan Africa - Non-Hydropower Renewables As % Of Total Generation, 2031

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