It is Africas largest economy and it is flooded with sunlight almost year-round. Yet South Africas photovoltaics market is growing at a rate of just 7.6 percent, lagging "significantly behind global uptake levels", according to the data published by industry analysts Frost and Sullivan.
An energy crisis in 2008 showed how much the countrys economy has outgrown its energy supply system, with rolling blackouts sweeping the nation.
As such, this is clearly a country in need of a new sustainable energy source, and conditions are perfect for photovoltaic manufacture and supply. Furthermore, the researchers say that 8.4 gigawatts (GW) of photovoltaics could be installed in the country by 2030, with predictions that 300 megawatts (MW) of large-scale photovoltaics could be installed annually from next year onwards.
But as the ‘M668 South African Solar PV Market’ report underlines, a lack of government attention is keeping a cap on what could be an obvious photovoltaics goldmine.
A fertile ground for PV
At the moment, the majority of South African photovoltaics comes from small scale off-grid end-users, which utilise it in combination with wind turbines and generators.
With the cost of using photovoltaics here at parity with that of being on-grid, it is clear that many South African households understand the potential benefits of choosing it as their energy supply and are willing to opt in, provided the costs remain competitive.
Larger corporations are also using photovoltaics to showcase their green credentials, says the report, which noted a "significant interest rising from the commercial sector", where companies such as Nedbank Ltd have installed photovoltaic panels on its office buildings as part of a drive towards a greener brand image.
However, the area where South Africa seems most suitable for photovoltaics is street signs, billboards and lighting.
The country is currently a world leader when it comes to implementing solar-powered billboards, with a pilot of 30 currently being conducted in a joint venture between Visiria (Pty) Ltd. and Samsung Electronics.
With sunlight described as "one of Africas greatest assets" by South African environmental site www.environment.co.za, it makes sense that many municipal organisations have reportedly shown interest in using photovoltaics to power street signs and lighting, which could prove to be an enormous stimulus to the market.
The success of municipal pilot projects has led the Johannesburg Road Association (JRA) to begin planning how to roll out photovoltaic road signs nation-wide, but the report cites the situation here as being represented across the industry, as there is a lack of municipal funding to spur the actual implementation of the project.
However, it hopes that, should the JRA succeed with the road signs, it will create a wave of interest as other municipalities will be spurred to follow suit.
Key growth areas
South Africa is not just a potentially profitable untapped market; analysts have also tipped it as having extensive possibilities for component manufacture that are yet to be fully exploited.
Frost and Sullivan surmised that, thus far, it is manufacturing which has driven the South African photovoltaics industry, although it far from reaching production capacity.
The cost of modules has steadily fallen at a deeper rate than the global trend, with a price decrease of more than 50 percent in 2009, compared to a global trend of 43 percent, while nascent manufacturing plants constructed thus far by Solairdirect Technologies and Tenesol Manufacturing (Pty) Ltd. are continually expanding in capacity, and are expected to reach 100 MW each.
The report states that "several global leading manufacturers are currently expressing interest in developing large-scale manufacturing facilities in South Africa," not least the 35 MW thin film facility, which has been in development in Paarl, the Western Cape, since December 2010, and which specializes in second-generation copper-indium-gallium-diselenide (CIGS) modules.
Sasol, the energy and chemicals manufacturer which produces the modules, has relocated the development team from Germany to Saarl for the final stages of the CIGS project.
But what could prove to be the crowning glory of South African photovoltaics, the proposed Upington Solar Park, is still in the planning stages.
The development in the Northern Cape could produce a potential five GW of solar energy (one GW in the first phase) using a mixture of concentrated solar power (CSP) and photovoltaic technologies.
According to Frost and Sullivan, this development alone could rocket the market to "global forefront levels" by creating a production, trade and manufacturing hub.
Yet the report also states that due to competitive manufacturing levels, South Africa is an inevitable photovoltaics hub, even if the Upington Solar Park doesnt become a reality, through the development of smaller-scale operations in the Northern Cape, or a component production hub in an industrial development zone (IDZ) such as Saidanha Bay.
Barriers to growth
In spite of every advantage propelling the South African market, the revenue forecast drawn up by Frost and Sullivan shows a slightly declining revenue for 2010, although a still positive growth compared to the previous year.
As the report states, South African photovoltaics could attain a revenue of $29.8 million in 2014 – a compound annual growth rate of 7.6 percent – but even for such a relatively disappointing target, the photovoltaics market is still entirely dependent on how the government implements its renewable energy strategy.
The 2008 energy crisis gave birth to the Integrated Resource Plan (IRP) of 2010, the South African 20 year energy master plan. This lays out an intended 600 MW of solar power to be produced by 2019, although the majority of this will come from CSP technology.
A press release from the South African Department of Energy, meanwhile, dated December 6, 2010, stated that, in assessing the readiness of institutional structures and sites (including grid connection process), as well as commitment of lenders, that "CSP accounted for five percent of responses and close to 10 percent of proposed capacity, [while] PV accounted for one third of responses and 15 percent of proposed capacity."
Those in the industry surveyed by Frost and Sullivan stated that they hoped for an "overspill" into the photovoltaics market, especially concerning the planned Upington Park development, but this is in turn dependant on how the Renewable Energy Feed In Tariff (REFIT) programme, introduced in March 2009, is implemented.
REFIT covered four RE sources, including CSP and large-scale photovoltaic grid-connected systems, which received a feed-in tariff of South African Rand 3.94 (around 0.41 or USD$0.58). Yet the gap between South Africa as a potential photovoltaics market and its potential implementation through REFIT could grow, as photovoltaics was not named in Phase III of the plan.
The report also highlights "a distinct lack of awareness" of photovoltaic technologies in South Africa as one of the key factors hindering the growth of the industry.
The implementation of REFIT has, in some cases, shifted the focus of the market "to adjacent technologies, such as solar water heaters and wind energy," while "scant interest or mention" by the government for photovoltaics, apart from large-scale photovoltaics, has meant it has remained isolated to off-grid applications.
A lack of government subventions or tax incentives, especially concerning building integrated photovoltaics (BIPV), has also affected its uptake two-fold, preventing its use in the residential sector, both during the planning of new buildings, but also inhibiting private end-users from exploring photovoltaics as an energy source.
The report is damning in this area, predicting that "it is unlikely that interest or demand would be generated for the residential sector within the forecast period."
Lack of attention
The lack of government attention, combined with a shifting industry focus to other forms of renewable and solar energies, have naturally affected the price of South African photovoltaics, which in itself provides a further and more compelling deterrent to consumers.
Price was named by Frost and Sullivan as "the primary factor restraining PV in South Africa," as even the 50 percent price drop of 2008 to 2009 acted as a deterrent, as the market was flooded with "dumping of cheaper, unaccredited and lesser quality goods".
An overall neglect of photovoltaics has also resulted in a high capital cost when purchasing photovoltaic systems and a lack of financing options, especially for on-grid residential applications, is deterring many potential users.
The report states that "although payback time is decreasing along with the price, this will be a significant restraint throughout the forecast period".
As with all growing economies, the drive to move away from rural areas is increasing in South Africa, which will only add to its already overstretched energy infrastructure. Although this evidence makes clear that photovoltaics, especially BIPV, could be just the solution, without the proper incentives and information the residential market for photovoltaics in South Africa will continue to be stunted.
Breaking through with PV
The Frost and Sullivan report provides clear and compelling evidence as to the enormous potential gains that could be made for the entire photovoltaics industry in South Africa. However, it also highlights the need to lobby the South African government, in order to push its attention on photovoltaics specifically, especially in terms of legislation and subventions.
If left to grow organically, South African photovoltaics is predicted to be worth $29.8 million in 2014, but it is clear from this report that its future could be far brighter.
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