business opportunities in africa

Found at http://www.energy.frost.com 8 Mar 2007

Although the South African renewable energy equipment market is still small, it is poised for spectacular growth. Increased demand for electricity in general and renewable energy technologies in particular will drive this growth.

Frost & Sullivan finds that the South African Renewable Energy Equipment Markets earned revenues of USD 58.0 million in 2005 and estimates this to reach USD 220.0 million in 2012.

“The lack of investment into renewable energy equipment in the past, coupled with the current base load shortages in South Africa, is driving the market for renewable energy equipment,” notes Frost & Sullivan Industry Analyst Cornelis van der Waal. “Equipment prices have declined in recent years and this has made the technology more accessible to end-users who do not have access to grid electricity. The telecoms boom in recent years has also contributed to the increased use of small renewable energy equipment, while large scale projects are in planning on a number of municipal sites as a result of increased electricity demand.”

It has become clear that Eskom will run out of base load capacity in 2007 and at the same time there is an increased awareness of pollution. This has led to small electricity users increasingly using solar panels and wind turbines to meet their needs.

At the same time, resources such as flowing water and wind farms are increasingly being built to increase the volume of electricity generated through renewable energy sources. As such investments into new product development are increased and as technology production reaches critical weight, there will be a general decrease in technology price. This has also been the case in renewable energy equipment, and many installations that were unfeasible years ago have now become feasible.

In addition to this, the price of electricity is also expected to increase and thereby increase the attractiveness of renewable energy equipment. Within South Africa the telecoms industry remains the largest user of solar equipment, and this is expected to continue until such time as end-users can deliver electricity easily to the national grid. Large scale bio-waste and wind projects are already being planned in Durban and Port Elizabeth.

The greatest challenge suppliers of renewable energy equipment in South Africa currently face is the lack of integration of small-scale producers into the electricity grid. Although South Africa has an abundance of wind and solar exposure, the cost of renewable energy technology remains high. Even with green credits, renewable energy remains more expensive than the cheap electricity delivered through Eskom. While there is also an increased level of awareness about pollution in South Africa, many people do not know of the availability of or the benefits of using renewable energy products.

“The lack of a well developed and advertised feed-in tariff for small scale electricity generators has meant that it hasn’t been feasible for end-users to invest in renewable energy technologies as they have no way of recuperating the long-term costs,” explains Van der Waal. “Eskom has the cheapest commercial electricity rates in the world and even residential consumers do not pay excessive rates for their electricity. As a result, the demand for renewable energy technologies remains low and is mostly restricted to off-grid applications. Equipment suppliers therefore have to spend substantial amounts on marketing campaigns to educate potential end-users. In addition to this, Eskom has a virtual monopoly in the electricity market in South Africa and the lack of competition has resulted in near impossible market entry for large or small scale independent renewable energy power producers.”

Equipment suppliers in South Africa stand at the brink of an explosive growth period. As electricity demand continues to outstretch supply it is expected that government will look at different ways of addressing the situation and this could include a reasonable feed-in tariff that will increase the use of renewable energy equipment. In addition to this, many of the municipalities that are dependent on Eskom for power would like to become less dependent and are doing feasibility studies to determine the possibility of generating independent power through available resources, such as bio-gas, wave and wind energy.

If you are interested in a virtual brochure, which provides manufacturers, end users, and other industry participants with an overview of the latest analysis of the South African Renewable Energy Equipment Market, then send an e-mail to Patrick Cairns - Corporate Communications at patrick.cairns@frost.com with your full name, company name, title, telephone number, e-mail address, city, state, and country. We will send you the information through email upon receipt of the above information.

The South African Renewable Energy Equipment Market is part of the Energy and Power Subscription, which also includes research in the following markets: European Renewable Energy Markets, Opportunities in Servicing Renewable Energy Plants in Europe, World DC/AC Power Inverter Markets as well as the World Wind Energy Generator Markets. All research included in subscriptions provides detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants. Interviews with the press are available.