From crisis to opportunity: How renewables are rewiring South Africa’s energy future

South Africa is undergoing a profound transformation in its energy sector. For years, significant challenges persisted — ineffective energy policy, underinvestment, outdated coal infrastructure and the persistent realities of load shedding. Today, however, the tide appears to be turning.  

A wave of new investment and policy reform is setting South Africa on a path toward energy security, sustainability and growth.  

The electricity market has witnessed a pivotal shift. Previously dominated by Eskom and government procurement models, the sector has started to embrace private enterprise and innovation at scale.  

Regulatory reforms enacted over the past several years have opened the door for independent power producers and private companies to supply electricity directly to customers. This liberalisation is already creating an investment boon — one that will accelerate the deployment of renewable capacity nationwide. 

Through the state procurement, predominantly in the Renewable Energy Independent Power Producer Procurement Programme (REIPPP), over R300 billion has been mobilised since 2011, funding renewable energy projects that now or soon contribute approximately 10 GW to the national grid. Currently, at AIIM we estimate another 5 GW is either under construction or in very late-stage development, driven largely by industry and business, not just government procurement. 

The next decade: Massive growth on the horizon 

In the coming decade, even more dramatic acceleration is anticipated. Utility-scale renewable plants — we forecast those connected directly to the national grid, feeding it with electricity will reach 30 GW by the early 2030s, effectively doubling South Africa’s installed renewable capacity. This is not just significant for the clean energy transition. It represents an unprecedented opportunity for investors and infrastructure developers alike. 

The Energy Council of South Africa, an industry body that that brings together key public and private sector entities to collaboratively shape the country's energy sector, estimates that a staggering R2 trillion in energy infrastructure investment is needed by the early 2040s, with the bulk earmarked for energy generation. This also includes approximately R400 billion to be invested in transmission infrastructure (to expand the grid with 14,200 km of high-voltage lines) and at least R150 billion in battery energy storage systems. 

The rollout of this funding reverses a 15-year drought of viable construction projects that has contributed to low economic growth, a stubborn jobs crisis and associated poor quality of life. Underscoring this lack of infrastructure investment is South Africa’s gross fixed capital formation, a measure of investment that includes new infrastructure projects. This measure should reach 30% of GDP by 2030, as envisaged by the National Development Plan, but it currently languishes at around 15%. 

Investing for the long game 

South Africa is uniquely positioned for renewable energy leadership. our coal generation fleet is agreed to be facing irreversible obsolescence, while the country’s wind and solar resources are world-class. Supply will enable demand in a growth enabled economy due to renewables now being the cheapest form of energy. Each round of the REIPPP since 2011 has produced lower prices for solar PV and wind energy, making renewables not just a climate imperative but also an absolute investment priority for any growth economy. 

As the CIO of the IDEAS Fund — South Africa’s largest domestic infrastructure equity fund, we view this energy transformation as the beginning of a new era for institutional investment. That is why we are actively seeking opportunities to channel institutional capital into renewable energy projects that will power the future of the SADC region. 

Our goal is to drive the next wave of growth and innovation as the energy sector continues to evolve. Our Fund has a proven track record in large-scale renewable projects. Established in 1999, it was among the first vehicles designed to give institutional investors direct exposure to infrastructure equity.  

While commercial lenders have long participated in infrastructure debt, there were previously no infrastructure equity funds accessible to pension and life companies. IDEAS filled that gap, achieving tremendous success over the past 25 years. 

Today, with R26 billion in assets under management and over R7 billion returned to investors (soon to reach R10 billion), the IDEAS infrastructure equity model has proven both sustainable and rewarding. Real returns have averaged 10%, consistently outperforming the 7% real target as well as domestic equities and bonds. This outperformance is no accident. At AIIM, we proactively seek growth sectors such as renewables — where patient capital and sound risk management translate into real, inflation-beating returns. This approach balances reliable cash flow with exposure to sector-wide growth as the market matures. 

What must happen next 

The shift to renewable energy in South Africa will be challenging, requiring clear policies and increased investment in the electricity grid. To fully realise the potential of this energy transition, South Africa must implement the following reforms: 

• Complete the unbundling of Eskom’s power generation activities: The establishment of an independent National Transmission Company has already boosted investor confidence and is enabling grid expansion. 

• Develop a wholesale electricity market: Creating a formal electricity market will facilitate power trading and improve grid balancing while enabling competition. 

• Introduce credit enhancement mechanisms: Development institution-backed guarantees and similar schemes can unlock significant global energy transition funding for critical transmission projects without placing an undue burden on the South African taxpayer. 

The clean energy transition is no longer just a government ambition. A vibrant, open electricity market is deepening liquidity, driving innovation and enabling domestic institutional investors to play a central role. Supported by strong local expertise and the global push to decarbonise, South Africa’s renewables sector is set for exponential growth.