Solar energy has become one of the most cost-competitive and rapidly expanding energies worldwide. Over the past 10 years, it has grown at a remarkable rate, surpassing even the most optimistic predictions. Gone are the days when solar was seen as an investment for the environmentally conscious alone; now, major investors, including Warren Buffet, are taking a gamble on the sector due to its promising growth outlook and dependable returns. Indeed, EY stated that ‘solar looks poised to become one of the major investment themes of the next 10 to 20 years’.

This renewable power source’s potential for powering our homes and businesses is virtually limitless. Solar can reduce our reliance on fossil fuels, provide energy security, reduce energy costs and help protect the environment from the effects of climate change. As a highly scalable technology, it can be deployed at both industrial and residential scale with the flexibility of allowing any additional electricity to be stored in a battery or fed back into the electricity grid.

Solar electricity is also increasingly affordable, with the International Renewable Energy Agency (IRENA) reporting that cost fell by 85% between 2010 and 2020. After solar panels have been installed, operational costs are fairly low compared to other power generation methods, and solar PV costs can be offset by providing free electricity throughout most of their 20 to 25-year lifespan. Since fuel isn’t required, solar offers an escape from dependence on costly and unreliable imports, ensuring that even remote areas have access to a reliable source of energy while driving inclusive economic growth, new jobs and poverty alleviation.

Moreover, solar power is far more efficient than fossil fuel-generated energy, especially in sun-drenched sub-Saharan Africa. By 2050, a 100% solar-wind-hydro energy system would reduce South Africa’s end-use energy needs by 55%, as per the findings of a Stanford University article. The associated cost saving is almost a 63% reduction nationwide, equivalent to a staggering R2.3tn ($133bn) annually. Economies of scale are likely to drive prices down even further.

The negative impacts of solar are limited and primarily related to the production and supply of the materials and metals required to produce the panels. While the chemicals used to clean the solar panels can affect the environment, alternative ways to clean solar panels are being explored, and government guidelines are provided to solar companies to ensure proper handling and disposal of these chemicals.

Transitioning to renewable energy sources can have other more surprising benefits. In South Africa, early deaths, disease and lost working days due to fossil fuel-associated air pollution cost the nation an astonishing R550bn ($32bn) a year, the International Institute for Sustainable Development (IISD) reports. This comes as no surprise given that Greenpeace named Mpumalanga’s coal belt in eastern South Africa the world’s most polluted hotspot for nitrogen dioxide and sulphur dioxide in 2018.

The opportunity in South Africa
Renewable energy is becoming increasingly important in South Africa as the country faces a critical energy crisis and looks to create a more sustainable future. With the country’s electricity grid strained and the need to reduce carbon emissions from fossil fuels growing in urgency, renewable energy is becoming the preferred alternative. With 2,500 hours of sunshine annually and one of the most stable solar radiation levels in the world, leveraging solar as a solution to blackouts (or ‘load shedding’) in South Africa – which costs the country R4bn ($230mn) each day the lights are out – makes economic sense.

The country is making great strides in the development and integration of renewable energy sources into its energy mix and is well positioned to continue to make progress in the coming years. It is one of the few countries in the world to have implemented a Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) back in 2011, an initiative designed to increase electricity generation through private sector investment in various renewable energies.

The programme has been a major success and is helping to reduce South Africa’s reliance on fossil fuels and move the country towards a low-carbon future.

When President Cyril Ramaphosa announced his ‘energy action plan’ in July 2022, he said: ‘The shortage of electricity is a huge constraint on our economic growth and job creation. It deters investment, it reduces our economy’s competitiveness. What the most recent load shedding has made clear is that the actions we have taken, and the actions that we continue to take, are not enough.’

The IISD has also stated that ‘to solve load shedding as quickly as possible and to build the foundation of an optimal, low-cost future energy mix, South Africa should significantly ramp up its investments in solar, wind, storage and technologies that integrate renewables into the grid’.

With 2,500 hours of sunshine annually and one of the most stable solar radiation levels in the world, leveraging solar as a solution to blackouts (or ‘load shedding’) in South Africa – which costs the country R4bn ($230mn) each day the lights are out – makes economic sense.

Fostering a green economy and diversifying South Africa’s energy mix to supply consistent power through solar, for example, boosts foreign investment and creates employment opportunities – even if the renewable energy supply is predominantly deployed using the existing infrastructure and municipal power grid. Each dollar of investment in renewables creates three times more jobs than in the fossil fuel industry, and the International Energy Agency (IEA) estimates that transitioning towards net zero emissions will lead to an overall increase in energy sector jobs.

While approximately 5mn jobs in fossil fuel production may be lost by 2030, there is the potential to create 14mn new jobs in clean energy. We need to think not only about solar energy in a climate context but also the substantial role it plays in the economy, as the global population grows and new energy-intensive industries emerge.

The time is now to invest
To put it into perspective, doubling the share of renewables in global energy within the next decade would see global GDP increase by around 1.1%, or $1.3tn, according to IRENA. The rapidly decreasing cost of renewable energy production alongside more favourable policies have made a strong business case for investing in solar energy in South Africa and elsewhere.

GreenAgri found that the initial cost of installing solar PV can typically be recouped within three to 12 years, providing free energy for many years after. Investment benefits of solar PV for businesses include tax allowances, reduced carbon tax and payments for energy fed back into the grid. Additionally, businesses can acquire solar via power purchase agreements (PPAs), providing a 100% asset-backed investment with stable and long-term returns.

While progress has certainly been made in the last year, only 1.5% of South Africa’s energy consumption in 2021 was accounted for by solar. South Africa will need $250bn over the next three decades to transform its coal-powered economy into a low-carbon energy system, according to a consultation paper released at the World Economic Forum in Davos, Switzerland, last year.

The report concluded that in order for South Africa’s energy transition to be successful, the majority of the $250bn needed will require private investment, although it suggested that public development financial institutions, such as the government employees’ pension fund or Development Bank of Southern Africa, should be the ones to initiate the process.

In 2020, approximately $5.9tn worldwide was spent subsidising the fossil fuel industry globally through explicit subsidies, tax breaks, and health and environmental damages that were not factored into the price of fossil fuels. In contrast, to achieve net zero emissions by 2050, an estimated $4tn/y must be invested in renewable energy technology and infrastructure by 2030.

The initial cost can seem daunting for countries with limited resources, and many will need financial and technical support to make the move to clean energy. But the investments will pay off. The reduction of pollution and climate impacts alone could save the world up to $4.2tn/y by 2030. Moreover, renewable technologies can reduce market volatility and improve energy security by increasing power supply options.

There has never been a better time or more pressing need to invest in solar panels. With the right technology, harnessing zero-emission, low-cost energy from South Africa’s sunshine is the proven solution to achieving affordable, holistic and sustainable growth for the nation. While solar energy is crucial to securing the country’s environmental and economic stability, it is also a solid financial investment. ‘Upfront costs for solar and wind power account for 80% of lifetime costs – meaning big investments today will reap even bigger rewards tomorrow,' stated UN Secretary-General António Guterres.

Put simply, as a nation that’s particularly vulnerable to climate change, ranked 92 out of 181 countries in the 2020 ND-GAIN Index, South Africa can’t afford not to invest in solar energy. South Africans are already suffering the consequences of climate-induced extreme heat, droughts, floods and diseases that impact health, livelihoods and food security. This will only worsen unless investment in solar is made to mitigate these dangers.

Transitioning to 100% renewable energy generation has the potential to end South Africa’s load shedding woes and eliminate more than 1bn tonnes of CO₂ annually by 2050 from the nation alone, according to a study by Stanford University. Furthermore, 96.5% of South Africa’s blackouts in 2021 could have been prevented with just 5 GW of additional wind and solar capacity, stated a report by Meridian Economics.

While Ramaphosa’s 10-point emergency energy plan incorporates some measures to accelerate solar deployment, further investment is required to tackle South Africa’s energy crisis and socio-economic challenges. Redirecting investment away from gas projects and towards solar developments is pivotal for South Africa’s clean energy transition.