Utility-scale batteries in South Africa: Improving grid stability and renewables integration with dedicated tenders


Ongoing capacity shortages and load shedding have plagued South Africa for most of the past ten years, caused by declining availability of its ageing coal fleet. Load shedding is the deliberate stoppage of electrical power supply by system operators as a preventive measure to maintain system balance when supply is currently or expected to be short of demand load. In 2022, this led to unprecedented load shedding of more than 8 terawatt-hours (TWh), which was a fourfold increase in unmet demand compared with the previous year. As a result, the South African government is using its Independent Power Producer (IPP) Procurement Programmes to allocate firm capacity, including battery storage. Utility-scale battery storage could be one pillar to provide additional grid stability by helping to meet peak demand, help integrate variable renewables, and, especially for industrial consumers, provide continuous electricity during load shedding and outages.

Sector development, sources of finance and business models

South Africa is aiming to procure utility-scale battery storage with two tender programmes: its Battery Storage IPP Procurement Programme as well as hybrid battery storage and variable renewables projects through its Risk Mitigation IPP Procurement Programme. These tender programmes are designed to facilitate the procurement of energy storage projects – or in the latter case projects that fulfil certain performance criteria irrespective of the technologies involved – through a competitive bidding process and aim to encourage private sector participation in expanding the country’s energy storage capacity. South Africa’s state-owned utility Eskom anticipates that these projects will showcase the effectiveness of batteries in facilitating the integration of renewable energy into the country's energy mix, while simultaneously easing the strain on the national electricity grid.

In November 2023, South Africa announced preferred bidders for the first Battery Energy Storage IPP Procurement Programme tender, which – if all implemented in full – would add 360 MW of dispatchable battery storage capacity to the national grid, and are now expected to enter into power purchase agreements (PPAs) negotiations with Eskom. Building on the success of this first tender, South Africa announced its plan to release a second tender in June 2024 with more than 1 200 MW capacity.

Within its Risk Mitigation IPP Procurement Programme, South Africa also signed project agreements with six hybrid solar PV, wind and battery storage projects that could see more than 400 MW of capacity added. Out of those, three projects with a capacity of 150 MW have already begun commercial operation under a 15‑year PPA with Eskom, and the others have or were expected to commence construction in late 2023.

The international community is also contributing to the development of battery storage systems in South Africa. For example, the World Bank and the African Development Bank recently approved funding for the battery storage element – worth around USD 500 million – of a hybrid project within the Eskom Just Energy Transition Partnership (JETP). This project aims to decommission one of South Africa’s oldest coal-fired power plants and replace it with 220 MW solar PV and wind power, as well as 150 MW battery storage. The funding comprises significant amounts of highly concessional financing.

Lessons learned

In South Africa, battery storage is increasingly seen as a key pillar to help provide grid stability and integrate variable renewables given its ageing coal-fired power fleet and grid. Competitive and transparent bidding processes for both battery storage only and hybrid projects are actively driving down financing costs, while state backing of PPAs is to some extent able to lower off-taker risk given Eskom’s financial state. Concessional financing provided by DFIs is also supporting the energy transition of Eskom itself while lowering its debt servicing costs. Combined, these initiatives of recent years have managed to invigorate a nascent market uptake in South Africa of battery storage projects, which needs to receive continuous support.

Nevertheless, significant obstacles still remain that require action: battery storage as well as hybrid projects often still face delays due to lengthy negotiation processes and bureaucracy and, given Eskom’s financial state, off-taker risk is still prevalent. Moreover, available grid capacity remains a significant constraint faced in particular by hybrid projects that combine battery storage with variable renewables, leading to project delays or cancellations.