Italian inverter manufacturer, Enertronica Santerno S.p.A. will be starting its Santerno SA Lab, employing 4 additional South African technicians and supervisors, explains Enertronica Sub-Sahara Area Manager Luigi Guerra, the goal of the laboratory being to localise additional work in South Africa.

“The idea is for Santerno to begin repairing our inverters locally, thus replacing the necessity of sending them to Italy and receiving them back from there. This will greatly improve the service we are able to provide to our clients locally, cut logistics costs and create additional local work opportunities” Guerra states.

An additional €1-million investment is in the pipeline to further expand Santerno’s production capacity of inverters for solar applications, including storage solutions, which demonstrates the great potential for the solar PV market in South Africa, explains Guerra.

Guerra elaborates that Santerno’s aim with local production is to deliver locally manufactured equipment with more than 40% local content. This will allow Santerno to exceed the minimum requirements listed in the framework of the Renewable Energy Independent Power Producer Procurement Programme (REIPPP) bid window five (BW5).

Further testimony to the Italian footprint in South Africa’s renewables sector is visible in the ongoing support offered by Enertronica Santerno to independent power producer Red Rocket. Guerra notes that one of Santerno’s strengths is that it offers on-the-ground aftermarket support to clients, including to renewable energy producers such as Red Rocket.

Italian companies including Santerno, Higeco, an industrial monitoring and control system supplier, and hydropower turbine supplier Scotta S.p.A have been instrumental in achieving the results at Red Rocket, states Luca Silva, Chief Operations Officer at Red Rocket.

Red Rocket, headquartered in Cape Town, which began in 2011 as Building Energy – an Italian solar Engineering, Procurement and Construction (EPC) company which decided to expand its business into Africa - recently won three onshore wind projects in South Africa’s recent BW5, comprising by far the largest win by a domestic Independent Power Producer (IPP).

Two of the three projects - the 140 MW Brandvalley and the 140 MW Rietkloof wind farms – are located in the Western Cape, while the 84 MW Wolf wind farm is in the Eastern Cape. These projects will generate approximately 1 500 GWh of green electricity per annum, once fully operational.

Western Cape: The Green Hub of the African continent

It is commonly known that within the South African renewable energy sector, Italy maintains an impressive presence, this is especially the case in the Western Cape region, where 92% of Italian investments in the past two decades have been directed to the renewable energy sector, report Wesgro and GreenCape.

Ranked among the top 21 global investment destinations in 2017 by the Financial Times FDI Intelligence, Cape Town and the Western Cape is now on track to be the green hub on the African continent, asserts GreenCape, a non-profit organisation that drives the widespread adoption of green economy solutions within the Western Cape.

Plentiful natural resources, advanced infrastructure, limited running costs and a qualified workforce advance the Western Cape’s position as an emerging green region. Crucial to the creation of marketing opportunities for companies and investors is also the pro-enabling role of the government which has repeatedly stated its commitment to the green economy.

Additionally, several investment incentives for green technologies, the presence of major companies involved in the renewables field and professional services, as well as five

universities with full R&D capabilities and training programmes focused on the green sector, further bolster the positioning of the province.

Cape Town’s commitment to becoming a green hub is further evidenced by the proactive way in which the city is sourcing renewable energy, with the first round of IPP tenders having been issued by the City of Cape Town at the beginning of 2022.

In the Western Cape there have been 14 utility-scale renewable energy projects procured between November 2013 and June 2021 (13% of the total number of projects nationally). In addition, seven of the 25 preferred bidders in BW 5 are located in the WC (28% of the total number of projects).

National Challenges... and Opportunities

On a national level, there remain various difficulties within the renewables and the energy sector as a whole. Some challenges affecting the RE sector in South Africa remain, reiterates Luca Silva, the main one relating to grid constraints that slow down the potential to uptake more power generation.

South Africa’s national utility ESKOM has faced significant challenges that include ailing infrastructure and its financial stability. As a direct result of systemic challenges and in protection of grid stability, the Utility released its outlook on national grid availability to shortly before the with submission of BW5.

A key finding from the GCCA report was that the Northern Cape was severely grid constrained. Consequently, several low-priced bids submitted in BW5 that were in constrained areas were not taken into consideration. In a subsequent GCCA report, Eskom has reported that the Northern Cape’s network capacity has been exhausted and that the one in the Western Cape is close to saturation. Tariff support is therefore necessary to collect the required funding to implement required grid improvements.

Economic development obligations constitute another challenge, foremost of which is the designated local content, which requires a portion of power plant components to be made in South Africa. “To produce or buy manufactured goods in South Africa is about 20% more expensive than goods produced in other parts of the world, such as in Europe”, Santerno’s Luigi Guerra states.

Supply challenges, including shortage of raw materials and commodity prices, which are experiencing several ups and downs due firstly to the Covid-19 pandemic and then to the war in Ukraine, also create great uncertainty about the expected return-on-investment in general, affirms Silva. In addition, there is a skills and knowledge shortage within the renewables sector in the country, as a large number of experienced and skilled people have left South Africa, Guerra notes.

Nevertheless, the market remains fundamentally attractive in terms of both wind and solar, hence the presence of leading global firms in the field. Opportunities further abound in the field of battery storage opportunities. The well-implemented government tender approach across the REIPPP bid windows, say Silva and Guerra, is one of the elements that has definitively rendered the South African RE space attractive. This is so much so that other countries have gone on to replicate the same scheme they conclude.

This article originally appeared in the 2022/2023 Directory of the Italian South African Chamber of Trade and Industries ITALCHAM