Sustainable Growth

Tuesday, 11 July 2017

New roles for South African municipalities in renewable energy - A review of business models

  • Year: 2017
  • Organisation: South African-Germany Energy Partnership
  • Author(s): Gaylor Montmasson-Clair, Karin Kritzinger, Louise Scholtz, Manisha Gulati
  • Countries and Regions: South Africa

The growth of renewable energy technologies is re-shaping energy systems across the globe. In South Africa, which relies on coal-fired power plants for 90% of electricity generation, this trend suggests a critical shift in dynamics, generating numerous risks and opportunities at all levels of the value chain.

This is particularly the case for South Africa’s municipalities. The re-definition of South Africa’s electricity systems indeed commands the need to better understand the business models available to municipalities to maximise benefits arising from this transformation while mitigating risks and balancing trade-offs. Business models are understood as maps, frameworks and plans that structure how investments are designed, implemented, managed, and financed. Business models are constructed in response to an opportunity (that arises or is foreseen) in such a way that the business (i.e. the municipality) extracts maximum value from this opportunity.

This Discussion Paper reviews possible business models for South African municipalities to seize arising opportunities and minimise potential risks associated with the introduction of renewable energy technologies in the domestic electricity system. It proposes a typology of available business models for municipalities to seize emerging opportunities arising from renewable energy technologies. Three overarching roles, spilt into seven business models, are considered for municipalities: building electricity generation capacity; procuring electricity; and playing a facilitation function. Based on a three-pronged methodological framework taking into account the drivers of the business models; their techno-economic potential; and their ability to manage risks (regulatory, financial and socio-political); this report reviews each business model, highlighting their strengths and weaknesses.

This paper was commission by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH and prepared for the South African-German Energy Partnership.

It was co-authored by Trade & Industrial Policy Strategies (TIPS), the Centre for Renewable and Sustainable Energy Studies (CRSES) at Stellenbosch University and World Wide Fund for Nature South Africa (WWF-SA).