Google has struck its first renewable energy deal in Africa with a $12m investment in one of a host of new solar power projects being built in South Africa.
The move underlines how attractive Africa’s biggest economy has become to global investors thanks to an ambitious drive to boost its nascent renewable energy sector and dilute its dependence on coal. Renewables drew more than $5bn of investment last year, up from just a few tens of millions in 2011.
The deal is small by the standards of Google, which has invested more than $1bn in wind and solar plants round the world in recent years, including a $200m investment in a West Texas wind farm six months ago.
But it is significant for South Africa, where a heavily coal-dependent energy system is creaking under the weight of years of under-investment and needs more sources of power to prevent a repeat of the crippling blackouts of five years ago.
The government has introduced a new renewables programme in the hope of generating 18GW of renewable energy by 2030 – equivalent to almost half the country’s current installed capacity of 44GW.
That has made it more attractive for investors than some European countries, where older subsidy programmes are being pared back, or US states where renewable energy goals are close to being met.
This is one reason Google cited for investing in the 96MW Jasper solar photovoltaic plant in the country’s Northern Cape province, which eventually aims to generate enough electricity to power 30,000 South African homes.
“There’s a clear need for more power in South Africa,” said Rick Needham, director of energy and sustainability at Google, explaining that this made the country attractive to companies seeking a stable investment climate.
Google only invests in renewables projects where it can be assured of a reasonable return and not necessarily for its own energy-hungry data centres. Rather, it hopes to help spur more deployment and growth in the sector generally, said Mr Needham, so eventually all users are buying more renewable power.
“In the meantime, we can make some returns on our investments, so it’s a win-win,” he said.
Ompi Aphane, a deputy director-general at the South African department of energy, said the project was “sizeable” in the context of the country’s renewables programme and hoped it could lead to the possibility of further business.
“It’s very good that the likes of Google see value and have expressed an interest in our programme. Over and above that we would like to also have solid investors participating in the programme,” Mr Aphane said. “You have the confidence that those kind of brand-conscious companies are not going do a quick and nasty.”
The $260m Jasper project is being developed by a consortium including SolarReserve, Intikon Energy and the Kensani Group, with senior debt and preference share funding being provided by Rand Merchant Bank.
It is one of many projects spurred by South Africa’s Renewable Energy Independent Power Producer Procurement Program, which awards developers the right to build wind and solar plants, provided they meet requirements relating to cost, local employment and other factors.
The Jasper solar plant is expected to create about 300 jobs for construction and 50 permanent jobs.