The development of a battery market and value chain in SA could create a lucrative industry capable of generating up to $2bn in revenue a year by 2032 and tens of thousands of jobs.
This is according to a new report by the World Bank which says that over the next five years SA is expected to show rapid growth in energy storage demand. The rise in demand will come from the transformation of the energy system to include more renewables and developing demand in the electric vehicle (EV) sector.
This is reflected in the government’s plans to gradually move SA’s power supply pool from coal-fired to renewable generation. The Integrated Resources Plan of 2019 makes provision for 26GW of renewable energy to be added to the grid by 2030, while Eskom retires about 15GW of coal power plants.
To balance a large quantity of renewable power, solar PV and wind have to be supported with energy storage systems such as pumped hydro and/or battery energy storage systems.
Opportunities
SA has already released the first grid-scale energy storage tenders, creating an opportunity for local companies to invest in such technologies.
However, a government-supported transition in the automotive industry to the manufacturing of EVs (as is already suggested in the Just Energy Transition Investment Plan) as well as local mining, refining and beneficiation of battery minerals can see SA emerge as a significant player in the global battery value chain.
In its battery market and value chain assessment report for SA the World Bank says the country’s battery storage market can be expected to grow from 270 megawatt-hours (MWh) in 2020 to 9,700MWh in 2030 under a base-case scenario and 15,000MWh under a best-case scenario.
It estimates that SA could earn R18bn a year and add 25,000 jobs by focusing on some easy-to-achieve opportunities. This would include mining, refining and beneficiation of battery metals already mined in the country (such as nickel, manganese, copper and vanadium), and the manufacture of battery energy storage systems.
When including some more ambitious opportunities — such as turning SA into a regional battery mineral beneficiation hub, and investing in local battery cell manufacturing and EV battery production — the potential upside increases to a R43bn contribution to GDP and about 60,000 new jobs.
In both the base-case and best-case scenarios, the EV sector is expected to drive the bulk of this growth.
Major exporter
SA’s “automotive industry, [which] is strongly dependent on exports ... would eventually need to transition to the manufacturing of EVs if it is to continue as a major exporter to its neighbouring markets in the long run.
“In addition, the clear global and, to a lesser extent, local trend towards renewable energy and electric mobility provides a strong incentive for SA to actively develop their local [battery] value chains,” the World Bank report says.
As the report shows, SA’s 270MWh battery storage demand is now dominated by the stationary storage battery market. The World Bank predicts, however, that by 2030 this segment will account for only about 31% of demand, while demand for mobile storage batteries for the e-mobility sector will increase from 1% of total demand in 2021 to 69% by 2030.
“An EV policy aimed at faster adoption of electric transport has not been formulated in SA yet. However, the rapid declines in battery prices and fast-improving economics in this segment will drive the demand post-2027,” the report says.
The R1.5-trillion Just Energy Transition Investment Plan focuses predominantly on investment in the electricity value chain, green hydrogen and new-energy vehicles. However, unlike some countries, SA has yet to set EV adoption targets to reduce carbon emissions from the transport sector.
The World Bank recommends that to stimulate local EV demand the government should consider introducing electric buses on a trial basis in all major metros, and require a percentage of taxis and passenger vehicles used by government officials to be EVs. Investment in batteries for EVs would not only stimulate local demand but also satisfy the requirements of importing countries and protect SA’s car industry, which contributes 3%-5% to GDP.
“SA’s automotive vehicle and component exports, mainly to Europe and the US, account for close to 60% of local production. These markets are rapidly shifting towards e-mobility, hence it is imperative that the SA automotive industry also pivots towards the local production of electric vehicles and components,” the report says.
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