Why South Africa’s consumer goods sector is racing to adopt renewable energy

1. What’s driving renewable energy adoption in the consumer goods sector today?

Adoption of renewable energy has historically been driven by a few key factors. Previously, load-shedding was a primary catalyst, with captive rooftop solar and energy storage deployed as hybrid systems to keep operations running. Today, this technical setup speaks more broadly to energy security, particularly in response to unexpected grid outages caused by neglected upstream electrical infrastructure.

Another major driver, arguably the most important for businesses, is cost savings. The price of solar and batteries has declined significantly over the past few years, while grid electricity tariffs have continued to rise well above inflation. This has created a highly favourable environment where renewable integration has shifted from an ‘if’ to a ‘when’. In addition, Battery Energy Storage Systems (BESS) can be installed onsite either as standalone solutions or paired with solar for arbitrage or peak shifting, both of which can yield substantial savings.

Carbon neutrality is also becoming a key motivator, especially for large, well-known retailers and brands, as it directly strengthens corporate reputation. However, sustainability initiatives still need to make financial sense while meeting customer expectations. In summary, the main drivers are cost savings from PV, further savings via BESS through energy arbitrage, followed by energy security and carbon mitigation.

2. How are rising electricity costs influencing FMCG companies’ shift to renewable power?

Rising electricity costs have been a major push factor for FMCG companies, and this has been the case for many years. Grid tariff increases continue to outpace inflation, whereas renewables procured through a PPA typically escalate only at around CPI (approximately 5%). This differential has made renewables increasingly attractive as a long-term cost-control strategy.

3. What role does consumer demand for sustainable products play in energy decisions?

South African urban consumers are increasingly receptive to environmentally responsible brands. ESG reporting also plays a significant role in investor relations. In short, people want to see companies acting responsibly. Large retailers now have public climate commitments and are being held accountable by investors and the media, which shapes public sentiment.

These commitments also cascade down the supply chain, meaning suppliers must decarbonise to maintain relationships with major retailers. Exporters can benefit as well, as products with a lower carbon footprint naturally hold a competitive advantage in international markets. Mechanisms like the EU’s CBAM currently affect heavy industry, but FMCG may be included further down the line.

4. How are grid instability and load-shedding affecting renewable energy uptake?

Load-shedding used to be the primary driver of renewable energy adoption. Today, grid outages, often caused by poor maintenance of upstream infrastructure, have taken centre stage. Solar alone cannot protect businesses from outages or poor power quality; this is where BESS becomes essential. While BESS on its own can address many of these issues, pairing it with solar provides far greater value.

5. What financial advantages are FMCG manufacturers seeing from renewable energy uptake?

The financial benefits are substantial, with clients seeing savings from commercial operation date (COD), particularly through PPA structures that require no upfront capital. Advantages include tariff hedging, significantly lower unit costs (R/kWh), and full coverage of operations, maintenance and repowering by the IPP. Savings also depend heavily on correct system sizing for both PV and BESS.

Where diesel generators are used, adopting PV and BESS is a cleaner and far more cost-effective option. Additional financial gains, often not accounted for, include improved production uptime, reduced downtime, lower spoilage, and protection of critical processes.

6. Which renewable technologies are gaining the most traction in the consumer goods sector?

In the FMCG sector, the most widely adopted technologies are:

• Rooftop and ground-mounted solar
  
• Hybrid PV and BESS systems
  
• Wheeled solar and wind energy

7. How are renewable solutions improving supply chain and production resilience?

Solar paired with BESS significantly improves production uptime, particularly in factories and distribution centres where interruptions are costly and disruptive. FMCG and retail players are increasingly integrating renewables into logistics. Shoprite is a notable example, having deployed an electric truck charged from solar at its Basson Distribution Centre. This not only demonstrates a serious commitment to decarbonisation but also reduces exposure to diesel price volatility and potential fuel supply shocks.

Additionally, investors, lenders and major customers increasingly view robust decarbonisation and energy resilience plans as part of overall business resilience, influencing both access to capital and opportunities in export markets (particularly under mechanisms like CBAM).

8. What incentives or policy changes are supporting renewable energy adoption?

The Section 12B tax incentive remains useful for smaller projects (up to 1 MW), offering accelerated depreciation. In 2021, the licensing threshold for larger projects increased from 1 MW to 100 MW, requiring only NERSA registration. In 2022, the threshold was removed entirely, enabling large industrial users to self-generate or contract embedded or wheeled energy from IPPs without full generation licences.

South Africa’s wheeling framework has become increasingly supportive, with progress towards a wholesale energy market and the introduction of trading licences for energy traders and aggregators. These actors are becoming particularly important in the FMCG sector, where traditional captive power and standard wheeling options are no longer sufficient.

At a European level, CBAM introduces a structural incentive to reduce the carbon intensity of electricity used in manufacturing, especially for export-oriented heavy industry, with FMCG potentially following in time.

9. What challenges do FMCG companies face when transitioning to renewable energy?

Renewable energy can be costly when financed on balance sheet, even with tax incentives. PPA and lease models, such as those offered by Yellow Door Energy, help overcome these barriers by removing upfront costs for creditworthy medium to large energy users.

A common challenge with PPAs is the requirement for payment securities (PCGs), which ensure long-term payment obligations are met and improve project bankability. FMCG companies may also face inconsistent or conflicting advice from various service providers, making it difficult to know whom to trust. Running an RFP can be time-consuming, and engaging advisors can be costly.

There is also rising uncertainty around future grid tariff structures and market reforms: Will fixed charges increase? Will a spot market emerge? Such uncertainties often lead to indecision. In some cases, companies delaying wheeling procurement have later found themselves unable to proceed due to grid congestion. This results in lost savings and missed opportunities.

10. What does the long-term future of renewable energy look like for the consumer goods industry?

Given South Africa’s strong solar and wind resources and extensive rooftop potential, C&I solar adoption is expected to grow rapidly. Energy systems offering demand response and enhanced flexibility, increasingly supported by AI, will become more prevalent.

Electric trucks charged with renewable energy are likely to become more common in FMCG logistics. Low-carbon production may become a mandatory requirement for access to export markets, and potentially some domestic markets too.

The energy supply market will continue to evolve, improving competition and enabling more companies, including those currently unable to procure renewables, to access cleaner, more affordable power.