Thakadu Solar is expected to generate 254 MW of new solar power. This corresponds to the electricity consumption of approximately 150,000 to 200,000 households. The electricity produced by the plant will be sold directly to businesses in South Africa. 

How the Norwegian guarantee works 

The Norwegian company Scatec will build and operate the plant. Norway is providing a guarantee of up to NOK 150 million to reduce the risk faced by Lyra Energy, a power trading platform, partly owned by Scatec. The guarantee ensures that Lyra Energy will get paid if customers fail to pay for the electricity they purchase. By providing this guarantee, the establishment of Thakadu Solar can go ahead.

‘The Norwegian guarantee scheme for renewable energy is a real win-win. It is cost-effective development assistance because the guarantee costs nothing unless the beneficiary incurs a loss. The project creates jobs which are key to reducing poverty and generates tax revenues the country can use to provide welfare for its citizens. This is exactly the type of support African leaders say they want from countries like Norway,’ said Minister of International Development, Åsmund Aukrust. 

More electricity means growth and jobs 

South Africa has long faced an electricity deficit, resulting in an unreliable power supply. Energy is essential for development, because electricity is needed to run schools, hospitals, and industry. To secure sufficient electricity generation, South Africa depends on private-sector investment in new capacity.

Such investments involve risk. If a bank considers there to be a high risk that a project will fail and that it will not recover its money, it is less willing to lend unless it can charge a very high interest rate. This makes a project more expensive for investors and less attractive. Through the Norwegian guarantee scheme, the Norwegian state assumes part of the risk, allowing viable projects such as Thakadu Solar to be realised.

‘This is the first agreement under the scheme to be signed with a private-sector partner, and it is particularly welcomed that it involves a Norwegian company. Over time, Scatec has demonstrated that Norwegian companies can make profitable investments in emerging markets, and Norway has supported this through a range of instruments, including, now, a state guarantee,’ said Aukrust.

Paving the way for more green investments 

The project is part of the broader transformation of South Africa’s  power sector, which is still heavily reliant on coal. Increased solar power generation will help reduce emissions and improve the stability of the country’s electricity supply. At the same time, it will help develop the market for direct power sales between producers and private consumers, paving the way for similar projects in the future. 

‘If Norway and Europe do not step up with partnerships and investments, many developing countries will turn to other partners that do not share our interests or values. Using development assistance to catalyse investments the market is unable to deliver on its own, is sound geopolitics and good development policy,’ said Aukrust.