The world has woken up to the fact that, in transitioning to net-zero forms of energy, the focus cannot be only on decarbonising energy production.  It also entails a focus on socio-economic transformation, especially in countries where whole communities depend on the fossil fuel value chain for their livelihood.

Without ‘justice’, no transition can be sustainable, particularly for a developing nation like SA, which needs to tackle poverty and inequality.

STANLIB’s Infrastructure Investment team channels capital from long-term investors to the projects, innovators and entrepreneurs who will support South Africa’s green energy transition. The team makes strategic investments which lay the foundations for sustainable economic growth by improving the stability, affordability and environmental impact of the country’s electricity supply. One of those investments is in Lyra Energy.

SA’s dependency on coal

Electricity generation accounts for 70% of SA’s greenhouse gas (GHG) emissions. SA’s ability to meet its commitments under the Paris Agreement will require a dramatic shift away from coal to renewable sources of generation. Weaning the economy off fossil fuels will inevitably have repercussions for the communities that depend on coal mines and thermal power plants for employment. The focus on the ‘just’ aspect of the energy transition means that stakeholder engagement must be the foundation of any path to net zero. Affected communities need to be given the necessary training to participate in a low-carbon energy economy.

Decarbonising energy production will require significant investment, whether to decommission a coal-fired power station or build the solar farm to replace it. Private capital will be required to supplement government investment. By establishing an appropriate regulatory framework, the government can create the conditions for private investors to generate strong risk-adjusted financial returns while creating significant social and environmental impact.

Structural demand for stable, affordable electricity

2023 was the worst year in South African history for electricity supply: load shedding was in effect for roughly 80% of the year. The economy has suffered as a result, emphasising the need for a reliable supply of affordable energy.

The energy currently supplied by Eskom is not only uncertain, but also expensive and expected to become more so as government capitulates to Eskom’s demands for price hikes. Unsurprisingly, commercial and industrial users are keen to secure a reliable supply of electricity at a price which is affordable today and predictable in the future. Privately-funded renewable energy generation (whether on-grid or off-grid) can meet this need while allowing corporate users to achieve some of their ESG ambitions.

SA’s energy generation landscape is undergoing significant liberalisation, as contemplated in the draft Electricity Regulation Amendment (ERA) Bill. As a result, independent power producers can meaningfully participate in both generating and selling energy.

STANLIB funds sustainable energy

STANLIB Infrastructure Investments, through the STANLIB Infrastructure Fund II, has partnered with two longstanding partners, Standard Bank Group and Scatec ASA, to create an innovative new renewable energy platform, Lyra Energy.

Lyra has leveraged the collective strengths of its partners to provide a smart, flexible private power supply solution to commercial and industrial power users. STANLIB has the infrastructure investment expertise and insights, as well as a deep understanding of the renewable energy sector and market dynamics, to enhance Lyra’s long-term growth potential. Standard Bank is the largest bank in Africa in total assets, with the largest network of corporate and industrial clients in the South African market. It is committed to unlocking value from the global transition to renewable energy. Scatec is a Norwegian-based renewable energy solutions provider with a track record of building about 1GW of renewable energy projects, and a well-established development pipeline. STANLIB has a longstanding relationship with Scatec spanning over a decade.

Lyra is the product of these three partners’ commitment to help SA make the energy transition by financing sustainable energy solutions for private sector power users.

Lyra fills a gap in the renewable energy market

Lyra will fund, build, own and operate renewable generation assets. The energy from these assets will be wheeled at affordable prices to Lyra’s offtake clients via the national grid.

The company will offer stable and affordable utility-scale renewable energy to previously unserved commercial and industrial power users across SA. Its target is businesses with significant electricity demands that are not large enough to justify a dedicated renewable energy project. It will provide these clients with the green energy certifications that they need to achieve their own and global net zero goals. At the same time, it will help these businesses to reduce their energy costs, achieve price stability and align with broader organisational climate ambitions. Its customers can expect increasing savings over time as Eskom’s tariff increases outpace inflation.

Customers will each sign a standardised, fixed-term power purchase agreement (PPA) which has been tailored to meet current market trends and addresses the traditional risks associated with bilateral PPAs and the wheeling of energy.

STANLIB plays its part

The principles of justice and transition are front of mind for STANLIB’s Infrastructure Investment team, which channels capital from long-term investors to the projects, innovators and entrepreneurs who will support South Africa’s green energy transition. The team makes strategic investments which lay the foundations for sustainable economic growth by improving the stability, affordability and environmental impact of SA’s electricity supply.