By Mandy Hattingh, Senior Associate, NSDV

Let's face it: South Africa's power grid isn't winning any awards for reliability. Our data centres are feeling the heat - and not in a good way. These digital powerhouses not only keep our online world spinning but are also fuelling the recent AI revolution - yet their ever-expanding capabilities hinge on one critical requirement: an uninterrupted power supply.

Renewable energy has emerged as a promising solution to this pressing issue. By harnessing abundant solar and wind resources, coupled with battery storage to account for intermittency, South Africa could secure a stable energy supply for its data centres. This approach not only addresses the immediate need for reliable power but also aligns with national and global efforts towards sustainability.

The global appetite for digital services is driving unprecedented demand for data centre capacity, with significant implications for energy consumption. As highlighted by the International Energy Agency in its 2024 Electricity Report, data centres, AI, and cryptocurrencies accounted for 2% of global power generated in 2023. This figure is expected to more than double year-on-year until 2026, with some researchers considering even this estimate conservative.

To put this into perspective, a single query to ChatGPT uses approximately as much electricity as it takes to power a light bulb for 20 minutes – about 10 times the energy of a standard Google search. As AI becomes more sophisticated, its energy demands increase correspondingly. Recent sustainability reports indicate that Google’s power usage was up 48% in 2023 when compared to 2019 and Microsoft’s was up 29% from 2020.1 Each of these companies attribute the rise to the development of AI.

South Africa's situation is particularly challenging. The country battles with an Energy Availability Factor hovering around 70%, significantly better than Nigeria's 35% but still far from ideal. Loadshedding has become a daily reality, affecting not just individuals and businesses but also hampering the country's ability to attract and maintain data centres crucial for economic growth and technological advancement.

However, this challenge presents a unique opportunity. Unlike traditional data centres that require proximity to urban centres for low-latency services, AI data centres have more flexibility in their location. They can be strategically positioned closer to renewable energy sources like solar or wind farms, often in more remote areas. This proximity can significantly reduce the need for long-distance power transmission, which often results in energy losses and increased costs.

By adopting this approach, South Africa could not only address its data centre power needs but also contribute to broader energy access goals. For instance, excess capacity from these renewable-powered data centres could potentially be shared with local grids, benefiting nearby communities.

Recent developments in South Africa show promise in this direction. The publication of Exclusion Norms for solar PV and battery facilities from certain environmental authorization requirements under the National Environmental Management Act, 1998, is a step towards streamlining the development of renewable energy projects. Additionally, amendments to the

Electricity Regulation Act, 2006 have made it easier for some projects to avoid licensing requirements from the National Energy Regulator of South Africa (NERSA).

However, the country has also seen some setbacks. The 2023 tax break for solar panel installations, which contributed to a 349% surge in rooftop solar capacity between March and June 2023,2 was not renewed for the 2024/25 financial year. Moreover, a recent 10% tariff on imported solar panels, while aimed at boosting local manufacturing, may inadvertently discourage investment in solar infrastructure due to increased costs and limited local supply.

Looking at examples from other African countries could provide valuable insights. For instance, in 2013 Burkina Faso has exempted solar energy equipment from import duties and VAT for 5 years which saw a surge in demand, while Cameroon offers a full VAT exemption for equipment used in solar PV panels until 2025. Nigeria provides income tax holidays to manufacturers engaged in renewable energy production.

Novel solutions like floating solar installations, which have shown promise in countries like Ghana, Rwanda, and Ethiopia, could also be explored in South Africa. These installations can generate significant portions of national energy demand while utilizing existing water bodies.3 These installations could be implemented in man-made reservoirs and dams thereby preserving the natural environment.

As South Africa aims to position itself at the forefront of the AI revolution and reap the benefits of this expanding industry, it must take decisive steps to incentivize the development of data centres powered by renewable energy. This approach not only addresses the immediate power needs of data centres but also contributes to the country's broader goals of energy security and sustainability.

By leveraging its abundant renewable resources and implementing supportive policies, South Africa can transform its current energy challenges into opportunities. This would not only ensure reliable power for data centres but also position the country as an attractive destination for sustainable tech infrastructure, driving economic growth and innovation in the process.