Norway guarantees financing for South African solar project

Norway is supporting the expansion of South Africa’s renewable energy capacity and the development of its power market through a state guarantee of up to NOK 150 million (approx. US$16.1mn)

Norwegian renewable energy company Scatec will develop and operate the solar power plant

The support is intended to encourage investment in solar generation for industrial users while helping reduce the risks associated with private-sector investment in South Africa’s energy market.

Norway’s Minister of International Development Åsmund Aukrust said the initiative could deliver economic benefits beyond electricity generation, including employment and additional tax revenues.

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 in a press release at regjeringen.no.

South Africa has experienced persistent challenges related to electricity shortages and an unreliable power supply, while its electricity system continues to rely heavily on coal.

The guarantee scheme is administered by Norad and was launched in 2025. The Thakadu Solar project represents the first guarantee issued to the private sector under the scheme.

Norad director General Gunn Jorid Roset said the mechanism can help reduce risks for private companies investing in renewable energy and support wider development of the electricity market.

"This is an effective way to use development funding. When we issue a sovereign guarantee, we help reduce the risk for private actors that want to contribute to expanding renewable energy. This is not just about a single power plant, but about contributing to an evolving energy market. Access to energy is fundamental to development, and in this effort, we need to work together with the private sector."

Supporting renewable generation and private power sales

The guarantee will support Scatec’s development and operation of the Thakadu Solar power plant, in which the company is also a co-owner.

Once completed, Thakadu Solar will add 255 MW of renewable electricity generation. The project’s output is equivalent to the electricity consumption of approximately 150,000–200,000 households.

The additional renewable capacity is expected to contribute to increased clean electricity generation, lower emissions and continued development of South Africa’s electricity market.

The project forms part of Lyra Energy, a platform established by Scatec with South African partners to supply electricity to large private-sector customers. Norway’s guarantee is designed to reduce counterparty risk for Lyra Energy, supporting the financing required to unlock the investment.

Scatec CEO Terje Pilskog said investment in renewable generation remains important for reducing electricity costs and improving energy access in emerging markets.

– Investment in renewable power generation in emerging markets is critical to reducing power costs and securing energy access, and schemes such as the state guarantee help accelerate the energy transition through solutions like these, said Scatec CEO Terje Pilskog.

Scatec has established Lyra Energy Trading with Standard Bank South Africa and Stanlib. The trading platform is designed to connect electricity producers with private-sector buyers.

The arrangement means Norway’s support extends beyond the addition of solar generation. It also contributes to the development of a market in which private electricity producers can sell power directly to industrial customers in South Africa.

Guarantee designed to unlock project financing

Norad is providing Standard Bank South Africa with a guarantee of up to US$15mn, approx. NOK 150 million. The guarantee will cover part of the payment risk associated with private buyers purchasing electricity.

The guarantee is a key condition for lenders to finance the solar power plant. By reducing the risks associated with private-sector power purchasers, the mechanism is intended to enable investment in new renewable generation that commercial players may otherwise be unwilling to finance independently.

Per Fredrik Pharo, Director of the Department for Climate, Nature and Private Sector at Norad, said the guarantee is intended to support financing for the solar project while contributing to broader reforms in South Africa’s electricity market.

The purpose of this guarantee is to help secure financing for a planned 255 MW solar power plant in South Africa.

Per Fredrik Pharo, director of the department for climate, nature and private sector at Norad added that the initiative would also support a developing market structure in which private electricity generators can supply industrial customers directly.

"In addition, the guarantee will support the development of the power market, in which private producers can sell electricity directly to industry – an important part of the country’s power market reform."