Is there light at the end of the tunnel?

South Africa’s energy sector has been plagued with uncertainty recently, leaving South Africans in the dark as to where the country’s energy future is headed and what it will take to keep the lights on.

As highlighted in the Hogan Lovells publication "Africa and Renewables – wholesale change or short-term surge?" launched at the recent Africa Energy Forum in Mauritius, much of the problem can be attributed to political interference and bureaucratic intransigence that can upset even the best of programmes. There are no better examples of this than the recent refusal of Eskom to sign 27 odd power purchase agreements (PPAs) under South Africa's renewable energy independent power producer programme (or REIPPP as it is commonly referred to) and cabinet reshuffles that resulted in three energy ministers in a short space of time. The ship seems to have been steadied under the new Cyril Ramaphosa presidency and utterances from government are encouraging. The PPAs have now been signed and several projects are advancing to financial close.

The uncertainty and confusion has resulted in emotionally charged debates, resulting in ”camps” that push the renewables/nuclear/gas/coal agendas. In these camps, you are either pro or against one or the other technology, whereas embracing all energy resources and giving each a seat at the energy table should ensure security of supply and an optimum energy mix. The issue around nuclear has been hotly debated, particularly around affordability, given that South Africa can produce baseload at a much cheaper rate, if one ignores the environmental impact of coal-fired generators.

Recently appointed Energy Minister, Jeff Radebe, has said that one-quarter, or US$25 billion, of South Africa's newly announced five-year investment target of US$100 billion could be met through investments in new energy projects, including a possible new greenfield crude oil refinery and a gas pipeline linking South Africa to the Rovuma basin, in northern Mozambique. This cannot be achieved solely through one energy source. Investments, including domestic shale-gas projects, could contribute significantly to the investment target along with other renewable energy and conventional projects.

The Department of Energy’s long-awaited revision of the Integrated Resource Plan (IRP) is due to be published in August 2018. The plan will provide a guide regarding energy production capacity allocation to each technology leading up to 2050. Assurances have been made that there will be a fifth bidding window under the REIPPP and that the gas programme is high on the agenda for imminent rollout. 

A comprehensive and affordable plan is critical, especially when we consider that South Africa ranked 113th out of 114 countries in the Effective Energy Transition Index 2018, a report by the World Economic Forum that considers the ability of countries to balance energy security and access with environmental sustainability and affordability. 

There is an immediate need to further diversify the fuel mix, and to create a positive environment for more investment to meet the energy infrastructure demands. South Africa currently meets more than 90% of its electricity demand through coal, which results in high per capita emission levels. This is no longer sustainable. The IRP will also need to ensure it addresses government’s mandate to create jobs, increase local content and grow the South African economy and ensure security of supply. 

The imminent release of the IRP will pave the way forward and, hopefully, will curb the uncertainty as to where South Africa’s energy future is headed. It will also clearly outline the allocation to each energy source. This is where the debate will change, and self-interest of individual energy suppliers and energy sources will have to be put aside. Each faction will need to move away from an “all or nothing” argument. Concepts such as flexible energy systems will take the fore as we explore how these energy sources can ultimately support each other. Flexible energy systems, or flexible generation capacity, refers to the ability to meet demand peaks by playing a complimentary role – providing back-up to low cost variable generation like wind or solar. There is plenty of opportunity in this regard as South Africa currently scores zero for flexibility in its electricity, according to the Energy Transition Index 2018. 

Today, there are a number of flexible technologies available, which include hydro, pump-storage, concentrated solar power (CSP), demand side response (DSR), batteries, gas, and even coal to some extent. Utilising these technologies in such a way that they complement one another instead of taking away from one another is what will make the IRP successful and pave the way for an energy certain country.

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