South Africa’s electricity infrastructure has deteriorated over the past decade, with both planned and unplanned blackouts. Despite the slowdown in economic activity due to the Covid-19 pandemic, the country has faced 1130 o’clock of planned power outages in 2021, the highest ever.
This not only leads to anger and frustration among the public, but also clearly hinders companies and their productivity. Relieving the electricity crisis is therefore a crucial condition for the economic recovery of the country. Therefore, observers have followed President Cyril Ramaphosa’s strategy and execution with great anticipation.
In the Address of the State of the Nation 2021 Ramaphosa named “rapidly expanding our power generation capacity” as one of the government’s top five priorities. This year he reiterated that this had not changed. This would clearly be an important outcome by which the success of his administration would be judged.
In his 2022 State of the Nation Address he has not raised any point that would have inspired confidence that his government is making progress on energy. He gave no indications of plans to Integrated Resource Plan† The last Integrated Resource Plan was adopted in 2019. The plan, which provides direction for power plant development and associated timelines, is to be reviewed every two years.
A revised plan is needed, especially in view of the rapid developments in energy generation technologies. In fact, the plan for 2019 is already outdated and updated forecasts are likely to lead to significantly changed optimal power generation scenarios.
Delays in construction
The Integrated Resource Plan 2019 provided immediate action to: construct 1600 MW of wind energy, 1000 MW of solar energy and 513 MW of electricity storage capacity to be put online by 2022. But these are not expected to be ready until early 2024. Projects to be completed by 2023 include an additional 2,600 MW of wind and solar power and 750 MW of new coal, but the process to identify the sites and developers has not yet begun. This means that all of these initiatives are two years behind schedule.
The coal project faces strong headwind due to altered perceptions of coal due to its role in global warming. But there is no excuse for the delays in initiating the officially approved plan to develop the renewable power plants.
The Minister of Minerals and Energy Gwede Mantashe, the lead implementer of the Integrated Resource Plan, is a vocal supporter of the previously dominant (but now increasingly less popular) coal, gas and nuclear sectors. Recently, however, he has tried to reassure the solar and wind sector that, despite: perceptions to the contraryhe too supports renewable energy†
South Africa cannot solve a pressing energy crisis while senior government officials openly disagree on the path to follow. The message of joint commitment to the implementation of the electricity plan is therefore to be welcomed. Confidence would be further bolstered by concerted efforts to reclaim lagging rollout timelines and immediate steps to update the power plan.
In the Address of the State of the Nation 2021 the president said procurement of the first and second series of renewable energy developments would begin in February and August 2021, respectively. The first target was met, but the second was postponed twice, first to January 2022 and then to the end of March 2022.
Before this year’s speech, Ramaphosa indicated that the call for applications to purchase the now severely delayed storage allocation and 3000 MW of gas generation capacity would be launched later this year. This is insufficient to make up for the backlog of new power stations.
The omissions and the loan for climate change
The president also steered clear of controversial energy developments.
He said nothing about the completion of the huge Kusile coal-fired power station, which is along with his twin brother Medupi plagued by massive delays, cost overruns and unexplained malfunctions of the still new machines.
He also kept silent about the 1,500 MW of new coal-fired power plants planned under the Integrated Resource Plan, which would normally be allocated to developers shortly. This may be a conscious effort to downplay any ambitions the country may have on this front so that they are not compromised. R131 billion foreign grants and loans expected in return for a climate-friendly energy development path.
Instead, he praised a North Cape green hydrogen generation initiative – a storage technology expected to co-exist with renewable energy generation – although this program is still in its relatively early planning stage.
Regulatory changes and the unbundling of Eskom
The president’s greatest achievements in the past year have been in the area of regulation. He relaxed power generation licensing requirements to make it much easier for entities to set up power plants up to 100 MW. This mitigated a bottleneck that has led many more mines, municipalities and other private entities to take steps to set up their own power generation capacity.
In his speech, Ramaphosa emphasized that this capacity is expected to reach 4000 MW for mines and 1400 MW for municipalities. That is considerably higher than was foreseen five years ago. This puts an end to bridging the electricity shortage.
To convince the skeptical nation that the energy crisis was being addressed, the president needed something new. To do that, the government released a draft revised electricity bill for public comment on the day of the speech. This includes several proposed reforms that would erode the monopoly of the national electricity company Eskom.
The draft bill further establishes the operational framework for new entities that would result from a unbundled Eskoma process that is expected to be completed this year.
Debates on the impact of this new bill and on possible amendments will feature prominently in the coming months, and the outcome of this process will decisively determine the future of electricity developments in South Africa.
Specifically, the bill will boost small-scale private electricity production – also known as “embedded” generation – and exceed the contribution projected in the current Integrated Resource Plan. Technological advances in electricity storage also make it feasible to use larger fractions of intermittent solar and wind energy than previously expected.
This calls for a re-determination of South Africa’s optimal electricity mix through a new Integrated Resource Plan. The work for that must now begin.