HomeFeatures/AnalysisCan SA's power sector be a winner again?

Can SA’s power sector be a winner again?

Antonio Ruffini,
Editor, ESI Africa
By Antonio Ruffini, Editor, ESI Africa magazine

A great deal of humanity’s increased prosperity over the past two hundred years has been due to its ability to exploit fossil fuels for abundant cheap power. What remains, for now, Africa’s largest economy has done the same. During the 1970s and 80s South Africa, blessed with good coal resources, built large scale minemouth coal fired power stations and for several decades the country had a genuine competitive advantage due to its cheap electricity. In addition, South Africa was able to produce a decent amount of liquid fuel from coal which helped its balance of trade.

This scenario is changing. Coal prices have gone up, the low grade coal used by the big Eskom power stations is finding competition from off-shore markets, the best resources have been used, and mining the rest becomes more complex and expensive. Transport of coal to power stations whose nearby mines have run out of reserves becomes an issue. The spectre of climate change / carbon taxes hangs over coal like a black fog. In short, a long-time winner for South Africa, while nowhere near out of steam yet, will have run its course.

The power supply sector has to plan and think in decades and South Africa, percentage wise probably the most coal for energy dependent medium-to-large country in the world, has begun to think about diversifying its power generation sector. Nuclear, renewables and other energy sources form part of this mix, as laid out in the country’s multi-decade national integrated resource plan (IRP).

However, this does not translate into the competitive advantage of cheap power. Forgetting even about the aforementioned coal wealth, the country has been lucky a number of times with its resources. It first got lucky with what were once the world’s richest diamond resources, then what were for a century the world’s richest gold resources and then incredibly it got lucky again by having the world’s richest platinum resources. Though gamblers will test this to their detriment and resources can be a trap, if you believe you are lucky sometimes you make your own luck.

Remembering that coal was once viewed as worthless junk that ruined otherwise good land, maybe South Africa has gotten lucky one more time. Its semi-arid western wastelands, seen as having little use beyond some sheep farming, and providing few opportunities, have suddenly become a focal area in three different ways. This region could be the country’s new Kimberley, its new place of gold (Gauteng), its new Rustenburg.

In April we should have a better idea as to whether South Africa will get the rights to host the multi-billion dollar Square Kilometre Array (SKA) telescope, which just in terms of what it entails for the region’s telecommunications infrastructure is dramatic.

The Upington area in the country’s north west is also the planned location for a very large solar corridor since it boasts some of the best solar radiation per square metre on Earth, almost 33% better than that of Spain which is arguably the world’s leader in developing Concentrated Solar Power (CSP) projects. Of all the renewables, CSP has the best potential to replace coal over the long term as a base load option because it uses steam turbines and the piping and steam systems are conducive to storage. Storage remains very expensive, though, and for power to provide the expected benefits this power must be cheap. At least here, all things being equal, South Africa’s brilliant sunlight statistics favour it over time.

And then there is the final bit, where South Africa may strike it lucky yet again, to the extent that it would seem to everyone else to be ridiculously unfair. Gas is the major new game in the global energy sector as humanity moves down the carbon curve to friendlier options. Suddenly it is suspected that the Karoo has a lot of shale gas. It is very important firstly to see if indeed it is commercially exploitable, and secondly to ensure that if it is, it is exploited to South Africa’s benefit and not just pumped offshore.

If commercially exploitable gas resources in the Karoo do exist, well, South Africa’s solar sunbelt is a definite. Then maybe, just maybe, by 2040 could the country not be sitting on its next big winner in the energy sector, large hybrid CSP/gas power stations, environmentally friendly and cheap and offering a genuine global competitive advantage?

Like all luck, it has to be made to some degree, the opportunities spotted and taken, some hard work put in, some courageous intelligent decisions made. The world becomes much more competitive, not less, and South Africa’s historical socio-economic legacy could yet severely undermine the country’s future. But it has never been a place short of ambition, and if enough people believe it can be so, as inconceivable as it sometimes may seem, it might be proven over time that South Africa can once again have a game changing winner in one of those areas with the highest stakes of all: cheap power.