By Siyabonga Mbanjwa, Regional Managing Director, SENER
The Integrated Resource Plan (IRP) and the follow-up explanation by the Minister of Public Enterprises, Pravin Gordhan are encouraging signs that key decisions to provide policy certainty and attract investment into the energy sector are finally being made. It has taken far too long to get to this point, though.
Load shedding, unemployment and the depressed economy mean that the Department of Mineral Resources and Energy (DMRE) has to proceed with greater urgency. Plans with no implementation are as bad as not having a plan at all. The process to procure new generation capacity from Independent Power Producers (IPPs) must start now. The focus must be on these due to Eskom’s high debt levels and weak balance sheet. All in all, though, we are optimistic for now.
There is a welcome acknowledgement that the power system is constrained and that there is an urgent need to call for 2,000MW to 3,000MW to be procured on an emergency basis. It should help to alleviate load shedding. Although the IRP and the ministerial explanation are welcome, there are risks which cannot be ignored:
• The inclusion of 1,500MW new generation from coal is one. Two private sector projects that were awarded to IPPs are being challenged by environmental groups and funders are turning their back on the projects. This might mean that other projects might be needed, and that in a very tight timeframe.
• It is unrealistic to rely on Eskom’s coal-fired stations that don’t meet minimum emission standards being allowed to continue operating beyond the initial five-year grace period. The Department of Environment, Forestry and Fisheries (DEFF) may not necessarily grant the extension and environmental NGOs might challenge a possible “yes” in court.
• Including power from the Grand Inga hydroelectric project is risky - it requires substantial investment, will be done in phases, has been stalled for a long time already and will have to overcome cross-border transmission challenges.
• The extension of the Koeberg nuclear plant by 20 years is inevitable because of the present and expected power constraints. There is a vague reference to a nuclear build programme but it is unclear as to what the planning is.
• The omission of Concentrated Solar Power (CSP) is a major concern. Whilst the deployment of CSP has been much lower than some more developed renewable energy technologies, its storage and dispatchability benefits far outweigh its disadvantages.
• The roll-out of natural gas is inevitable in order to close a possible gap in power supplies due to the risks enumerated above. The government should be bolder by allocating more megawatts towards natural gas than at present.
• It is a concern, too, that solar PV projects will not be coming online in 2024, 2026 and 2027. Ideally there should be allocations for each year between 2022 and 2030. This will provide policy certainty and attract direct investment.
On the other hand, the substantial allocations for solar PV and wind are welcome. This shows a greater sense of urgency in ensuring that green-house gas emissions are reduced in line with South Africa’s commitments in the Paris Agreement. Equally welcome is the constant roll-out of wind projects at 1,600MW per annum from 2022 until 2030. This provides investors with a clear pipeline of projects that should lead to greater levels of localisation, industrialisation and job creation.
The introduction of “storage”
The introduction of “storage” is a plus but it is an imperative that this is not seen as battery storage only. It must include other options such as pumped storage, hydrogen, molten salts used on CSP plants, and more. Add in the positive postulated move from mega-projects to smaller and modular projects. They come on stream quicker and at a reduced risk. While the proliferation of renewable energy is a threat to coal sector jobs, this not only about which technologies will provide more job opportunities. It is of greater importance that we act against climate change for the benefit of future generations and in an affordable way for the consumer.
The cost of cleaner technologies is coming down and soon will be the best cost option when combined with storage and gas. Of course, a just energy transition is vital – we need to engage all stakeholders, minimise job losses in the coal sector and reskill workers. Unemployment is a national crisis: government must make it possible for the private sector to create jobs while trade unions also have to focus on creating additional jobs and not just enhancing labour conditions for current employees. Overall, the government has taken first important steps to revitalise the energy sector.