South Africa’s public utility Eskom is struggling to strike a balance between the country’s electricity needs, the price it is permitted to charge for power, the cost of its main source of energy (coal) and current levels of consumption. While the utility received government approval for a construction of a new power station, called Coal 3 at this stage, delays to the Medupi and Kusile coal-fired stations mean that there’s an electricity crisis looming.
The utility admits that there will be a potential gap in supply in 2014. In an energy market dominated by coal-fired generators, at first glance it seems that South Africa has few means of broadening its electricity mix, but there is growing interest in the country’s gas resources, with plans to develop an offshore gas field. As such, we expect that gas could have a greater role to play in the long term. Other factors that will shape the development of South Africa’s electricity market include speculation over a carbon tax, which could be introduced by 2015, and would affect the profitability of fossil-fuel electricity generation. It’s of little surprise, then, that talk of nuclear power is emerging.
In 2012, electricity generation in South Africa stood at 246.53 terawatt hours (TWh), representing a 1.32% increase on the previous year. Coal-fired sources of electricity accounted for nearly 95% of this figure, and it is expected that coal will continue to play a major role in electricity production rising by a compound annual growth rate (CAGR) of 2.44% to stand at 295.91 TWh in 2022. Economic growth is forecast at a real GDP of just less than 3% every year to 2022, and this together with demographics will both drive demand upwards. South Africa will be a net exporter of electricity during this period.
In July 2013, Eskom stated that construction of the coal-fired Medupi power station had fallen behind schedule, and the first of six 800 MW units at the site are not likely to begin operations until the second half of 2014 instead of December 2013. In another major development in the country’s power sector Ansaldo Energia and FATA, the subsidiaries of Italian power engineering company Finmeccanica, secured a turnkey construction contract worth US$581 million from a consortium led by French utility GDF Suez for two open cycle gas turbine power plants in the Durban and Port Elizabeth areas.
A senior figure in South Africa’s Department of Energy implied in August 2013 that nuclear power would have to play a part in the country’s future energy mix.