/ 5 February 2021

SA’s new energy path gains momentum

(Photo: Bloomberg via Getty Images)

South Africa is on track to meet its post Covid-19 energy needs while reducing its dependence on coal in the current low economic growth scenario, but also when economic growth accelerates in the second half of the decade to 2030. This was affirmed by Minister for Minerals and Energy Gwede Mantashe when he spoke at the third South African Investment Conference (SAIC), held virtually in November last year. 

The conference took place after cabinet had approved the Integrated Resource Plan (IRP 2019) which guides the country’s energy needs to 2030, in line with the country’s National Development Plan (NDP), and projects the needs further to 2050. 

Mantashe told the conference that as the department is responsible for energy security of supply, the DMR (Department of Mineral Resources) was on track to fully implement the IRP 2019. “Energy security in the context of the IRP 2019 is defined as South Africa developing adequate generation capacity to meet its demand for electricity, under both the current low-growth economic environment, and even when the economy turns.”  

The IRP sets South Africa on a path to pursue a diversified energy mix that reduces reliance on a single or a few primary energy sources. South Africa has a particular need to reduce its dependence on coal in order to reduce emissions. In order to achieve this goal, the IRP allocates the biggest growth to renewable energy for the next decade. 

Mantashe told delegates that the IRP also recognises the challenges posed by Eskom’s plant performance, which is why the government undertook the first in a total of nine policy interventions that underpin the IRP.

The first decision is for government “to undertake a power purchase programme to assist with the acquisition of capacity needed to supplement Eskom’s supply”. Towards the end of last year, government launched the Risk Mitigation Independent Power Producer Procurement Programme, which is designed to source 2 000MW from a combination of technologies, from private producers.  This is in addition to procuring additional power from existing renewable energy IPPs (independent power producers). 

Coal remains an important source of electricity generation for South Africa, as it is abundantly available. But as signatories to the Paris Agreement on climate change, South Africa has committed to reducing emissions from coal. Since 2010, when the IRP was first developed, South Africa has enabled significant generation of electricity from coal through the construction of the Medupi and Kusile power stations. But soon Eskom will stop building new coal power stations and also contribute to the lowering of emissions by converting its diesel-fired power stations to gas. 

The most significant policy development over the past year, first announced at last year’s State of the Nation Address, is regulations that allow for the generation of power for own use. The regulation removes licensing requirements for generation facilities of under 1MW and eases licensing requirements for generation for own use above 1MW. 

The IRP further makes provision for distributed generation for own use above 1MW and removes the need for a ministerial approval for deviation from the IRP before Nersa (National Energy Regulator of South Africa) can process a generation license application. Government is preparing to procure almost 12 000MW from renewable sources.  

The IRP envisages that coal will account for 33 364MW or 43% of installed capacity by 2030. South Africa has ample solar and wind power sources, the latter mostly in coastal areas. By 2030, wind is expected to account for 22.53% or 17 742MW. Solar PhotoVoltaic will account for 10.52% at 8 288MW. Battery storage technology will account for 5 000MW (6.35%). Hydro, which is currently sourced from Cahora Basa in Mozambique, will contribute 4 600MW (5.84%). Nuclear will be sourced through the refurbishment of the Koeberg nuclear reactor, to extend its life for 20 years beyond 2024, and will account for 1 860MW, or 2.36%. The nuclear build programme will be procured to a maximum of 2 500MW at a scale that South Africa can afford. 

In addition to complementing Eskom’s power purchase extending the plant life for Koeberg, the other policy directives in the IRP include supporting Eskom to comply with minimum emissions standards and consolidating various initiatives into a single stream for a smooth transition and for coherent policy development. 

The resource plan notes that: “South Africa should not sterilise the development of its coal resources for purposes of power generation, but instead all new coal power projects must be based on high efficiency, low emission technologies and other cleaner coal technologies.”

Finally, South Africa will maintain its links with the Southern African region where it currently trades electricity though the Southern African Power Pool.  The IRP commits South Africa to participate in strategic power projects that enable the development of cross-border infrastructure needed for regional energy trading and that drive regional integration. 

South Africa’s IPPs make their mark 

South Africa’s Independent Power Producers have started to deliver tangible economic, social and environment benefits to the South African economy in the decade since government actively sought private sector participation in power generation. 

The Independent Producer Programme (IPPP) was set up in 2010 by the Department of Minerals and Energy, the National Treasury and the Development Bank of Southern Africa, among others. The programme was set up to procure electricity from renewable and non-renewable sources from the private sector; it also has to contribute to socioeconomic development objectives. The renewable energy leg of the programme, or REIPPP, has gained momentum and grown at a relatively fast pace. 

The Integrated Resource Plan of 2019 identifies 39 696MW to be added to the national grid between 2019 and 2030. Clean energy sources have a crucial role in meeting that target, and wind and solar photovoltaic are expected to make the biggest contributions after coal.  

Breakdown of new capacity to be added between 2019 and 2030

➣ Wind: 14 400MW (45.7%)

➣ Solar photovoltaic: 6 000MW (19.1%)

➣ Gas and/or diesel: 3 000MW (9.5%)

➣ Hydroelectricity: 2 500MW (7.9%)

➣ Energy storage: 2 088MW (6.6%) 

➣ Coal: 1 500MW (4.8%) 

➣ Other technologies to fill the short-term capacity gap: 2 000MW (6.4%)

By June 2020, the REIPPP had attracted investment of both debt and equity worth R209-billion, about 20% or R40-billion of which was foreign investment. The programme had created 52 603 job years. 

About 6 422MW of electricity had been sourced from 112 renewable energy projects across a total of seven bid rounds since the first project became operational in November 2013. Independent power producers have also proven to be reliable, with 64 out of 68 projects that were operational by June last year running for longer than a year.  

The IPP office also states that IPPs have made a socioeconomic contribution of R1.2-billion since being set up, with enterprise development spend of R384.2-million. These producers have helped South Africa to achieve carbon emission reductions of 50.2-million tonnes, and 59.4-million kilolitres of water have been saved. 

The introduction of private players into electricity generation has a range of benefits, including the reduction of reliance on constrained fiscal resources; Eskom is struggling with R480-billion in debts. IPPs also contribute to the diversification of energy supply and the nature of its production improves energy security while modernising infrastructure. They attract new investment, skills, technologies and competition into the industry, stimulate local industry development and job creation, and enable benchmarking of performance and pricing.

SA ties itself to a lower emissions path

During the second half of 2020, South Africa adopted policies that will shape how the country produces energy and consumes water, how land is used to produce food and how minerals are extracted, in order to adjust to a low emissions path. 

Producing electricity by coal-powered stations will soon be a thing of the past, as South Africa recently adopted the National Climate Change Adaptation Strategy and the Low Emissions Development Strategy, in accordance with the Paris Agreement on Climate Change

The National Climate Change Adaptation Strategy (NCCAS) was approved by cabinet in August last year, and South Africa’s Low Emissions Development Strategy (Leds) was released in September. The two documents show how South Africa will meet its commitments made under the Paris Agreement on Climate Change, which is now set to carry more weight now that the United States of America is set to rejoin the agreement, following the election of Joe Biden as president. 

The National Climate Change Adaptation Strategy has as its central objective: “To transition to a climate resilient South Africa, which will follow a sustainable development path, guided by anticipation, adaptation and recovery from a changing climate and environment to achieve our development aspirations.”

The Leds, for its part, seeks to ensure that: “South Africa follows a low-carbon growth trajectory while making a fair contribution to the global effort to limit the average temperature increase, while ensuring a just transition and building of the country’s resilience to climate change.”

A key area in which South Africa can lower its emissions is in the use of coal for electricity production. Eskom’s use of coal-fired power stations and Sasol’s use of coal to produce fuel and other chemicals in its Secunda and Saolburg plants makes South Africa one of the top 20 emitters in the world, far above measures for its population size compared to the global average. 

The Leds identifies energy supply as a key area in which to reduce emissions. It notes that the decarbonisation of energy supply will be driven through three legs. The first is the Integrated Energy Plan, which analyses current energy supply and demand trends within the different sectors of the economy, across all energy carriers. It then projects the country’s future energy requirements, based on anticipated evolution of technology as a key factor under a variety of different scenarios, especially for economic growth. 

The second leg is the Integrated Resource Plan, which guides the evolution of the South African electricity supply sector and projects the country’s energy mix to 2030. The plan first released in in 2010 to cover the period from 2010 with the latest iteration released last year, envisages the addition of 39 696MW to the grid over the next 10 years. Coal will account for only 4.8% or 1 500MW of this new capacity. The IRP thus provides a mechanism for government to drive the diversification of the country’s electricity generation mix and promote the use of renewable energy and other low-carbon technologies.

The Leds also examines biofuel opportunities, which are offered through the Biofuels Industrial Strategy of 2007, which is yet to be fully implemented. Second- and third-generation biofuels technologies could potentially increase the volumes and quality of biofuel that could be produced, without competing with food products or feedstocks.

South Africa does not have numbers attached to its Climate Change agreement. Instead, the country works with peaks, plateaus and declines to benchmark its emissions trajectory. The country’s emissions are expected to peak before 2030, then flatten after that and fall before 2050. 

A number of existing coal-fired power stations will be retired between 2030 and 2050, which is expected to contribute to flattening of the emissions curve. Large investments in additional generation capacity will be required in order to meet the projected electricity demand and sustain economic growth. South Africa is expected to further exploit its favourable conditions for wind solar power.