South African Business 2016 edition

OVERVIEW Energy The

OVERVIEW Energy The South African energy landscape is incredibly diverse, ranging from coal to solar, wind, nuclear and bio. Renewables are increasingly under the spotlight, although coal fires most of South Africa’s power stations. The Department of Energy (DoE) has updated the country’s plan for electricity — the Integrated Resource Plan (IRP2010). It is a 20-year projection of electricity supply and demand — about 42% of electricity generated in South Africa has to come from renewable resources. The National Development Plan (NDP) envisages that by 2030 South Africa will have an adequate supply of electricity and liquid fuels to ensure that economic activity and welfare are not disrupted, and that at least 95% of the population will have access to grid or off-grid electricity. The plan proposes that gas and other renewable resources like wind, solar and hydro-electricity will supply at least 20 000 MW of the additional 29 000 MW of electricity. Other recommendations include diversifying power sources and ownership in the electricity sector, supporting cleaner coal technologies, and investing in human and physical capital in the 12 largest electricity distributors. South Africa has a number of large energy role-players. Stateowned company Eskom generates, transmits and distributes electricity to industrial, mining, commercial, agricultural and residential customers and redistributors. In 23 August 2014, for the first time since construction began eight years ago, the Medupi Power Station in Limpopo is began pumping power. The first unit of Medupi, unit six, was handed over to its operating division. Unit six will feed 794 megawatts (MW) of power into the national grid. Sasol is an international integrated energy and chemical company with more than 34 000 people working in 37 countries. The company develops and commercialises technologies, and builds and operates world-scale facilities to produce a range of product streams, including liquid fuels, high-value chemicals and lowcarbon electricity. In South Africa, Sasol refines imported crude oil and retail liquid fuels through its network of some 400 service stations and supply gas to industrial customers. It also supplies fuels to other licensed wholesalers in the region. South Africa is part of the Southern African Power Pool (SAPP), created to supply consumers from SAPP member states with reliable and SOUTH AFRICAN BUSINESS 2016 86

economical electricity. The SAPP allows the free trading of electricity between SADC members, providing South Africa with access to the vast hydropower potential in the countries to the north, notably the significant potential in the Congo River (Inga Falls). South Africa is a coal-rich country, and 13 of its 21 power stations are coal-fired. The Koeberg nuclear power statio, near Cape Town, generates 6% of South Africa’s electricity. Sites for new nuclear plants are being investigated. South Africa’s installed electricitygeneration capacity of around 44 000MW places it well ahead of any other African country, but with the demand around 37 000MW, the reserve margin is very small. The country has plans to add 50GW to the grid by 2030 to help drive economic growth. A lot of attention is being paid to the renewable energy sector, and government blueprints for the future of power generation in South Africa allocate specific targets for each sector. A figure of 17 000MW in renewable energy by 2030 has been set, with a three-year target of 3 750MW. The Industrial Development Corporation (IDC) plans to spend R25-billion on green projects by 2017. Its green efficiency fund is putting up R5.2-billion to finance 12 independent power-producer projects: six photovoltaic, four wind and two concentrated solar power (CSP). Established mining and construction houses OVERVIEW in South Africa are increasingly looking to create their own power. Construction giant Group Five, is setting up a 150MW solar plant in the Northern Cape, with the possibility that the plant could be upgraded to 450MW capacity. The Northern Cape is home to several large iron ore and manganese mines that need lots of electricity. South African energy manufacturers are also building a reputation for exporting their machinery and services. Cummins South Africa supplied and installed generators that provided 7MW of capacity to the Madagascar government to prevent blackouts during the overlap of their harvest time and the Christmas period at the end of 2014. International renewables companies are looking for South African partners. In March 2014, government gave the go-ahead for shale gas exploration in the southern Karoo and elsewhere. South Africa has very limited oil reserves. About 60% of its crude oil requirements are met by imports from the Middle East and Africa. The country produces about 5% of its fuel needs from gas, about 35% from coal and about 50% from local crude oil refineries. About 10% is imported from refineries elsewhere in the world. Biofuels are expected to reduce the country’s reliance on imported fuel. The biofuels industry in South Africa, the continent’s biggest agricultural producer, has been held back by an inadequate regulatory regime and concerns that biofuels would hurt food security and affect food prices. Spanish company Abengoa, in partnership with IDC and community trusts in Upington and Pofadder, is building Khi Solar One, a 50 MW solar tower plant near Upington, and KaXu Solar One, a 100 MW parabolic trough solar plant near Pofadder. The two power stations are expected to leverage investment of over R10 billion and generate almost 500 GWh clean solar electricity a year. The two plants will reduce South Africa’s carbon-dioxide emissions by about 498 000 tons a year, and create from 1 400 to 2 000 construction jobs and about 70 permanent operation jobs, as well as numerous indirect jobs. DCD Wind Towers, the COEGA IDZ wind turbine manufacturing facility, is well on its way to being completed. The project, expected to boost South Africa’s wind power competitivity immeasurably, is a joint initiative between the DCD Group, the IDC and the Coega Development Corporation. SECTOR INSIGHT Large companies are taking an interest in cleaner energy. • DCD Wind Towers is nearing completion • Shale gas exploration is on the horizon • South Africa is looking for a nuclear power partner 87 SOUTH AFRICAN BUSINESS 2016