South African Business 2019 edition

SPECIAL FEATURE Energy

SPECIAL FEATURE Energy and the future South Africa’s exciting renewable energy programme is back on track. A new Integrated Resource Plan was released by South Africa’s Energy Minister in August 2018. This was a major event because the first Integrated Resource Plan (IRP) was printed in 2010 and was supposed to be updated regularly to guide the nation’s approach to electricity. Instead, the release of updated IRPs was delayed. In that uncertain environment, there was a strong push for expensive nuclear options. The release of IRP 2018 brings certainty to the market again. Nuclear will not be considered again until at least 2030. The South Africa Photovoltaic Industry Association (SAPVIA) welcomed what it calls the “rational” draft Integrated Resource Plan. When South Africa ran out of power in 2008, a programme to get private investors to build renewable energy capacity was instituted. It was called the Renewable Energy Independent Power Producers Procurement Programme (REIPPPP). Between November 2011 and July 2016, South Africa received commitments of investments to the value SOUTH AFRICAN BUSINESS 2019 26

SPECIAL FEATURE of nearly R200-billion through this innovative and efficient programme with encouraged private investment into the South African power generation sector. According to the Department of Energy, the REIPPPP by 2016 had not only delivered multiple millions in investments, it also created more than 30 000 jobs and benefited local community development to the tune of R256-million. Figures released by the South African Wind Energy Association (SAWEA) showed shareholding for local communities reached an estimated net income of R29.2-billion over the lifespan of the projects. Some 14 000 new jobs are expected to be created, mostly in rural areas, and more than R30-billion has already been spent on Black Economic Empowerment (BEE) in the construction phase. In April 2018, new Energy Minister Jeff Radebe restarted the REIPPPP when he signed off on projects totalling R56-billion that will add 2 300MW to the national grid. There had been a long delay in the process as national utility Eskom argued against accepting more power purchase agreements while they had a surplus. Most of South Africa’s electricity comes from coal and Eskom is building two huge coal-fired power stations. Most commentators on the IRP 2018 have praised its basis in science and the fact that it has adopted the “least-cost” method of analysing options. With renewable energy costs having been dramatically reduced, the IRP concludes that wind, gas and solar power (photovoltaic) will be the three methods to be allocated the most new projects up to the year 2030. The other form of solar power (concentrated solar power, CSP) is very effective and some projects have been successfully commissioned, but it is relatively expensive. Despite the emphasis on renewables in the IRP, SA’s energy mix is still weighted towards coal. Two new power stations, Kusile and Medupi, are being built by Eskom and 1 000MW has been allocated to private producers to build coal-powered stations known as Thabametsi and Khanyisa. The IRP has attracted criticism for enabling an expansion of the coal industry. Koeberg nuclear power station is due to be decommissioned soon after 2045. In commenting on the IRP 2018, SAPVIA raised a question about the role of the Small-Scale Embedded Generation market in the form of facilities such as rooftop-PV installations and the growth in demand for LPG gas for cooking. The association stated that the 200MW allocation is insufficient to address what it believes is a growing market. POWER GENERATION TO 2030 Technology New allocation to 2030 % of mix in 2030 Wind 8 100MW 15% Gas 8 100MW 16% Solar (photovoltaic) 5 670MW 10% Concentrated solar power 300MW 1% Hydro 2 500MW* 6% Nuclear None 2.5% Pumped storage None 4% Coal 1 000MW 46% * This takes into account the possible Inga project in the Democratic Republic of Congo. 27 SOUTH AFRICAN BUSINESS 2019