The energy crisis and energy security into the future must be managed to protect South Africa’s long-term socioeconomic interests while balancing our sustainability obligations and our international commitments to climate change and decarbonisation. The role of the state will remain central to the provision of energy. Load-shedding poses an immediate danger to life, the economy and the state. South Africa’s energy crisis is of seismic economic proportions.
Load-shedding has eroded the purchasing power of South Africans, with food being the biggest driver of inflation. Despite improved employment numbers in the last labour force survey, the crisis has resulted in the disruption of business activity, compromising the job security of the employed and worsening the potential for jobseekers. Such ramifications require a deliberate and orchestrated effort by the state of proportions not previously seen.
Our primary responsibility is to the South African people. As a result, in July 2022, the president announced the Energy Action Plan. July 2023 marked the first anniversary of the plan, which contains five key outcomes:
• Fix Eskom and improve the availability of existing supply;
• Enable and accelerate private investment in generation capacity;
• Accelerate the procurement of new capacity from renewables, gas and storage;
• Unleash businesses and households to invest in rooftop solar; and
• Fundamentally transform the electricity sector.
These outcomes have guided the actions by the ministry in the Presidency responsible for electricity to mitigate the deterioration of performance. In the first of a series of articles on the crisis, I will reflect on the progress made.
In April, we had a shortfall of 6,000MW. To put this in context, one stage of load-shedding approximates to 1,000MW that must be placed back into the system. Fixing Eskom is a precondition to mitigate the effects of the crisis as Eskom is a dominant market player across the energy value chain of generation, transmission and distribution. The energy availability factor (EAF) measures the reliability and efficiency of installed capacity. Technically, it is the difference between maximum available capacity, planned maintenance, unplanned breakdowns and other capacity losses. From a historic low of 48% three months ago, EAF has significantly improved and is averaging 61%.
We have had less severe load-shedding than anticipated over the winter, in part due to a reduction in unplanned losses from 18,000MW to approximately 16,000MW, in addition to increased generation from wind power. Based on this saving, we have used the opportunity to conduct much-needed maintenance on our existing fleet. If this were not the case, the country would be experiencing a lower stage of load-shedding. This is important as it demonstrates that we are addressing the country’s energy crisis in a non-myopic manner, working towards our long-term energy security.
Work has been under way to return additional units at Kusile and Medupi to service on an expedited basis. The additional MW coming online will substantially reduce load-shedding. By the end of this year, we will have more than 4,000MW of generation capacity, in addition to 4,000MW gain since April. While this is more than the 6,000MW needed, 8,000MW remains insufficient to meet the country’s future growth demands. The growth rate of energy supply must surpass that of the economy.
Private investment in power generation has increased exponentially due to state liberalisation reforms. Since implementing these changes, the pipeline of private generation has increased to more than 100 projects representing more than 10,000MW of new capacity, some of which will connect to the grid this year. A survey finds that, subject to grid development, the potential is greater, at 66,000MW.
Eskom has leased land around several power stations in Mpumalanga to private developers. The choice of location is a direct function of transmission grid capacity and availability. Phase 1 includes agreements signed for 1,800MW, in addition to purchasing excess power from companies, unlocking almost 400MW in the immediate-term with a further 600MW being contracted.
Appropriate incentives to ensure that households and businesses feed power into the grid are a necessary prerequisite
Towards expediting the operationalisation of generation projects, time frames for regulatory approvals have been drastically reduced. For example, environmental permits are now issued in 57 days, in comparison to taking anything up to six months. Aligned to this, an Energy One Stop Shop has been established as a single-entry point for renewable energy projects to obtain necessary authorisations.
The government previously introduced bid windows through the renewable energy independent power producer programme (REIPPP). This is a systematic and controlled process to go to market in a way that ensures competition and transparency. New capacity under construction from the last two windows is more than 2,300MW and future windows will seek over 9,000MW from wind, solar PV, battery storage and gas solutions.
In Vietnam, through a state programme committing to buy excess electricity from households and businesses, 8GW of electricity was generated within 12 months. In South Africa, we require the modernisation of our grid for this solution to work. Business and household solar solutions are a critical component towards self-sufficiency. Rooftop space of members of the South African Property Owners Association is roughly 100-million square metres. Assuming that 50% can be utilised for rooftop solar, 9.5GW of electricity can be generated. From the perspective of business and household incentives to invest in solar, expanded incentives were announced in the 2023 budget, including a rebate of 25% of the cost of solar panels and a mechanism to accelerate the asset’s write-off in the first year.
Total rooftop solar capacity has increased to more than 4,000MW, which also contributed to reduced load-shedding over the winter period. Appropriate incentives to ensure that households and businesses feed power into the grid are a necessary prerequisite. A draft net-billing framework has been developed to standardise net billing across municipalities and is awaiting Nersa approval. Similarly, the government will soon publish a wheeling framework enabling businesses to sell electricity to the grid.
We require appropriate enablers to broaden the participation rate for household solar among poorer households. I have asserted that opportunity cannot be wasted in a crisis. We have partnered with merSeta and financial institutions towards financing the rollout of solar panels for low-income households, replacing electric geysers with solar and training accredited installers. This initiative concerns our work towards identifying the intersection of social and market interests.
From a market reform perspective, the National Transmission Company of South Africa is being established as an independent entity tasked with managing the national grid. This will ensure that the grid remains publicly owned while levelling the playing field for increased private sector participation in generation. The Electricity Regulation Amendment (ERA) Bill was tabled in parliament on July 20 and will establish a competitive market among multiple generators.
The 2019 Integrated Resource Plan is being updated to consider changes in the EAF and to consider the efficiency of various technologies. This will provide an indicative, forward-looking plan to guide South Africa’s optimal energy mix. We must be able to continuously demonstrate progress on the Energy Action Plan and ensure energy security not only for South Africa but also for her neighbours, ensuring regional energy sovereignty. While we achieve this, despite the great strides made by the democratic government, it is important that we don’t lose sight of guaranteeing universal access to electricity for all.
Ramokgopa is minister in the Presidency for electricity
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