If Gwede Mantashe’s department of mineral resources & energy is looking for advice as it works on a long-overdue but critical update of South Africa’s official energy plan, there’s plenty of it going around.
The department could, for instance, follow the recommendations of the EFF and contract an armada of foreign power ships while embarking on a huge nuclear build programme with Russia’s help. Or it could make an about-turn and yield to calls for a complete shift to renewables in just one decade.
It’s more likely that, in updating its Integrated Resource Plan (IRP) — the blueprint for South Africa’s future energy mix — the department will chart its own path, as it did in 2019.
Much has changed since that update. For one, solar has been declared the cheapest source of power in history by the International Energy Agency (IEA), with wind close behind. Globally, the Russia-Ukraine war has accelerated the shift away from fossil fuels. And in South Africa, an $8.5bn climate finance deal aims to spur clean energy investments, while legislation has been introduced to allow companies and municipalities to procure their own power.
So, while the 2019 IRP projected that renewables would account for 34.3% of the electricity mix by 2030, that target now looks decidedly low to most energy system modellers.
The options
Changes to South Africa’s electricity mix are being driven largely by the urgent need to restore energy security and by the looming closures of old power plants. Of Eskom’s 15 coal-fired plants, seven will reach their end of life by 2030, and two more by 2035. By the end of 2050, only the two most recently built coal plants — Medupi and Kusile — and one unit of the Majuba plant are expected to remain operational under the country’s just transition plan.
To plug the growing supply gap, comply with air pollution regulations and meet climate targets, the just transition strategy — which is linked to the climate finance deal and is separate from the IRP — will have 50GW of new renewable capacity added to the grid by 2030, plus storage and gas facilities to ensure grid stability.
That’s more or less consistent with most energy system models run by professional bodies, says Jesse Burton, a researcher in the Energy Systems Research group at the University of Cape Town.
To achieve the optimal energy mix, South Africa should be focusing on adding solar, wind and battery storage capacity, plus a modest amount of gas for peaking and emergency purposes only, Burton tells the FM.
Solar is set to make up an increasing share of the country’s daytime power mix. That’s in line with other markets: the IEA believes solar PV panels will usurp coal as the largest source of power capacity in the world by 2027.
But solar isn’t a complete solution, as the technology is limited by cloud cover and the number of daylight hours. South Africa’s solar farms in 2021 ran at a capacity factor — energy produced vs hypothetical maximum output — of 26.4%, according to the Council for Scientific & Industrial Research (CSIR).
Wind power, on the other hand, can operate around the clock and help meet surges in electricity demand during the evenings. The country’s wind farms operated at a capacity factor of 35.8% in 2021, though some are capable of running at above 50%.
For context, the capacity factor of South Africa’s ageing coal fleet was 54.2% in 2021.
Then there’s gas, a fossil fuel that is less polluting than coal and is widely seen as necessary to cover shortfalls at peak times, or during occasional periods of unusual weather. Modelling shows that gas plants will run at capacity factors of less than 10%, says Burton, as they will be required only for a few weeks a year in aggregate.
With coal-fired power stations reaching the end of their lives, and private power generation ramping up, SA’s power system is headed for a reset
— What it means:
But this is all contested terrain. Some in the industry argue that South Africa should go all in on gas, while others say the country arrived too late to the game and should rather focus on installing a mix of short-duration lithium batteries and, say, long-duration vanadium redox flow ones. Storage facilities can be charged during the day when power supply is high and demand is low, and dispatched when households start ramping up their usage after the sun goes down.
Mikhail Nikomarov, chair of the South African Energy Storage Association and head of Bushveld Energy, argues that the country won’t need any gas in its electricity mix — at least once there’s enough generation capacity online to resolve load-shedding.
Renewables plus storage “can deliver the same services at a cheaper price”, he says, pointing to the costs of recent procurement rounds in South Africa and the conversion of gas plants to big batteries in the US.
The National Business Initiative (NBI), however, argues that the country will require both batteries and gas. Its least-cost model shows the need for 130GW of renewable energy by 2050, plus 29GW of gas and 15GW of battery storage. It says gas should be used only for peaking purposes and for system stability, rather than as an always-on baseload solution.
Standard Bank corporate and investment banking CEO Kenny Fihla also believes “gas has a role to play in expanding access to energy”. He points out that it is significantly cleaner than coal.
He sees gas as a mid-merit generation solution: it operates at a lower capacity factor than coal-fired and nuclear power plants, but at a higher factor than facilities used to meet peak demand, such as batteries.
The benefits of energy as a system-wide public good get eroded by some users being able to exit. Many South Africans could be left with a failing system. So a lot depends on whether Eskom’s generation business can turn itself around
— Jesse Burton
But all the new energy sources in the world would be dead in the water without a way to get power to those who need it. As it stands, the provinces with the best solar and wind resources in South Africa — the Western Cape, the Northern Cape and the Eastern Cape — have all but run out of grid capacity.
This means Eskom’s transmission unit has its work cut out. As part of a new debt relief deal with the National Treasury, it will have to involve private companies as it installs new power lines and substations.
Nevertheless, transmission lines can be slow to roll out due to the considerable land and servitude acquisitions that are required.
With this in mind, Eskom says it is considering turning to batteries in the meantime. Because they soak up power when there’s too much available and discharge it when supply falls, batteries are increasingly being used as transmission assets in other markets.
Burton says authorities should also focus renewable energy procurement rounds on provinces with ample grid capacity — including Mpumalanga. That should help cushion the blow as old coal mines and plants in the province reach their end of life, and if South Africa simultaneously scales up its local component manufacturing capabilities.
Cutting back on coal
Does the energy transition mean South Africa’s love affair with coal is finally over? Not quite.
Burton says it doesn’t make economic sense to build new coal plants — a point on which the CSIR, the NBI and others agree — but an accelerated coal retirement programme wouldn’t be practical either.
Eskom needs all the electrons it can get, and some coal plants still produce cheap electricity, considering that their construction costs were fully amortised long ago.
However, Burton adds, many of Eskom’s coal plants will require substantial investment to improve their performance and ensure compliance with pollution laws.
Still, as the country’s coal mines and power stations reach their end of life, power generation will gradually shift away from Eskom and towards households, businesses and private power companies. With that, the power utility will evolve into a transmission and distribution company, and a grid operator.
This is both good and bad, experts say.
“The benefits of energy as a system-wide public good get eroded by some users being able to exit,” Burton says. “Many South Africans could be left with a failing system. So a lot depends on whether Eskom’s generation business can turn itself around.”
Prof Sampson Mamphweli, head of the energy secretariat at the South African National Energy Development Institute, says that while the decentralisation of power generation will have a negative effect on Eskom’s balance sheet, the utility can generate passive revenues as private power producers transport electricity to their customers via its grid — a process known as “wheeling”.
Eskom’s system operator, meanwhile, will have to become more flexible in its approach to balancing supply and demand. If it adopts a similar approach to its peers in Australia, Europe and North America, it will hold automated auctions through the day and night, procuring the least-cost mix of power from facilities that are online and available.
Whichever route it takes, South Africa is on the brink of a fundamental reset of its power system. The eagerly awaited revision of the IRP will lay the foundation for the country’s future electricity mix — as will the decisions that South Africans are taking right now to rid themselves of load-shedding.
* This article is part of a series by news site explain.co.za on the just energy transition. Reporting in this series was made possible by funding from the African Climate Foundation
While not a panacea on its own, the adoption of rooftop solar solutions by households and businesses is expected to help to plug South Africa’s power supply gap.
Vietnam, which was also facing a power crunch several years ago, installed more than 9GW of rooftop solar in 2020 alone, thanks to an incentive programme that included generous feed-in tariffs.
Regulators are introducing similar incentives in South Africa, including tax breaks, financing schemes and formalised feed-in tariffs.
For example, Cape Town mayor Geordin Hill-Lewis recently announced that the city would soon start paying businesses and households for any excess power they generate, and other municipalities are expected to follow suit.
Australia has already shown what can be done. South Australia has periods where there is zero demand for power from the grid during the day; businesses and households are getting all their electricity from rooftop solar panels and small-scale biomass units.
The isolated Western Australia grid, meanwhile, has periods where rooftop solar alone accounts for 78% of power demand, according to data from the Australian Energy Market Operator.
However, hurdles remain. For instance, households and businesses wanting to feed power into the grid will need to first install approved bidirectional meters.
Kadri Nassiep, Cape Town’s executive director of energy, confirms that these cost about R12,000 each, but says the city is looking for cheaper alternatives.
The city might also consider offering time-of-use tariffs, he says. Experts say this would encourage households and businesses to install batteries and help meet power demand during peak hours.
Prof Sampson Mamphweli, head of the energy secretariat at the South African National Energy Development Institute, thinks an attractive feed-in tariff would be “a rand-to-rand kind of a tariff with incentives for customers feeding into the grid during peak demand”.
— Making the most of the sun
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