Transitioning to a greener economy

As South Africa continues its journey of transitioning to a greener economy, the country is asking the energy sector to fast-track procurement and calls for the implementation of the 2019 Integrated Resource Plan (IRP).

By Ntombifuthi Ntuli*

The added wind energy allocation in the 2019 IRP will reduce the cost of energy, improve the country’s competitiveness and help boost the economy. The procurement of new capacity is not coming online quickly enough in order to close the short-term generation capacity gap.

Thus, the country remains short of generating capacity and outages will continue when increased winter-demand arrives. Additionally, as the country eases out of lockdown, load-shedding will once again be on the cards.

The country’s 2019 IRP outlines increased allocations for wind power, which will contribute 18% of the country’s electricity by 2030. The wind sector is happy with the apportionments of the IRP, as it is reflective of the comments we submitted during the public consultation process.

The latest plan, which maps out the energy mix for the next 10 years, envisions the nation’s electricity production capacity rising considerably by 2030. It makes provision for a significant roll-out of renewable energy and storage. According to the Minister of Mineral Resources and Energy, Gwede Mantashe, Eskom has already commenced work on a utility-scale battery storage system, which allows for a more diverse energy mix.

The South African Wind Energy Association (SAWEA) sees energy constraints as a clear symptom of Eskom’s reduced energy availability factor and a reminder that the country needs to procure new generation capacity, expecially in light of government’s decommissioning plan for ageing coal power stations.

Earlier this year, President Cyril Ramaphosa actively prioritised regaining investor confidence and specifically set an investment growth target of R1 trillion over the next five years, which the Renewable Energy Independent Power Producer Procurement Programme will help deliver.

We now await the promised Ministerial Determination and a clear timeline to kick-start increased renewable power generation to give effect to the 2019 IRP. But this is only the first step in delivering new power into the grid.

Thereafter, the industry will wait for an RFP (request for proposal), the announcement of preferred bidders, and the financial closure period (which takes about 12 months), before the power purchase agreements are signed. Thereafter, construction can commence, with new projects reaching commercial operation within 18 to 24 months.

Decentralisation offers new opportunities

SAWEA sees municipalities being allowed to procure from independent power producers (IPPs) as a game changer. An announcement by Mantashe in early May has gazetted for public input the draft amendments to the Electricity Regulations on New Generation Capacity. This gives effect to Ramaphosa’s 2020 SONA announcement that municipalities in good financial standing will be enabled to develop or procure their own power generation.

To shift away from a centralised monopoly to a more efficient decentralised generation model will increase competition and drive down energy prices, which will ultimately stimulate the economy and support the growth that South Africa is seeking.

With private sector participation in the energy generation business, where municipalities and large-scale private power users can purchase power directly from IPPs, the benefit of introducing competition into the electricity generation market will naturally result in price reductions, while increasing generation capacity.

We need the market to be opened for IPPs to be able to supply electricity to the private sector. Private renewable energy producers can supply electricity to intensive users at a rate of 25% less than Eskom mega-flex tariffs – this includes municipalities.

*Ntombifuthi Ntuli is the CEO of the South African Wind Energy Association (SAWEA).