Energy

from South African Business 2022

Development finance and SMME support

Generation exemption has changed the energy landscape.

Medupi power station is one of the largest engineering projects in South Africa’s history. Credit: Eskom

In June 2021 President Cyril Ramaphosa announced that private entities could go ahead and produce electricity without a licence, raising the threshold from 1MW to 100MW at a stroke. Intensive energy users such as mining houses had been arguing for this policy initiative for a long time, as had manufacturers in the sugar and timber milling industries, which produce vast amounts of biomass which can be turned into energy.

The presidential announcement was almost universally welcomed by interested parties, including the CEO of national utility Eskom, which is struggling to keep South Africa supplied with sufficient power. Mining companies such as Sibanye-Stillwater and Gold Fields want to marshall renewable energy resources to power their own operations.

Another big game-changer in the South African energy landscape will be the unbundling of Eskom. An Independent Transmission System and Market Operator was set to be established by 31 December 2021, assuming that all the documents are signed by that date. Companies such as Earth & Wire are preparing to become independent utilities in a more flexible energy environment.

However, the move away from fossil fuels is not as straightforward as might be assumed. Despite the emphasis on renewables in South

Africa’s latest integrated resources plan (IRP), South Africa’s energy mix is still weighted towards coal. Two huge 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. Koeberg nuclear power station is due to be decommissioned soon after 2045.

The Minister of Mineral Resources and Energy, Gwede Mantashe, is a former coal miner and he has unapologetically argued the corner of the coal industry, pointing out that South Africa still has vast reserves of coal.

This fact, and the need to make what has been called a “just transition” to green energy, underpin the creation of the Presidential Climate Change Coordinating Commission (PCCCC). Led by Valli Moosa, a former minister of the environment who famously campaigned against the proliferation of shopping bags, the PCCCC aims to look beyond the jobs lost by a switch to greener energy options and consider issues such as the effects of climate change on vulnerable communities. Renewable energy development zones (REDZ) are intended to contribute to mine rehabilitation and to support a just energy transition.

SECTOR INSIGHT A green hydrogen industry could transform South Africa.

Hydrogen and hybrids

One of Earth & Wire’s projects intends producing e-methanol by combining green hydrogen with a synthesis gas. Instead of using fossil fuels to make the e-methanol, this process will be powered by renewable energy and use elements such as seawater, biomass and solid waste. ENERTRAG South Africa, with experience around the world and in partnership with Sasol, are the technical partners on the project, which will be located in Humansdorp in the Eastern Cape where a number of wind farms are situated.

South Africa’s huge reserves of platinum group metals (PGMs), allied to plentiful sun and wind, gives the country a headstart in terms of establishing a green hydrogen industry. Daily Maverick 168 ran a story at the end of July 2021 titled “Hydrogen economy may be a saviour”. The news article reported on the establishment of a R103-million PGM manufacturing facility in Gauteng by Isondo Precious Metals. The article quotes the acting chief director for Special Economic Zones (SEZs) in the Department of Trade, Industry and Competition (the dtic), Thami Klassen, welcoming the facility as it would be hosting “manufacturing processes of platinum group metal components for the fuel cell and electrolyser industries that underpin the emerging green hydrogen industry”. Production is expected to begin in the middle of 2022.

A R2-billion hydrogen fuel cell project has begun in Mpumalanga under the leadership of Mashudu Ramano, a former chairman of several companies including Astron Energy. Seed funding has been provided by the Industrial Development Corporation (IDC) and the Development Bank of Southern Africa. Anglo American is investigating the feasibility of creating a “hydrogen valley” from its PGM mine in Limpopo to the coast of KwaZulu-Natal. One of the companies involved in the study, French firm Engie, estimates that the local market for green hydrogen could be R142-billion annually by 2040, with the export market worth 10 times that (Sunday Times).

The 128MW Oya Energy Hybrid Facility being built near Matjiesfontein in the Western Cape is unusual. Falling within the Komsberg Renewable Energy Development Zone (REDZ), the project is owned by G7 renewable energies and will use a hybrid controller to dispatch power to the grid when it is needed from whichever of the technologies is producing power; wind turbines or solar PV arrays supported by lithium-ion batteries.

South Africa’s acclaimed Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) attracted about R200-billion in committed investments, mostly in solar and wind power, in just five years.

Research has shown that there will be an electricity supply gap of approximately 2 000MW between 2019 and 2022. The Oya project is part of a more recent addition to the REIPPPP, the Risk Mitigation IPP Procurement Programme.

A majority of wind projects have been allocated to the Eastern Cape, but approximately 60% of the solar projects so far allocated in the programme have been in the Northern Cape, the nation’s sunniest province. Projects such as Kathu Solar Park (100MW), a concentrating solar power (CSP) project, and the Roggeveld Wind Farm (147MW) are indicative of the large scale of most of the energy generation that is being rolled out.

Gas is also in the mix. The Department of Energy is targeting the procurement of 3 126MW and intends spending R64-billion on port, pipeline, generation and transmission infrastructure at three key ports, Richards Bay, Coega and Saldanha Bay. ■

ONLINE RESOURCES

IPP projects: www.ipp-projects.co.za National Energy Regulator of South Africa: www.nersa.org.za South African Independent Power Producers Association: www.saippa.org.za South African Wind Energy Association: www.sawea.org.za Credit: BTE Renewables

COP 26

"Partnership aims to accelerate the decarbonisation of South Africa's economy"

“South Africa welcomes the commitment made in the Political Declaration to supporting the implementation of our revised Nationally Determined Contribution, which represents our country's ambitious effort to support the global battle against climate change.

“We look forward to a long term partnership that can serve as an appropriate model of support for climate action from developed to developing countries, recognising the importance of a just transition to a low carbon, climate resilient society that promotes employment and livelihoods.” President Cyril Ramaphosa: COP26 must ensure a just transition that leaves no one behind

Subject to concurrence on the investment framework, and in line with budgetary procedures and consensus on the use of funds and terms on which finance may be provided, mobilize an initial amount of approximately $8.5 billion over the next three to five years through a combination of appropriate financial instruments, which may include but is not limited to multilateral and bilateral grants, concessional loans, guarantees, and private investments, and technical support to enable the just transition, with a view to longer-term engagement.

Source: UK News Today Nov 2021 "Net Zero emissions 2050"

South Africa is developing plans to enable a just move to net zero. Our electricity sector, which contributes 41 percent of our greenhouse-gas emissions, will be the first phase. We will be decommissioning and repurposing coal-fired power stations and investing in new, low-carbon generation capacity. We will also pursue green industrialisation opportunities such as electric vehicles and fuel cell production that stimulate job creation and economic growth.

Source: UK News Today Nov 2021

Source: Northern Cape GH2 Strategy 2021

"Launch this exciting development for the Northern Cape. "

Minister Barbara Creecy: Launch of Northern Cape Green Hydrogen Strategy and Sasol as anchor investor The new roadmap builds on what has been achieved in the past 10 years and moves us from research and development to manufacturing and commercialization. Local manufacturing of hydrogen products and components will contribute towards job creation and skills development and enhance economic transformation that will benefit the previously marginalized sectors of society, particularly women and youth, especially in a province, like the Northern Cape, which is one of the poorest in terms of demographics in South Africa. As we have heard this afternoon, the intention is to have a dedicated green grid, electrolyzer park, and green hydrogen-related Special Economic Zone to manufacture green hydrogen industry-related goods and services in the Northern Cape. We are particularly excited by this development which aligns with the DFFE’s declaration of the expanded western Strategic Energy Corridor in the Northern Cape. Over the past few years, our department undertook Strategic Environmental Assessments to identify among others renewable energy development zones (REDZ) and strategic energy corridors, in which large-scale grid infrastructure expansion could be incentivized. This was done to proactivity identify environmental sensitivities and assist in orientating infrastructure development away from areas of high environmental sensitivity, allowing for a streamlined environmental authorization process that speeds up development while maintaining the highest environmental protection. Through this process, we have heeded the call from the His Excellency President Ramaphosa to cut red tape and to halve the authorization timeframe for transmission scale electricity grid infrastructure and reduce the timeframe for electricity grid development from 7 to 3 years by allowing a pre-negotiated route to be submitted for authorization which significantly simplified the servitude negotiation process.