Introduction

South Africa’s well-documented electricity crisis is a binding constraint on economic growth and solving power supply challenges is one of the key interventions needed for faster, more sustainable and inclusive economic growth.

Ageing power stations and underinvestment in maintenance, compounded by years of corruption and maladministration at State-owned power utility Eskom, have weakened the electricity system, resulting in debilitating load-shedding that has become the default in managing grid stability when demand exceeds supply. Plant availability, as evidenced by the energy availability factor has fallen to 62%, against a target of 70% (Eskom, 2022). At the same time, electricity prices have increased by 175% over the past decade, which, combined with unreliable supply, has constrained economic growth as customers lower their demand and adopt alternative sources of power (Nersa, 2021).

The Council for Scientific and Industrial Research (CSIR) has published data that show 2020 and 2021 were the worst years on record for load-shedding. According to a 2020 report by the CSIR, load-shedding is estimated to have cost the economy between R60-billion and R120-billion in 2019, when the country experienced 530 hours of outages, amounting to 1 353 GWh. The total economic impact of load-shedding over the past ten years could be as high as R338-billion (Wright & Calitz, 2020).

Government acknowledges that power constraints must be addressed, with several policy interventions and new energy generation projects set to come on line over the next few years to close a capacity shortfall that is estimated to be between 4 000 MW and 6 000 MW.

New energy generation projects to come on line:

• More than 500 MW from the remaining projects in Bid Window 4 of the Renewable

Energy Independent Power Producer Procurement Programme (REIPPPP), which are, for the most part, complete.

• 2 600 MW from Bid Window 5 of the REIPPPP, for which the preferred bidders were announced in 2021.

• Up to 800 MW from the Risk Mitigation Independent Power Producer Procurement

Programme projects that are ready to proceed.

• 2 600 MW from the soon-to-be-opened Bid Window 6 of the REIPPPP.

• 3 000 MW of gas power and 500 MW of battery storage, for which requests for proposals will be released in 2022.

• An estimated 4 000 MW from embedded generation projects in the mining sector.

• About 1 400 MW currently in the process of being secured by various municipalities.

Source: Ramaphosa, 2022

Introduction

Business Leadership South Africa has called for the accelerated procurement of additional electricity from independent power producers (IPPs), potentially doing away with ‘bid windows’ in favour of procuring “on an ongoing basis as the situation demands” (BLSA, 2021).

While stakeholders agree that there are no simple solutions to South Africa’s energy crisis, there is a need to identify creative, short-term measures to help better manage and stabilise the situation, while simultaneously advancing South Africa’s low-carbon, clean energy transition. South Africa has secured an initial offer of $8.50-billion (about R131-billion) to fund a just-transition to a low-carbon economy by investing in renewable energy, green hydrogen and electric vehicles (European Union, 2021).

Stabilising electricity supply will help improve business confidence, improving sentiment towards South Africa and making it more attractive to foreign and domestic investors.

The Inclusive Society Institute (ISI) met with energy experts in February 2022 to gather sectoral insight for a broader research project that will culminate in a new blueprint for economic growth and development. This report is a summary of discussions with industry participants, whose expertise pertain mostly the electricity sector, as opposed to the energy sector.