South Africa’s energy sector is facing uncertainty and turmoil, which appears to be directly related to the current political crisis the country is dealing with.
Eskom’s Brian Molefe featured prominently in Public Protector Thuli Madonsela’s State of Capture report, which investigated the influence the Gupta family has on the president, a number of ministers and state-owned enterprises (SOEs). Molefe has since fallen on his sword and will be leaving the utility at the end of December, and Madonsela has left the office of the Public Protector after her term ended.
However, the State of Capture report remains a political football being kicked around and Eskom appears intent on pursuing nuclear energy, despite department of energy (DOE) policy delaying the need for nuclear to 2037. Other academic studies have pushed this back as far as 2040, or suggested nuclear is not needed at all.
Critics believe factions of government are pushing the nuclear programme, which is expected to cost billions, as it will provide opportunities for enrichment similar to the arms deal.
The power utility’s head of generation, Matshela Koko, who has been appointed as acting CEO to replace Molefe, has made public statements that suggest nothing has changed in Eskom’s hunger for nuclear.
Although he has stated that the parastatal is not “married” to nuclear, he has insisted that Eskom will continue to pursue it and that the power utility could pay for the nuclear build programme from its own cash reserves. He stated that this would amount to R150bn in 10 years’ time.
Global expansion of renewables
However, while Eskom advocates for nuclear, globally investment is shifting to renewable energy sources, which are growing at a rapid pace.
In 2010 there were 10 gigawatts (GW) of solar energy in the world, by 2015 there was 299GW and by 2030 there is forecast to be 30 000GW. Earlier this year, The Guardian reported that 147GW of renewable energy had come online in 2015, the largest annual increase ever.
Clean energy investment increased to $286bn, more than twice that of spending on coal- and gas-fired power generation. Solar energy accounted for 56% of the total and wind power for 38%.
In South Africa, over R200bn has been invested in the renewable energy sector in the last few years, says Jesse Burton from the Energy Research Centre at the University of Cape Town.
“It’s a sector that is growing in an economy that is hardly growing at all,” says Burton. According to her there has been a large decrease in costs of delivering renewable energy in the last few years and insists that renewable energy is now competitive with coal generation. “Not just Eskom coal, but with private sector coal,” she adds.
The total SA energy system is between 40GW and 44GW, with renewable energy currently contributing 2GW of this, with another 4GW commissioned but not yet online.
However, some projects have been sitting in limbo for more than six months as Eskom refuses to sign the power purchase agreements with commissioned independent renewable energy projects.
Burton describes Eskom as the “veto player”.
“Eskom is integral to the energy system in South Africa and it’s in their interests not to let Independent Power Producers (IPPs) into the system,” she says.
Burton says this is all interwoven with the politics of the nuclear deal.
Says Solar Capital’s chairperson, Paschal Phelan: “We set the standard for the world in how to procure renewable energy.
“Now we are playing silly games and missing the opportunity. We are going from being leaders to being also-rans.”
Solar Capital has two solar energy plants in De Aar with 132kV Eskom lines traversing the sites; one is 282 hectares and the other 191 hectares.
Delays hurt renewable sector
Momentus Energy plays in both the wind and solar sectors and was one of the first companies to benefit from the DOE’s IPP programme.
It built RustMo1 Solar Farm, a 7MW solar photovoltaic (PV) power generation facility located at Buffelspoort, which is 22km outside Rustenburg in the North West.
Momentus Energy managing director Gareth Warner says the power struggle between Treasury and Eskom over the nuclear deal has had very negative consequences for the renewable sector.
Red Cap runs the Kouga wind farm, which reached commercial operation in March last year and adds 300GWh of clean renewable energy to the grid annually.
Red Cap’s Mark Tanton says the renewable industry just ignored the debate over nuclear knowing that the economics should stack the argument in their favour.
Says Phelan: “We in the industry laughed when we heard about the nuclear deal. The capital costs are outrageous.”
Government guarantee exposure to the power sector at the beginning of the current financial year sat at R368bn, which is the majority of its total exposure of R467bn.
Warner says nuclear is being considered despite the fact that costs associated with renewables have dropped to a third of what they were in round one of the IPP programme.
According to Tanton no one could have foreseen renewable costs dropping so drastically. He attributes the downward cost pressure to the European utilities “piling” into the country. “They were very bullish on South Africa. Our renewable programme was very attractive to them.
“It’s a lovely success story. But the last six months it’s been hard to keep the Europeans positive,” says Tanton.
Warner says that renewable projects awarded over a year ago in round four of the IPP programme still have not been signed off. He says this process normally only takes four to five months.
Tanton is of the opinion the repercussions of the delays will mean small players will be squeezed out of the market.
This is a shortened version of an article that originally appeared in the 15 December edition of finweek. Buy and download the magazine here.