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As Eskom flounders, political and financial logjam stalls new energy supply - experts

Dec 10 2019 14:31
Sarah Evans

As South Africa reels from persistent electricity blackouts, questions have been raised about why the Department of Energy and Eskom have not taken steps to procure new energy sources in recent years. The last round of Independent Power Producer procurements began in 2015, and Fin24 understands that the majority of those 26 projects are nearing completion and will come online soon.

But a fifth round of bidding has yet to be announced by Mineral Resources and Energy minister Gwede Mantashe, despite South Africa’s desperate need for new electricity generation.

Experts say there is nothing preventing South Africa from kicking off a new round of bidding for IPPs to supply power to the grid, from a technological point of view. But the logjam is political and financial, and largely hinges on whether or not Eskom can get its house in order.

According to SA’s latest Integrated Resource Plan (IRP), the country’s long-term energy plan, 3 754 gigawatts (GW) of renewable energy are already under construction or committed to the grid.

From 2025 to 2030, the construction of an additional 5760 GW of photovoltaic (solar) energy is expected, while 8100 GW of wind-powered electricity is similarly expected to be added to the grid.

There are two new coal projects on the horizon, expected to add 1 000 GW to the grid by 2024. However, these will likely be delayed, due to a lack of financing (most major banks will no longer fund coal as an energy source), and litigation as a result of the negative impact they are expected to have on the environment.

Niggles

An energy expert told Fin24 that will all start coming online soon, and the delays have been the result of niggles expected in a process like this, such as the closing of financial agreements.

But the reality is that with Eskom’s ageing coal-powered fleet acting unreliably, due to age and years of not being properly maintained, South Africa needs more energy, and soon.

An expert in the field, with experience in both the renewables sector and government’s own efforts to curb load shedding, told Fin24 that there will probably be no new coal coming online, despite government’s commitment to include coal in the IRP.

The IRP says Medupi and Kusile will play a "significant role in electricity generation in South Africa", and that coal is still an "integral part of the energy mix".

But the expert says that the major banks won’t fund new coal projects anymore due to climate crisis concerns, and the projects are likely to be tied up in litigation for years, even if they go ahead.

And even if all goes according to plan, a new coal plant will take up to five years to build - optimistically.

Slow motion

Bryce McCall, a researcher at the Energy Systems Research Group at the University of Cape Town's chemical engineering department, says much of the infrastructure that was in place a few years ago, in terms of renewable energy, is not there anymore. McCall adds that this infrastructure will return fairly quickly once new REIPPP bidding rounds are announced. This includes industry players who have moved elsewhere because the government dragged its feet on the latest round of IPP procurement.

But this is not insurmountable, he says, adding that there is still enough infrastructure and industry here to move forward, should Mantashe decide to kick off new energy procurement now.

Rather, he says, the problem is political. Renewable energy remains a political hotbed, he says, even though Eskom probably knows it faces an uphill battle should it try to procure new coal power.

Another industry expert with knowledge of the IRP process says Eskom cannot come on board as the "purchaser" of IPP energy now, because it doesn’t have a stable balance sheet. It therefore opens the board up to being accused of reckless trading if it cannot guarantee that it will pay the independent power producers.

McCall says that South Africa will still be vulnerable to load shedding even if new energy is procured now, because it will still be reliant on its old coal fleet for some time. If this is not properly maintained, new renewable energy will certainly help, but load shedding is unlikely to go away any time soon.

* This article has been amended to reflect that Bryce McCall is a researcher at the Energy Systems Research Group, located at the chemical engineering department at UCT. The unit was formerly known as the Energy Research Centre. 

electricity  |  energy crisis  |  eskom  |  load shedding
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