What it will take for South Africa’s ailing power utility to keep going

By David Richard Walwyn Professor of Technology Management, University of Pretoria

The chief operating officer of South Africa’s electricity utility, Eskom, warned in May that the government should urgently start building new generating capacity. He was referring to a new build programme which has existed for at least a decade.

The country’s Integrated Resource Plan of 2019, a cabinet approved document, sets out the timelines for decommissioning coal-fired power stations and adding 44GW of new capacity, including 18GW of wind energy and 8GW of solar (photovoltaic).

The country is already way behind on this programme, limping along with antique power stations and regular power cuts. Outages are a regular occurrence which are estimated to cost the country’s economy about US$1 million an hour.

South Africans are all too aware that there is an energy crisis. But in my work on energy systems and transitions, I began to ask questions about the real nature and extent of it, and how Eskom should be responding. My views are informed by Eskom’s data portal, a rich source for insights on South Africa’s complex electricity system. The portal is designed to share detailed information on electricity demand and supply. It has data on sources of energy, levels of storage and the extent of loadshedding (power cuts) on an hourly basis.

I analysed the data for demand and supply for the first half of May 2022. It revealed three main trends: demand has fallen; power cuts aren’t as big as they could be; and there’s scope to get more out of the system using renewable energy sources.

South African power supply and demand trends

The data reveals three key trends for the utility. Firstly, Eskom has dropped 6GW (about 21%) of demand within a year. This is because many non-paying customers have been disconnected and several large clients, among them industrial users like mines, are now generating their own power.

The figure below compares two days of demand, one from June 2021 and the other from May 2022. It reflects actual demand, not Eskom’s supply. The difference in demand is staggering. At this rate, South Africa simply won’t need Eskom in five years.

A graphic showing energy demand.
Energy demand from June 2021 and from May 2022. Provided by author.

The second interesting finding is that the quantity of the power cuts is small relative to the total delivered energy. Over the week 12-19 May 2022, Eskom delivered 4,271 MWh of electricity and cut 70 MWh, which is only about 1.6% of the energy generated, as shown in the image below.

I’m making this point to show that power cuts could get much worse, unless the rebuild programme begins soon. One reason that the power cuts attract high media attention is that consumers bear a disproportionate share of the energy cuts relative to Eskom’s anchor customers.

For instance, under level 4 where power cuts can last for over five hours in a day, lower end users have power for only 67% of the day – meaning 33% of their power supply is cut. But the total energy saving across the whole system is 10%. This suggests that Eskom deliberately preserves supply for its anchor customers – large industrial users and essential services – even during the power cuts.

The final issue is that Eskom could get more capacity from its pumped hydro schemes. These schemes use excess power at night to pump water to high storage dams, from which the water is released during the day to meet the higher demand during daylight hours. During the week 12-19 May, capacity utilisation of pumped hydro was only about 38%.

If there had been sufficient power during the day to refill the reservoirs, Eskom could have added 1.7 GW of generation capacity during the early evenings, making full use of the pumped hydro capacity and avoiding the need for loadshedding. That daytime power could have come from the renewable energy programme, if the Department of Mineral Resources and Energy had followed the build schedule.

Figure showing the portion of the energy supplied by solar power facilities.
Energy supplied by solar power facilities. Supplied by author.

Eskom’s options

What are the options for Eskom, apart from starting the build programme?

To answer this question, we need some basics on energy systems. South Africa has a diverse energy system. Electricity is obtained from coal (the largest source), wind, solar, hydro-electric, nuclear, diesel and imports.

Wind, solar and nuclear can’t be controlled by the operator. Gas, hydro-electric, pumped hydro and diesel can. Coal is somewhere in between the two. Eskom’s role as the system operator is to blend all the sources to match the demand.

The difficulty is that both demand and supply are variable, as shown for solar in the image above. It is akin to managing a catering event when you have no idea how many guests will be there or how many meals will be delivered.

So, Eskom follows some simple rules (like other energy system operators). The rules are first to use sources it cannot control (wind, solar and nuclear), then add the coal power stations, and then top up with hydro-electricity and pumped hydro. And if there is still a shortfall, bring in the gas and diesel turbines.

The most obvious solution to Eskom’s immediate problem is two-fold:

  • bring in more renewable energy, especially wind and solar, of the independent power producers procurement programme
  • make more use of pumped hydro by using any sources of additional low-cost power, available from independent power producers and elsewhere.

This approach has already been outlined in my previous publication covering the independent power producers procurement programme. I criticised the programme’s requirement of stand-alone power producers and argued that interconnectedness of the producers would reduce cost and increase resilience in the system. It is precisely this arrangement which will provide a solution to the short-term issues within the national grid.

In the longer term, the country needs to properly implement the 2019 Integrated Resource Plan, even if it clashes with the Department of Mineral Resources and Energy’s coal, gas and oil interests. If the country doesn’t start the 2019 plan now, it will lead to the demise of Eskom as an energy producer as users are compelled to turn to other sources.

Article courtesy of The Conversation.

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The reality of SA’s electricity crisis

South Africa’s power sector is navigating an almost perfect storm of a growing electricity supply deficit, exacerbated by Eskom’s deteriorating generation because of increasingly unreliable coal plants, resulting in skyrocketing electricity prices. Together these forces are crippling the economy.

With the country emerging from a Covid-induced economic slowdown over the past two years, it is becoming clear that we have been lulled into a false sense of progress regarding the rollout of new energy generation. The stark reality of the situation is alarming, with almost weekly load shedding and the possibility of stage 8 recently mentioned by the government. We are on track to break another record for the worst year of load shedding. By Eskom’s own admission, load shedding so far for 2022 has already exceeded their predictions and is set to worsen in the months ahead.

Figure 1: Hours of load shedding from 2014 to 2021[1]

Given the delayed roll-out of the emergency power procurement plan, which was set to start a year ago and due to come online this month, Eskom has been forced to rely even more heavily on its diesel-fueled generators, at an enormous cost to the utility. South Africa also faces growing pressure to transition to clean energy to meet environmental commitments and avoid punitive international trade terms.

Key questions that need to be answered are: What has been done to address this situation? Will the current plans be enough, and how could the country accelerate the power sector’s reform?

PLANNED INTERVENTIONS: BUT ARE THESE ENOUGH?

South Africa’s successful Renewable Energy Independent Power Producer (REIPPP) programme over the past 10 years and planned reform of the power sector and transition to cleaner energy has been internationally recognised and achieved significant support.

Since 2019, the government has announced several notably bold plans, given the country’s historical reliance on Eskom’s centralised command and control of electricity supply. These have included:

  • Eskom’s unbundling and energy sector reform in September 2019 (“Roadmap for Eskom in a Reformed Electricity Supply Industry”).
  • Updated Integrated Resource Plan (IRP-2019) in October 2019, which outlined the planned electricity procurement over the next 10 years and the transition in the energy mix towards renewables.
  • Launch of Emergency Power Procurement Plan (RMIPPPP) in 2020 and announcement of RMIPPPP preferred bidders in March 2021.
  • The resurrection of the REIPPP programme, with the launch of Bid Window 5 in April 2021 and the announcement of preferred bidders in October 2021. It follows a hiatus of procurement from Independent Power Producers since Bid Window 4 was announced in 2015.
  • Government’s move to unlock private power generation and grid access by lifting the Nersa licensing threshold to 100MW in August 2021.
  • Local research and the development of green hydrogen and battery storage, technologies that are globally acknowledged as key to power generation in the future.

Over the last six months, plans by Independent Power Producers have been complicated by an international supply backlog in the equipment required to build new power plants, together with a significant increase in shipping and insurance costs.

Unfortunately, the delays and unpredictability of contracting Independent Power Producers since 2015 has almost wiped out the local supply industry, necessitating a measure of foreign-sourced procurement. However, there is optimism about re-igniting the development of the local supply sector, given the amount of renewable energy set to be rolled out over the next 10 years. 

MUCH HAS BEEN ACHIEVED ON PAPER

In theory, much has been achieved in terms of the intention to reform the energy sector and unlock new sources of electricity supply. In summary, the following steps to take electricity generation forward have been made:

  • RMIPPPP: 11 Independent Power Producers were awarded almost 2 GW of new power contracts more than 12 months ago, but only three are nearing financial close.
  • REIPPPP Round 5: 25 Independent Power Producers were awarded 2.6 GW of new power in August 2021 in the most heavily contested bid window, resulting in the lowest tariffs awarded so far in South Africa.
  • Private power generation: dozens of projects totaling some 4 GW are in the pipeline for registration to avail of the <100 MW embedded generation cap.
  • IRP 2019 has outlined the decommissioning of more than 10 GW of coal by 2030, replacing it with 31 GW of new power (incl 21 GW of renewables) over this period.
  • Eskom’s unbundling has progressed and the first step of legally separating its transmission operations into a separate company was achieved in late 2021.

THE REALITY OF THE SITUATION

Despite the ambitious plans and the initial steps taken, there is growing frustration with the glacial progress that is being made towards fully executing them. South Africa is one to two years behind the new power schedule outlined in the IRP 2019.

The first three projects under the RMIPPP programme concluded Power Purchase Agreements by Eskom in early June 2022, with financial close expected within 60 days, but most of the programme has stalled. Environmental issues and litigation plague the Karpowerships, and the pass-through of gas costs are now prohibitively expensive for Eskom. Many REIPPP Round 5 projects are struggling to close, given the significant price adjustments of engineering, procurement and construction contracts against the backdrop of the tight margins bid under the REIPPP programme. Private power projects are also struggling to meet Nersa’s stringent requirements – 18 projects have been registered, including 16 in April 2022, since lifting the licensing threshold in August 2021.

The capacity of Eskom’s national transmission grid is highly constrained in the Northern and Western Cape, limiting the potential for new projects to connect to the grid. Furthermore, the reliability of Eskom’s coal plants is rapidly deteriorating. The Energy Availability Factor (EAF) for the year to date has averaged less than 60%, and the trajectory is increasingly moving in the opposite direction to the 75% targeted EAF that was envisioned in the government’s plans under the “Roadmap for Eskom in a Reformed Electricity Supply Industry”. The increasing cost of maintaining Eskom’s aging assets, together with the huge cost over-runs and interventions to address design flaws of mega coal plants Medupi and Kusile, has driven up the real cost of electricity by more than 600% over the past 15 years.

Figure 2: Eskom average tariff vs. inflation (CPI)[2]

Note: The graph depicts overall average increases – actual increases will be different for different types of consumers (residential, commercial and industrial) and will vary between municipalities.

THE ROADMAP TO TURNING AROUND THIS DIRE SITUATION

  • We urgently need to simplify and fast track the registration of license-exempt projects (<100 MW) through better coordination between Nersa, Eskom, the Department of Mineral Resources and Energy (responsible for electricity procurement), the Department of Public Enterprises (responsible for Eskom) and National Treasury.
  • To assist Eskom, private concessions should be given to Independent Power Producers to upgrade parts of the grid network where they need to connect. Independent Power Producers could achieve cost recoveries if the wheeling fees Eskom charges for using its grid network were reduced.
  • To expedite the financial close of Round 5, consideration should be given to granting a one-off adjustment to the tariffs to help projects address the unexpected increase in equipment supply costs. Doing so would arguably be cheaper than the cost to the economy for every day of load shedding, plus the cost of running diesel generators by Eskom.
  • Instead of a new bidding process for Round 6 of the REIPPP programme, there could be an award of Power Purchase Agreements (PPAs) to the lowest range of bidders that missed the tariff cut off in Round 5.
  • Another update to the IRP is needed given the delays in project closings and performance deterioration in Eskom’s coal plants. This should include the increased allocation to electricity procurement from Independent Power Producers by municipalities in good financial standing, expected to be a growing factor in South Africa’s electricity sector reform in the years ahead.
  • A formal plan to facilitate the use of Eskom’s infrastructure by municipalities in good financial standing that wish to procure electricity directly from Independent Power Producers, and consumers who wish to sell power into the grid, would greatly assist in rolling out the decentralisation of power away from Eskom generation.
  • The updated IRP should include an increase in the speed and scale of developing additional renewables and battery storage.

EXECUTION OF THESE PLANS ARE THE KEY TO A BRIGHTER FUTURE

There is an urgent need to fast track the build-out of new power generation to minimise the reliance on Eskom’s coal plants and reduce the negative impacts of load shedding. Many positive factors support energy reform, including the extensive national grid infrastructure, significant amounts of private investment in the pipeline, South Africa’s vast natural resources, and global support for the clean energy transition.

The key issue is prioritising, coordinating and executing decisions that are primarily still on paper. We cannot afford further delays; this is a national emergency for South Africa. We need to do more, faster. However, inflexible regulatory paradigms restrict private sector investors who have the capital, expertise, and the will to make a difference. Significant capital investment is required to upgrade/strengthen the grid. It cannot be left up to Eskom alone and offers an opportunity for public-private partnerships that will ultimately lead to a brighter future for our country.


[1] Source: CSIR Energy Centre

[2] Source: https://bit.ly/3xu4KFa

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UK PACT-funded project to support 250 buildings and five SMMEs in the race to meet EPC deadline

In an effort to accelerate the uptake of energy performance certificates (EPCs) in South Africa, the Green Building Council South Africa (GBCSA) and the Carbon Trust are calling for 250 building owners and five SMMEs to participate in an EPC project funded by UK PACT (Partnering for Accelerated Climate Transitions).

Since inception of the UK PACT-funded project in March 2021, GBCSA and Carbon Trust have supported the South African National Energy Development Institute (SANEDI), and the National Department of Mineral Resources and Energy (DMRE) with implementation of a mechanism to support South Africa’s new EPC regulation that aims to drive energy disclosure within South Africa’s existing building stock.

“Climate change and sustainability continues to move up the corporate agenda with global stock exchanges (including the JSE) and investors placing ever increasing emphasis on ESG management and reporting,  EPCs could become an important part of South Africa’s national decarbonisation strategy, driving energy efficiency in buildings and ultimately aiding the just transition to a low-carbon economy,” says Jonathan Booth of the Carbon Trust.

South Africa’s EPC regulation was made effective in December 2020 with the requirement for certain types of public sector buildings greater than 1000m² and of private sector buildings greater than 2000m² to obtain an EPC within a two-year period.  

As the December 2022 deadline for obtaining an EPC looms for affected building owners, the project is shifting focus from helping to lay the EPC groundwork (read about the project’s first year here) to supporting the implementation of the mechanism. This is anticipated to accelerate the uptake of EPCs in South Africa.

The project team is now actively seeking to support building owners with EPC groundwork and SMMEs who would like to become SANAS accredited inspection bodies.

Call to support 250 building owners in obtaining EPCs

Support will be offered to 250 building owners/managers in obtaining EPCs, whose building fits the following criteria:

  • The building is older than two years with no recent major refurbishments
  • The buildings are of one of these Occupancy Classes
    • Entertainment & Public Assembly
    • Theatrical & Indoor Sport
    • Places of Instruction
    • Offices
  • A minimum of 12 months of energy data is available for the building
  • Public sector buildings greater than 1 000m2, private sector buildings greater than 2 000m2

Owners (or building/facilities managers) of the selected buildings will be provided with:

  • Introductory EPC training
  • An EPC tool to facilitate data gathering and to assist with the necessary calculations
  • Availability of an email based ‘help desk’ to provide ongoing support

If you are a building owner or manager responsible for obtaining your building’s EPC and would like to benefit from this support, sign up online here.

Call to support five SMMEs to become SANAS accredited inspection bodies

The just transition to a low-carbon future and job creation within the green economy are major imperatives both internationally and in South Africa. The EPC legislation plays its part in addressing this by supporting SMMEs involved in the fields of energy efficiency, energy management or energy auditing within the built environment to potentially attain SANAS accreditation as Inspection Bodies. The role of these Inspection Bodies is to verify the data for EPCs and to issue the EPCs.

“EPCs are a good first step for building owners to understand their impact, improve energy efficiency and eventually target net zero. While the industry is faced with several challenges, I personally am very excited about the positive job opportunities and skills in understanding a buildings energy use this regulation will create” says Lisa Reynolds, CEO of GBCSA.

Five SMMEs will be offered financial and technical support to help them obtain accreditation from SANAS as an Inspection Body able to issue EPCs.

If you are an SMME and interested in becoming a SANAS-accredited Inspection Body, apply online here.

For information around upcoming EPC training and awareness, workshops please contact info@gbcsa.org.za.

Coming soon: +IMPACT 18: UNCOVER THE A-Z OF EPCs

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Cost of petrol surges but SA lags in uptake of electric cars

In the past week, the cost of petrol nudged up against the R25 a litre mark, so South Africans can be forgiven for considering alternatives to cars that run on conventional fuel.

by Ethan van Diemen, Daily Maverick

According to a statement released by the Department of Mineral Resources and Energy, the average price of Brent crude oil had increased from $104.7 to $115 a barrel. The department said the main contributing factors were the increasing demand amid the summer driving season in the northern hemisphere and the European Union’s discussions on possible sanctions on crude oil and petroleum products from Russia.

With the petrol price seeing such a big increase and the effects of climate change already raining down on South Africa, a shift from the internal combustion engine could not come soon enough for road users.

While these are unlikely to ameliorate the more pernicious impacts and cost implications of our dependence on hydrocarbons, there are some alternatives in the pipeline, if escaping the ever-rising cost of petrol is your main concern. 

Green hydrogen

South Africa is betting big on so-called green hydrogen as a way to both grow and decarbonise hard-to-abate sectors of the economy. 

Hydrogen is the lightest and most abundant known element in the universe. It can also serve as an alternative, emissions-free transport fuel when used to power fuel cells. 

Hydrogen is considered green when it is produced using renewable electricity to split water into hydrogen and oxygen using electrolysers.

Fuel cells work by combining hydrogen and oxygen in an electrochemical process that generates electricity, with the only byproduct being water.

In a report compiled by global information consultancy IHS Markit titled “The Super H2igh Road Scenario for South Africa”, a “feasible scenario” is laid out that the country could cut its greenhouse gas emissions by 75% by 2050 if it were to take advantage of the opportunities presented by the hydrogen economy.

Business Maverick recently reported that Anglo American Platinum unveiled a prototype of the world’s largest hydrogen mine haul truck — weighing in at 220 tonnes unloaded. It can carry a load of up to 290 tonnes and it does it all without any greenhouse gas emissions. 

While this prototype offers a glimpse into a low-emissions future for mobility, having this technology widely adopted for passenger vehicle use in South Africa requires a level of investment in renewable energy generation, hydrogen production, hydrogen storage, hydrogen transportation and hydrogen refuelling sites that just does not exist at present. 

Electric mobility

Fuel cell electric vehicles (FCEV), however, are only recently emerging from the shadows of their more well-known counterparts: electric vehicles (EVs) and variants thereof. 

These vehicles, whether battery-electric, plug-in hybrid or hybrid-electric, are increasingly being adopted in the developed world where incentives and the necessary infrastructure to support these vehicles exist.

Battery-powered electric vehicles (BEVs) use lithium-ion batteries to power their operation and, like their hydrogen power counterparts, they release no greenhouse gas emissions and are less harmful to the environment when they are charged using electricity generated from renewable sources.

While perhaps the most desirable option, especially as petrol prices skyrocket, South Africans have limited options in this regard.

Trade & Industrial Policy Strategies (Tips), an independent economic research institution, in a policy brief called “Towards an inclusive rollout of electric vehicles in South Africa”, explained that “the rollout of EVs in the passenger car market is influenced by a series of factors. These range from domestic structural inequality to automotive market dynamics”.

They continued that “the number of EVs available in South Africa remains limited. The lack of local supply is particularly striking in the entry- and mid-level market segments, with most available models competing in the high-end to niche segments. Only seven BEVs were available on the local market at the end of 2021, all at the high end of the market.

“The availability of hybrid vehicles is slightly higher, with 23 HEVs and 11 PHEVs having registered at least one sale by the end of 2020. No Fuel Cell Electric Vehicle is currently on offer,” the policy brief reads.

The International Energy Agency recently released a Global EV Outlook report. Among others, it noted that “sales of electric cars (including fully electric and plug-in hybrids) doubled in 2021 to a new record of 6.6 million, with more now sold each week than in the whole of 2012”.

It showed that the number of electric cars on the world’s roads by the end of 2021 was about 16.5 million — triple the amount seen in 2018.

Solar energy

Solar-powered cars are another alternative to the internal combustion engine that seems suited to the South African environment, but is well away from being available for mass adoption as a passenger vehicle. 

The Mail & Guardian reported in February that the Tshwane University of Technology engineering and built environment faculty travelled from Pretoria to Swakopmund, Namibia, in the SunChaser 4, a solar-powered vehicle. 

“The fourth-generation solar electric car covered more than 2,153km on highways using solar panels installed on the vehicle’s flat surface,” they said at the time. 

While offering a glimpse into an alternative — albeit underexplored — means of transport, it is unlikely that South Africans are going to travel along the country’s roads in anything resembling the SunChaser in the near future.

While some of the attempts, such as the one mentioned above, are laudable, electric mobility in general is not without its issues in the South African context. 

An op-ed first published by GroundUp notes that EVs, “due to the rare earth metals of their batteries and their greater average weight, have a larger manufacturing footprint than equivalent internal combustion engine vehicles”.

Moreover, the majority of South Africa’s energy generation is powered by the carbon-intensive process of burning coal — thereby all but eliminating the environmental benefit of the vehicle’s alternative drivetrain. 

Without many FCEV options and associated infrastructure — and until and unless South Africa thoroughly reforms its electricity generation and distribution regime — electric mobility is unlikely to steer road users away from the costs and environmental implications of the internal combustion engine any time soon.

This article first appeared on Daily Maverick and is republished here under a Creative Commons license.

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“Landmark” power purchase agreements signed, but Mantashe still punts multiple energy technologies

“Leave the issue of environmental challenges to environmentalists. They will take us to court, allow us [the Department of Mineral Resources and Energy] to go to court… Eskom must not enter that space. They must take up energy. That’s it.” This was said by Minister Gwede Mantash, at the signing ceremony of the first three power purchase agreements under the RMI4P on 2 June. 

by Julia Evans, Daily Maverick

Mantashe was addressing Eskom CEO André de Ruyter, emphasising that Eskom should focus solely on energy generation, and not let environmental concerns stop it from having procurement in a range of energy technologies like gas and nuclear. The three power purchase agreements (PPAs) of the RMI4P, signed at the Independent Power Producers (IPP) offices, were dubbed “landmark projects” as they are considered to be the largest renewable projects of solar and battery combined technologies in the world. 

The Risk Mitigation Independent Power Producer Procurement Programme (RMI4P) was introduced to the market in August 2020 and aimed to close the immediate energy supply gap, as indicated in the 2019 Integrated Resource Plan, and reduce the extensive use of diesel-based peaking electrical generators in the medium to long term. 

The RMI4P had a target of procuring 2 000 megawatts (MW) of new generation capacity from different generation projects.  

Of the 11 PPAs awarded to preferred bidders in March and June 2021, three of the projects have now been signed, which saw Norwegian renewable energy company Scatec enter a 20-year agreement with Eskom to dispatch 150MW (all projects are 50MW each) to the national grid, between 5am and 9.30pm daily. 

Bernard Magoro, the head of the IPP office, called the RMI4P a “long journey” — the bid window was opened to the market in August 2020, and now, nearly a year after all the preferred bidders were announced, some of the PPAs are being signed into agreement.  

Delays can be attributed to ongoing litigation and administrative problems, such as three gas-fired projects failing to secure environmental permits to operate and red tape put up by the National Energy Regulator of SA (Nersa) delaying renewable projects. 

De Ruyter said at the signing ceremony: “This is unique technology in that for the first time we now have dispatchable renewable energy thanks to a combination of solar and batteries. 

“And this addresses one of the key challenges of renewable energy in that, typically, without storage, they are self-dispatching.” 

Jan Fourie, Scatec’s general manager for Sub-Saharan Africa, told Daily Maverick that to his company’s knowledge their project would be one of the biggest solar photovoltaic (PV) and battery projects on the planet. 

“It proves that dispatchable renewables are possible. It’s cost-effective. And it’s available today,” said Fourie. 

“So I think it takes away the argument that renewables are intermittent.” 

The “landmark” projects will be built in the Northern Cape 12-18 months after the financial close (3 August 2022) and have an installed capacity of 540MW of solar PV capacity and 1.1GWh of battery storage. 

Mantashe said that while he was excited about the contribution these projects will make, “I want a bigger contribution”, and the process of building generators needed to be reviewed and shortened to address the urgent issue of load shedding. 

“We must find a formula of cutting that process out and make it easy to do business in South Africa,” said Mantashe. 

Prices for these projects were bid at R1 884.61 per MWh – which is favourable compared to the R2 300 to R9 000 per MWh Eskom is currently paying. 

The projects have attracted R16-billion in investment and will create about 4 968 job opportunities (measured in job years) during their construction and operation. 

Anti-bribery and corruption clause 

De Ruyter said the agreements include anti-bribery and corruption clauses. 

“This is very important, of course. Eskom’s recent history has been characterised by capturing corruption, and we have therefore taken a very firm stance on this,” he said. 

“We are able to give the South African public the assurance that these agreements have been done with the very strictest standards of corporate governance and ethics. 

“I think it shows what the art of the possible is if we are all together held accountable for maintaining the highest standards of governance.” 

The benefits of renewable energy 

Terje Pilskog, the CEO of Scatec, whose company already has six renewable projects operational in South Africa said: “We believe South Africa’s abundant sun and wind resources combined with the quick turnaround of establishing renewable-based projects make for the most effective and sustainable solution to the energy risks the country is facing.” 

Pilskog illustrated the benefits of renewable energy, citing how it is cost-competitive relative to thermal energy, doesn’t experience pricing volatility like fossil fuels, is not linked to international commodity prices and is a big part of the solution of reaching commitments of the green transition and limiting global heating to 1.5 or 2°C above pre-industrial levels.  

“It has achieved its rightful status as the lower-cost, clean alternative to fossil fuels. And we should seize the opportunities that are arising as a result.” 

However, Mantashe was not sold. 

Mantashe sticks to gas and nuclear

Today, we signed power purchase agreements with 3 projects under RMIPPPP. These projects are expected to add new energy to the grid within 18 months. We did this against the backdrop of #Loadshedding which hinder on our economy & on livelihoods. #InvestInSAEnergy #InvestSA pic.twitter.com/TUgnMIvbvJ

— Gwede Mantashe (@GwedeMantashe1) June 2, 2022

In his address at the ceremony, after expressing his excitement at the Scatec projects, he emphasised that the energy mix should include several types of generation.  

“My biggest problem as a person is the polarisation of the debate among energy technologies,” said Mantashe, saying that the debate made it seem that in order for one technology to expand, another must die. 

“We need all of them. We are short of energy. We don’t have universal access to energy. So everybody must have space to grow.” 

Mantashe said the IPP office should work to get the other eight RMI4P projects signed, including resolving the problem of Karpowership (which has three approved PPAs). 

Mantashe said he had seen Karpowership and gas-to-power technology work very well in Ghana and Gabon, as well as Europe.  

“In South Africa — no. All the gas projects that have been approved are taken to court. 

“But Europe has taken a decision that gas and nuclear are part of the energy mix. In South Africa, we don’t want to touch anything.” 

Mantashe added that Europe had labelled gas and nuclear as part of the energy transition. 

He said he made this point not because he thinks one technology is better than another, but because he believes multiple energy technology solutions can coexist together and resolve the problems of load shedding and energy poverty. 

New IRP finally being revisited 

In line with his thinking that multiple energies can coexist and solve issues, Mantashe revealed that on Wednesday night his department had made the decision to revise the Integrated Resource Plan (IRP), which last came out in 2019 and details what South Africa’s energy mix should look like based on cost and social imperatives. 

He said they were revisiting it now, as a big part of the plan had been implemented and they had to revise it now to look into the future, beyond 2030. 

Mantashe’s department has faced criticism for not updating the IRP sooner, as the introduction to the 2010 IRP (the last one to come out before the 2019 IRP), states:  

“The Integrated Resource Plan (IRP) is a living plan that is expected to be continuously revised and updated as necessitated by changing circumstances. At the very least, it is expected that the IRP should be revised by the Department of Energy (DoE) every two years, resulting in a revision in 2012.”  

When asked why the IRP had taken so long to be updated, Mantashe said the previous IRP came out in 2011, so this revision was happening a lot faster and they needed time to implement the plan and assess results. 

The minister also said that revising the IRP would be a very long process, so he could not give specifics on when it would come out.

This article first appeared on Daily Maverick and is republished here under a Creative Commons license.

Green Economy Journal Issue 52

READ GREEN ECONOMY JOURNAL ISSUE 52: On page 20, a case study details the renewable energy solution modelled for a tailings processing and exploration diamond mining operation. It demonstrates the engineering and economic feasibility of various hybrid energy approaches.

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Wind energy industry celebrates new bid window for renewable procurement

The South African Wind Energy Association (SAWEA), together with the broader renewable power sector, are celebrating the Department of Mineral Resources and Energy’s (DMRE) announcement to open a new procurement round as another step towards addressing energy security and further stimulating the role of the wind sector in South Africa’s development objectives.

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South Africa’s new nuclear build programme

STATEMENT BY THE DEPUTY MINISTER OF THE DEPARTMENT OF MINERAL RESOURCES AND ENERGY, DR NOBUHLE NKABANE, NUCLEAR TECHNOLOGY IMBIZO

A very good morning and a warm welcome to all of you to this strategic event, Nuclear Technology Imbizo under the theme “Promoting Global Partnership to Support the South African New Nuclear Build Programme”.

I have been made aware that Nuclear Technology Imbizo is organised by the South African Young Nuclear Professionals Society (SAYNPS), in collaboration with Nuclear Industry Association of South Africa (NIASA), Women in Nuclear South Africa (WINSA) and Southern African Radiation Protection Society (SARPA).

Thank you for inviting me here to deliver a keynote address. Nuclear is an important issue, and a highly topical one in South Africa – for the government, parliament and the public alike. Especially at this point where, as the Department, we plan to advance towards procuring the 2500MW nuclear programme by 2024. This programme was identified as one of those supporting the Economic Reconstruction and Recovery Plan whilst ensuring security of energy supply.

In 2021 Minister Gwede Mantashe made a determination in terms of section 34 of the Electricity Regulation Act, 2006 (Act No. 4 of 2006) for the 2 500 MW of nuclear Energy to be procured. Pursuant to this, the National Energy Regulator of South Africa’s concurred with the Minister’s determination in August 2021, the concurrence came with “Suspensive Conditions” that are currently being addressed.

It is important for me to reiterate the Principle Number 3 of South Africa’s Nuclear Energy Policy, which states that “Nuclear Energy shall form part of South Africa’s strategy to mitigate climate change.” Therefore, in line with this policy principle as we embark on the consultations for the Just Energy Transition in South Africa, we recognise that nuclear plays a pivotal role as one of the clean energy sources that are needed to achieve Net-Zero Emissions by 2050.

It also important to note that the Integrated Resource Plan of 2019 indicates that the expected decommissioning of approximately 24 100MW of coal fired power plants post-2030 supports the need for additional capacity from cleaner baseload energy technologies including giving recognition to nuclear as a clean energy source.

The silence about the role of nuclear energy in the National Climate Change debate is of concern. Our policy embraces an energy mix which includes, Nuclear, Coal, Hydro, Gas, Battery Storage and Renewable energy. We follow global developments which points out the key role of nuclear energy towards global decarbonisation and there are demonstrated cases where some countries of the world are already in
compliance with the Paris Agreement on Climate Change because of increasing the capacity of nuclear in their energy mix.

Our country needs all energy sources, working side-by-side to achieve the energy security whilst we gradually transition to respond to climate change imperatives. To this end we need to extract maximum benefit from the full value chain of implementing energy projects within our country. The beneficiation of our own minerals should be exploited in full to ensure that benefits accrue for our people.

It has been proven internationally that nuclear energy provides an electricity source that our country should extensively invest in, to produce large amounts of clean electricity and to address the scourge of energy poverty whilst delivering on various socio-economic benefits such as long-term employment and positive economic impact.

According to the International Atomic Energy Agency, several countries are planning to include nuclear power for climate change mitigation in their Nationally Determined Contributions (NDCs) under the Paris Agreement. This is because the international community acknowledged that plans in NDCs are not sufficient to meet the goal of limiting the increase in average global temperature to below 2 °C pre-industrial levels.

South Africa is well endowed with nuclear capability and should align with the global consensus to recognise that nuclear power will play a critical role in mitigating climate change. Therefore, South Africa should include nuclear power and infrastructure as part of the Green Taxonomy to ensure nuclear is competitive and sustainable.

As we engage during these two days with our assessment on the “Promoting Global Partnership to Support the South African New Nuclear Build Program”, we must return to the central question of how we can demystify nuclear technology for a broader reach to ensure public’s understanding and acceptance.

We acknowledge initiatives such as Stand Up For Nuclear that play an important role to help demystify nuclear technology for a broader reach to ensure public’s understanding and acceptance.

In closing, I would like to thank all stakeholders in the nuclear industry, for their continued support of activities such as Nuclear Technology Imbizo. We certainly hope that this will not be the last time to South Africa host such event.
Thank you!

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What’s really going on with SA’s energy supply?

The National Science and Technology Forum (NSTF) Discussion Forum on Load shedding and power cuts – what is really going on?

Why load shedding is necessary

Gav Hurford, National Control Manager: System Operator, Transmission, Eskom

There are multiple layers to understanding load shedding. It begins with South Africa’s power system value chain: generation, transmission and distribution (transporting electricity to the consumer), and customer services. A centralised control is needed to keep the power system stable.

Gav Hurford: Why load shedding is necessary

In general, bulk electricity cannot be stored. It must be generated at exactly the same time it is consumed. The System Operator manages the supply/demand balance at every second.
 
There is very hierarchical control of the high voltage power system, with instructions moving top down from national control (765-132 kV) to regional control (132-66 kV) and finally local control (66-11 kV), such as municipalities. Hurford says: “There is no ‘big red button’ in the National Control Centre (NCC) that we hit to start load shedding. It’s a lot more systematic than that.”

South Africa’s NCC operates parts of the network in Swaziland and parts of the network in Mozambique. Hurford says there are plans to make the NCC a separate entity outside of Eskom.

National Control Centre and the supply/demand balance of 50Hz

The System Operator is part of the NCC and the NCC is responsible for the overall wellbeing and real-time operation of the entire power system. In general, this means:

  • Dispatching available generators to meet demand or reducing demand to match the available generation (eg load shedding). If there’s too much demand and not enough power generation, the whole system starts to slow down ie the frequency starts to drop. This puts the network in jeopardy. Typically the network should run at 50Hz or close to it. Hurford says that this supply/demand balance of 50Hz relates to the generators’ mechanical capabilities. South Africa’s large coal-fired generators must remain running at or close to 50Hz.
  • Managing maintenance outages of the vast transmission network. The South African network is interconnected from Cape Town up to the Democratic Republic of Congo, and from Namibia across to Maputo. These all run at the same frequency of 50Hz. The bigger the grid, the more stable it tends to be. However, it also means the countries are “locked in and share the same fate”, says Hurford. South Africa’s Eskom operates the largest system. According to the 2019/2020 Southern African Power Pool (SAPP) statistics (sapp.co.zw), the maximum demand was 38 897 MW. Next highest was Zambia with 2 237 MW. It’s clear that South Africa won’t receive a lot of help from its neighbours.
  • Controlling the power system to maintain stability.
  • Overseeing the safety of people and plants.
     

Eskom’s generation responsibilities

Source: ‘Why load shedding is necessary’

  • Brown rows: owned by Eskom.
  • Green rows: the two Independent Power Producers (IPP) and these are open cycle gas turbines (OCGT) which burn diesel.
  • Grey rows: renewables that have been added to the power grid since 2015 (about 560 MW). The bulk of these are wind generation, solar PV (photo voltaic, like solar panels) and CSP (concentrated solar power).

Hurford says that South Africa already has significant amounts of renewable energy (RE) on the grid. Typically, during the week there is a contribution of 12% and there have been contributions of over 20%.

Grid Code and maintaining the 50Hz supply/demand balance

The South African power industry is governed by the Grid Code, a National Energy Regulator of South Africa (NERSA) suite of documents. It lays out what licensees (participants in the power system) can and can’t do, what is expected of them technically, and what to do to maintain the stability of the power system. It includes what to do in a power crisis.
 
The frequency of the power system needs to stay within 49Hz and 50.1Hz. In that range, generators should operate continuously. Grid Code Level 1 restrictions occur when the frequency drops by 0.5Hz (49Hz-48.5Hz). A large generator only tolerates this for about 80 minutes over its lifetime of 30 years.
 
Automatic tripping starts at Level 2 (48.5Hz-48Hz). Here the lifetime tolerance is about 10 minutes, operating for one minute in this range. Each consequent level shows a 0.5Hz drop with automatic tripping after a very short time.
 
Below 47.5 Hz it becomes chaotic, says Hurford. Generators will then automatically trip off to protect themselves and there will be a cascading situation. As more generators trip off, there is less capacity available to supply the demand and the frequency drops even further. This results in the tripping of every generator connected to the power system and a national blackout. (Note that there are other causes for large and national blackouts beyond lack of generation capacity, including faults on the transmission system.)

To maintain the supply/demand balance, Eskom uses a range of options:

  • During normal system operations. The base load power and self-dispatched generation comes from nuclear, coal, IPPs, and Eskom’s RE.
  • As demand increases within normal system operations. Eskom uses more RE. There are also various products. Examples include specific customers switching off their plant or part of a plant, as well as contractual agreements where Eskom can interrupt demand. The benefit of these products is rapid response. (It’s quite a slow process to ramp up a large coal fire station – about 8 MW per minute – for example.)
  • At highest peak during normal system operations. There is a country response with calls to reduce load ie the ‘power alert’. Hurford says that the public does respond and the impact can be significant. “We can get about 275 MW response if we haven’t shed for a while,” he says.
  • System Emergency. This is declared in terms of the National Code of Practice (NRS048-9). It’s a document adopted by industry and approved by NERSA. It sets out a systematic way of load shedding, from the System Operator declaring a system emergency to load shedding stages and further. The third edition is currently being developed. The guiding principle of NRS048-9 is that all participants be treated equitably. This does involve ensuring essential services meet criteria, like hospitals having back-up generators. NRS048-9 allows for very specific circumstances – if something critical is happening – where power is not interrupted.
  • After System Emergency. There is large customer and international load curtailment, scheduled load shedding (stages 1-8), and unscheduled load shedding. Load curtailment means load reduction from customers who can reduce demand on instruction. Load shedding is load reduction from disconnecting the load at selected points on the transmission and distribution network.
  • Beyond stage 8 load shedding. Hurford says there are contingency plans if South Africa needs to go beyond stage 8, such as large blocks (towns and cities) dropped off the network plus more. The aim is to prevent a total power system collapse.
     

Impact of national blackouts

Planned and unplanned load shedding is part of the solution to avoid a national blackout. So far, South Africa has not had a full national blackout. However, there have been a number around the world. Hurford says the one in March 2019 in Venezuela drew many parallels with South Africa. They have a similar system and the cause was poor maintenance. Venezuela was down for around five months.
 

The impact in Venezuela included: looting, running out of water, the inability to process sewerage, people dying at hospital (no electricity for essential equipment), business interruption, the inability to keep food fresh, and much more. There was an impact on almost every single part of daily life.


There are other considerations with a national blackout. Hurford says the telecommunications backbone would fail in about eight hours. Another example is the impact on available liquid fuel. While it’s used to power so much, it also needs powered storage. Just moving around the country would become severely limited.

South Africa’s system design includes contingency plans and capabilities to deal with a blackout. There are Black Start capabilities to restart the power grid.


Understanding our emergency reserves

Emergency reserves provide a limited amount of energy and are only available for a short duration. There is also an ongoing need to replenish emergency reserves. The cycles become clearer when looking at pumped storage and open cycle gas turbines (OCGTs).

Pumped storage schemes involve water stored in an upper reservoir and then released to drive turbines that generate electricity. The water ends up in a lower reservoir. At night, excess energy allows the water to be pumped back up. It’s a 168-hour cycle so reserve power is not easily restored. Hurford says that pumped storage is about 75% efficient but offers the only viable means of storing large amounts of energy. South Africa has three pump storage stations.

South Africa has 20 OCGTs and Eskom owns 14. These cost about 10 times more than coal to run, using almost 1900 litres of diesel per minute per generator. The cost is excessive. Beyond that, it’s not even possible to move diesel fast enough to these generators.

Between pumped storage, OCGTs, and gas turbines, Eskom is able to dispatch almost 6000 MW, making up the majority of the emergency reserves.

Managing a constrained power system

“We’ve had to manage the power system very differently from the traditional way,” says Hurford. “Obviously we need to do maintenance on generators but we can’t shut them all down. We are forced to do maintenance as and when we can.”

Managing the systems involves Eskom teams doing scenario planning, looking at installed generation capacity, plant unavailability, the demand forecast, planned outages for maintenance, and potential unplanned outages. Eskom works with three scenarios at any given time. Even with this planning, the system is volatile and unreliable. It “makes giving the country certainty absolutely impossible”, says Hurford.

However, the system is continuously monitored and, where there is enough time, Eskom gives the country as much warning as possible. Note that Eskom is fully mandated to do whatever is required to get the power system stable even if there’s no time to give a warning. Hurford says he knows there’s anger around load shedding and consumers have a right to be angry. He also hopes that understanding the situation in more detail will ease the frustration.

What happened? Load shedding in South Africa and how to fix it

Dr Jarrad Wright, National Renewable Energy Laboratory (NREL), USA

Dr Jarrad Wright: What happened? Load shedding in SA and how to fix it


South Africa’s power system is in crisis with urgent action needed to ensure system adequacy while simultaneously creating a cleaner and more diversified long-term energy mix. So says Dr Jarrad Wright when he presented on ‘What happened? Loadshedding in South Africa and how to fix it’. He was, until recently, at the Council for Scientific and Industrial Research (CSIR) and is now at the National Renewable Energy Laboratory (NREL) in the USA.

Wright says there is a worrying trend of a continuous increase in load shedding. There has also been a shift from equal levels of planned maintenance and unplanned outages in 2017 to more unplanned outages at higher levels as the years progress. This means there’s limited space to do planned outages and maintenance. He says, “There is still a lot that needs to come into play until we get an adequate power system over the next two to three years.”
 
To reduce load shedding and increase power generation, his recommendations include enabling regulations and institutional capacity for customer response at scale (power self-supply) to all customer segments. Wright says South Africa also needs to accelerate the augmented Department of Mineral Resources and Energy (DMRE) Risk Mitigation Power Procurement Programme. All things need to be done in parallel including implementing the Integrated Resource Plan (IRP) 2019 now. This is so there is sufficient time for lengthy procurement processes, technology specific lead times, and so on.

The case for renewable energy

Professor Frik van Niekerk: A compelling case for fast-tracking renewable energy in SA and the region

Prof Frik Van Niekerk noted that we have a growing population and a growing energy need. At the same time, there is an unreliable energy supply and the burden of the climate crisis. The current renewable energy (RE) use is too low and he says our future planning is insufficient. Van Niekerk presented on ‘A compelling case for fast tracking variable renewable energy in South Africa and the region’. He is from the Unit for Energy and Technology Systems, Faculty of Engineering, North-West University.
 
Van Niekerk says that we need a strategy to accelerate the green energy trajectory. He recommends deregulating and deploying RE of which there is an abundance in South Africa and Africa, ensuring a fair energy transition, and recognising the lowered cost of RE and storage technologies.
 

Dr Melanie Murcott: Ending SA’s reliance on energy from coal


Dr Melanie Murcott also spoke on the just energy transition in ‘Ending South Africa’s reliance on energy from coal? An introduction to the policy framework for South Africa’s Just Energy Transition’. She is from the Department of Public Law, Faculty of Law, University of Pretoria.
 
She notes that it’s a false binary to pit concern for the environment against employment. The energy landscape in South Africa must transition, not just because of loadshedding. In a time of climate change, fossil fuel-driven energy is a justice issue, particularly for vulnerable and disadvantaged communities. (Note that according to World Bank data, South Africa is the 13th highest greenhouse gas emitter in the world.)
 

Tommy Garner: The perspective of independent power producers


Tommy Garner presented on ‘The perspective of independent power producers’. He is Business Development Manager at Earth and Wire, and the Chair of the Independent Power Producers (IPP) Association. Garner notes that Eskom operates an ageing generation fleet, with more than half of the stations over 37 years old. Replacement and refurbishment of major components mean extensive outage time and is costly.
 
He says the significant increase of unplanned outages over time shows the low reliability. “You don’t know when it’s going to break down,” says Garner. This makes it difficult to plan for maintenance.
 

Obstacles to renewable energy

Van Niekerk looks at what is holding us back from more RE. He says that IRP2019 still has too much coal in the energy mix and the idea of ‘new coal’ should be avoided. IRP2019 isn’t ambitious enough and there’s insufficient attention to storage. Deregulation is needed, as well as a more distributed small-scale generation rather than just a centralised system. He emphasises more urgency around RE, including prioritising it within the highest offices of government.
 
He doesn’t believe the problem to be technological but rather around political considerations. These include Eskom debt liability, labour politics, gate keeping, and procurement issues. Garner agrees with him.
 
Garner explains that when new technology gets to the point of lower costs, this drives more demand in the RE sector. (RE costs are now up to 45 times cheaper over the last 10 years while coal, nuclear and carbon capture are not reducing in cost.)
 
With more demand in the sector comes more production investment and more supply – which in turn drives lower costs. This feedback loop continues, with more infrastructure investment and more government support. This then drives better capability and more public acceptance. It also drives less demand of older technology.
 
Garner says that this was happening in 2010 when government added RE into the energy mix. There was also investment in the IPP office, and the Renewable Energy and Energy Efficiency Partnership (REEEP) programmes were very successful.

However, in 2014, these positive causal feedback loops came to a halt. As part of state capture and the Gupta family intervening in Eskom, government supported the fossil fuel industry, says Garner. Agreements for REEEP weren’t signed and the programme started to fall over. There was less infrastructure investment and less government support in RE. Garner says this also led to IRP2019 including coal.
 
All of this has resulted in a stop-and-start process.
 
Garner says South Africa needs between three to five times our current generation capacity with variable renewable energy (VRE) and between 35-90 hrs of battery storage. We can then go to a complete VRE system.

Hurford does note that, when planning power grids, we need to keep in mind the ‘one in 10 year’ event where there is no wind or sun to maintain stability of the network

Garner recommends updating IRP2019, especially regarding battery storage, prioritising investment in grid infrastructure, and government pushing through the unbundling of Eskom and supporting RE and IPP, among other things. He also sees deregulation as a significant driver.

Professor Roula Inglesi-Lotz: The impact of electtricity shortage on SA’s economy

Prof Roula Inglesi-Lotz, South African Association for Energy Economics (SAAEE) and Department of Economics, University of Pretoria (UP) presented on ‘The impact of electricity shortage on South Africa’s economy’. Among other things, she shows the effects of electricity supply on attracting Foreign Direct Investment and the need to stabilise the energy supply.

Professor Xiaohua Xia: Go Solar

Prof Xiaohua Xia from the Department of Electrical, Electronic and Computer Engineering, University of Pretoria (UP) and Director: Centre for New Energy Systems, UP presented on ‘Go solar’. He looked at an off-grid PV system that is being piloted at the university, suitable for rural and urban environments.

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Minister Gwede Mantashe: Debate on the State of the Nation Address

15 Feb 2022

Remarks by the Honourable Minister of Mineral Resources and Energy Mr Samson Gwede Mantashe on the occasion of the SONA Debate, 15 February 2022

Speaker of the National Assembly, Ms Nosiviwe Mapisa-Nqakula,
Chairperson of the National Council of Provinces, Mr Amos Masondo,
The President of the Republic, His Excellency, Cyril Matamela Ramaphosa,
Deputy President of the Republic, His Excellency, David Mabuza, Honourable Members of Parliament

Yesterday, we were honoured by a right-wing blue party asking for our heads instead of focusing on our ability to execute. All this did, was to confirm that we must work harder and that we are on the right track to the irritation of the DA.

The reality is that the Blue Party is trapped in the polarised energy debate and fail to listen to free intellectual advice they get.

An economist Chris Hart cautioned that shutting down coal fired power stations “will mean costlier electricity, fewer jobs and a country with a quasi-third-world economy being relegated to the fourth-world division”.

John Kane-Berman, a former CEO of IRR, asserted that “Mantashe is right, and the DA is wrong” referring to SA nuclear and coal contributions. He described Mr Mileham as “out of touch”.


Hence our support for a just transition instead of a pendulum swing from coal to renewables that is unworkable. The Just Energy Transition means, we have a duty to travel through a journey from high carbon emissions to low carbon emissions.

The President informed the Joint Sitting of our steps to quickly instal additional electricity generation capacity to close the current shortfall of about 4 000 megawatts of electricity.

We are implementing the Integrated Resource Plan (IRP) 2019 and driving required policy reforms to increase investment in and ascertain energy security of supply.

We have since amended and gazetted the Electricity Regulation Act and the Electricity Pricing Policy for public comments. These amendments are aimed at reviving the ISMO Bill,

First, enabling the creation of a non-discriminatory and competitive power trading platform on a willing buyer-willing seller basis, and drive affordability through fair competition.

Second, establishing an Independent Transmission System and Market Operator which will enable a competitive market for electricity generation in the country.

This legislation passed the scrutiny of parliament in 2013 but had to be shelved as there was no established market that would trade at the time.

Next month, and in April, we will conclude the power purchase agreements for: 

  • the two thousand megawatts (2 000MW) Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP). The challenge is that, not all of the RMIPPPP preferred bidder projects may be in a position to conclude power purchase agreements due to outstanding processes on their side.
  • two thousand six hundred megawatts (2 600 MW) from the renewable energy, Bid Window 5, for which preferred bidders were announced by the end of October 2021. 


In addition, 

  • at the end of March, we will issue a request for proposals for two thousand six hundred megawatts (2 600 MW) from renewable energy, Bid Window 6. 
  • in April, there will be a request for proposals for five hundred and thirteen megawatts (513 MW) from battery storage.


Thereafter, additional bid windows, including bid window 7, will follow at six-month intervals.

The IRP 2019 provides for gas as a transition fuel to support large penetration of renewable energy into the grid. It also provides for cleaner coal technologies and nuclear for sustaining some level of baseload power, necessary for power system stability. It is comforting to see that there is now growing global consensus on the role of gas and nuclear in the energy transition. The European Union has labelled these technologies as part of the green transition.

Recently, through the Central Energy Fund, working with Transnet and Coega Development Corporation, a request for proposals for a gas aggregator was issued. This will enable us to secure the liquified natural gas necessary for the gas-to-power generation, for which a request for proposals will be issued towards the end of the year. Through this, conversion of existing generation facilities in the Eastern Cape, currently running on expensive diesel, will be realised.

We are addressing the suspensive conditions from the Energy Regulator (NERSA) before we can issue a request for proposal for the two thousand five hundred megawatts (2 500MW) of nuclear energy.

Notably, there is no immediate solution to our energy shortage challenges. Energy projects have long lead times. We must be systematic in our approach and appreciate that it will be a little while before these initiatives impact the economy.

We urgently need to meaningfully establish the Upstream Petroleum Industry to support economic growth and meet our energy needs. The Upstream Petroleum Development Bill before Parliament seeks a systematic and orderly exploration and exploitation of our oil and gas resources, doing so in accordance with Section 24 of the Constitution.

We should pay attention to the developments between Western countries and the Russian Federation on the Ukraine matter, in so far as it impacts crude oil prices. This could result in huge increases in fuel prices globally and negatively affect local consumers and transport users.

This highlights the ill-informed clamour against oil exploration on our coastal lines by both ENI and Shell. Both have since discovered oil in Namibia and Ivory Coast after being booted out by environmental lobbies.

Related is the greed and arrogance of certain petroleum entities that want to shut local refineries and import the product, something that will cause job losses to our people, cost our economy dearly, and lead to uncertainty of supply. For our national and economic security, we are taking drastic measures in this regard.

Energy security is critical for economic reconstruction and recovery, particularly for a developing economy like ours, that seeks to industrialise.

Honourable Members

We must address energy poverty at the same time as the transition from high carbon emissions to low carbon emissions.

We remain committed to our global commitments towards net zero emissions to mitigate against global warming. Between now and 2030, the largest allocation for additional energy generation is towards cleaner energy sources.

Lobbyist of all kinds, with unspecified incentives, seek to entice our country to jettison our present energy sources overnight. Doing so is detrimental to our economy, our industrialisation, and our global competitiveness. Notably, in Glasgow, developed and developing countries committed phasing down to net zero emissions in 2050, 2060 and even 2070. Critically, everyone of the industrialised countries continue to use fossil fuels, in the form of coal and gas.

We should be wary of being used as guinea pigs for costly technologies by developed economies, as it has been for centuries. Our country also needs technological innovation and advance and skills upgrade for our people. Therefore, where appropriate, global partnerships should be pursued.

Our own Council for Geo-Science (CGS) is collaborating with the World Bank to experiment on the Carbon Capture Utilization and Storage (CCUS) research. Success in this regard will mean continued exploitation of our coal resources for energy security, jobs, skills and technology development, and low carbon emissions.

South Africa must explore, prospect, and manufacture its mineral resources to be a global competitor and supplier in the bourgeoning global Green Hydrogen and Battery Storage markets.

We possess the world’s largest high-grade resources in, at least, six key commodities that play a critical role in the global hydrogen and energy storage sector. These are vanadium, platinum, palladium, nickel, manganese, rare earths, copper, and cobalt.

Support for the development of the local green hydrogen and battery storage sectors, working with Science and Technology, other departments, the private sector, and global partners, is key for us.

Our draft exploration strategy, presently in Cabinet processes, aims to take advantage of this and drive investments into the future demand of these minerals, for the just energy transition.

Let me conclude by welcoming the work underway in Transnet to improve operational efficiencies at the ports. Mining relies heavily on efficient railways and ports for their export logistics.

I thank you.

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The DBSA: developing development

Gordon Brown, GreenEconomy.Media, caught up with Lungile Tom, Development Bank of Southern Africa, to determine how the Bank keeps on compounding its success as well the success of so many, many others – while making an immense difference to this nation.

GB: What role has Development Bank of South Africa (DBSA) played in support of the DMRE’s procurement programmes?

LT: DBSA was instrumental in supporting the IPP office (the agency designated with implementing and rolling out procurement programmes on behalf of the DMRE) at inception. We provided the seed capital for the establishment of the IPP office. Since then, DBSA has continued to support the initiatives of the IPP office.

DBSA has supported several projects that bid in the early and subsequent rounds of the procurement programmes, by providing senior and mezzanine debt, and most importantly for the Bank, in focussing on funding the BEE component.

The DMRE programmes seek to address multiple economic development imperatives through the various bidding rounds, and these align perfectly with the mandate and objectives of DBSA.

We assist many black equity partners, including black women-owned entities, with BEE funding, which enables them to take stakes in the IPP projects. This support extends to local community trusts in the form of equity funding.

While this is a high-risk category, we have managed the risk and achieved success with these categories of funding from as early as Bid Window One (BW1) through to BW4, as well as round five and in the risk mitigation programme.

DBSA was very pleased that several bidders we supported in the RMIPPPP were successful in being named preferred bidders.

Let’s unpack this word “support”. As a development finance institute (DFI), I assume your support speaks to a more favourable set of lending terms than what may be available from commercial banks? For example, aspiring black energy entrepreneurs who would not necessarily be able to raise an equity portion off their own balance sheets can apply to DBSA for funding, and would qualify for assistance?

Absolutely. From a BEE perspective, the pricing of that debt is very competitive when compared to what certain other institutions charge. We provide finance to BEEs on a limited recourse basis. We can offer these because we are comfortable with the revenues being generated in the underlying project.

The strength of the underlying project allows us to take a position and provide debt financing to that BEE entrepreneur, at a competitive level, compared to other BEE funding instruments, such as preference shares, which are more costly to the BEE entrepreneur. This is DBSA’s competitive edge.

Recourse versus limited recourse versus non-recourse funding. What are the points of relaxation between these different categories of funding?

In this space, the funding that you find is “limited recourse” financing. We rely solely on the value of the underlying project and not on the lender’s balance sheets. These are the key principles of project finance, and BEE is financed on a project finance basis.

In the context of the REIPPPP and of the renewable energy sector generally; what role does DBSA play within the broader value chain?

This speaks to the activities of the DBSA and how we are structured as an organisation. We have divisions, with some units that work solely on providing planning services and assistance to various state organs, such as municipalities and other institutions.

In this context, we move on from planning to project preparation, where we become greatly involved, and indeed instrumental, in supporting projects to reach bankable feasibility stage. At this stage, we can open the project to other funders. We carry a project through to the stage that other funders come in. And we provide this project support within South Africa as well as to the rest of the continent.

Key criteria within projects are seldom aligned. They are quite specific to country and sector, requiring specialised project preparation work.

Our space primarily deals with project finance, and these are bankable projects ready to be financed, but as indicated we do have a division focused on project preparation.

We also fund municipalities and state-owned companies, so the nature of the finance depends on the structuring of that project or financial need. Once projects are funded, we continue to oversee the operations, maintenance, and support the monitoring of outcomes of whatever infrastructure project it would be.

The municipalities form the biggest chunk of our business, as the DFI. We already provide capacity and bulk infrastructure support. Adding another layer of EGIP funding shows how involved we have become in the entire municipal value chain.

Specific to the REIP, and even more specific to wind energy projects, how would you define DBSA’s role? What percentage of your portfolio is allocated to renewable energy and/or wind?

Subject to correction, of our energy portfolio, renewable energy is approximately 42%. I would say wind projects account for 10% of the 42%.

We see growth in the renewable energy sector in South Africa aligned with the integrated resource plan (IRP). As DBSA’s mandate is to facilitate the IRP, we see our portfolio of renewable energy projects projected to grow to approximately 50% of our total portfolio, with wind projects likely to account for 15 to 20%. This is a projection, and it will ultimately be driven by the market and availability of projects under development in South Africa and Africa.

DBSA is accredited by international organisations like the GCF and the GEF? How does this enable the Bank to fulfil its mandate in the region?

Our accreditation allows us to be more proactive in responding to market failures or gaps in the market that need to be addressed. This occurs when the private sector is unable or unwilling to provide funding for a particular investment type deemed developmentally advantageous.

We worked with GEF in the small IPP programme where we developed a programme to assist black entrepreneurs have access to adequate competitive financing into their project. Likewise, with GCF, in support of embedded generation because we saw a need for a higher level of first-class or credit enhancement in those projects. We worked with the GCF to come up with something concessional to support the bankability of those projects and to offer more affordable funding.

Let’s talk about DBSA’s support of the small embedded generation projects under the Embedded Generation Investment Programme (EGIP). I understand that the initial book is closed. Please outline the details of the programme.

The EGIP was designed to support projects in the embedded generation space. These are projects that have private off-takers in the commercial and industrial space as well as municipalities. We saw a growth in this sector and identified a need for a first-class credit enhancement in the capital structure of those projects.

We provided the credit enhancement in the form of a subordinated debt, with a higher, more competitive rate than would be offered to REIPPPP projects, improving the affordability of these projects to end-users. A facility of this nature is second ranking to senior debt, but also comes in at a cost that is concessional to the project.

Our objective is to see projects become more bankable, fully-financed and to reach financial close. We want to see this space grow. 

As we saw in BW5, the subscription level was five times the capacity bid. Nevertheless, there are many projects developed on sites with available resources and all that’s needed is an off taker. It then becomes about trying to grow that market, which in turn may allow energy users to secure their energy supply and trigger further development.

BIOGRAPHY

Lungile L Tom is Senior Investment Officer at DBSA, specifically focused on project-financed projects across various infrastructure sectors in South Africa and the rest of the Africa. Tom is a chartered accountant (CA (SA)) and a 2020/2021 Harvard South Africa Fellow. Her educational background includes Master of Philosophy (MPhil) in Development Finance.

DBSA: WINNER OF IJ GLOBAL ESG ENERGY DEAL OF THE YEAR, APAC/AFRICA The judges identified DBSA as the winner of the Sub-Saharan Africa category, recognising the DFI for its issuance of its first ever €200-million green bond to target climate mitigation, adaptation or indeed both. The green bond was issued through a private placement with French DFI Agence Française de Développement (AFD) and structured in alignment with DBSA’s Green Bond Framework, which reiterates the lender’s commitment to playing a role in the transition to a low-carbon economy. The framework is aligned with the International Capital Market Association (ICMA) Green Bond Principles.

One judge pointed to “lots of firsts in this transaction”, adding that it was “difficult not to applaud the channelling of such extensive investment into affordable and clean energy in South Africa”. Another judge added: “It is right and proper that development banks take the lead in ESG and set an example for others to follow.”

“The bonds have been structured in alignment with the DBSA’s recently released Green Bond Framework, which reiterates the DBSAs commitment to playing a role in the just transition to a low -carbon economy; this is the first green bond issuance by DBSA and the first time a South African issuer issues bonds in Euroclear France.”

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