R60 billion worth of energy projects in the pipeline for South Africa

 ·23 Nov 2021

South African mining companies have 3,900MW of renewable energy projects worth an estimated R60 billion in the pipeline, which, if built, would relieve pressure on Eskom.

However, there are a number of red tape issues that still need to be addressed to help speed up development, the Minerals Council of South Africa said in a statement on Tuesday (23 November).

“There is a pressing need for the mining industry to supplement Eskom electricity supply,” said Minerals Council chief executive Roger Baxter.

“But the benefits extend to diversifying supply, reducing exposure to continued high increases in prices, unpredictable supply and to reduce scope 2 and 3 emissions in line with the sector’s commitment to reach a target of net-zero carbon emissions by 2050,” he said.

Baxter said Minerals Council member companies have steadily increased the number of renewable energy projects in recent months, with a 146% jump in electricity generation seen from the planned 1,600MW in 2020.

The license-free concession for embedded generation of up to 100MW was a major factor in this increase and it is probably the government’s biggest structural reform in two decades, he said.

“Renewable energy projects in the mining sector could go a long way towards easing the pressure on Eskom to the benefit of other industries and the country as a whole. These projects must be expedited through a smart tape system.

“Environmental authorisations take too long and should be materially shortened. In addition, policy issues related to wheeling charges and surplus offtake to other users are required,” he said.

Baxter added that electricity prices have increased more than six-fold over a decade and are now the second-largest cost component after salaries for deep-level and electricity-intensive mines. The renewable projects in total will account for about a third of the mining sector’s annual electricity consumption, he said.

He added the mining industry will not completely replace Eskom supply, as it needs 24-hour baseload electricity to operate mines safely, productively, and efficiently, something renewable energy sources are unable to provide now.

The sector’s 3,900 MW is purely supplemental and will not detract from critical baseload 24/7 capacity from Eskom, he said.

Red tape

Among the constraints for the mining industry in approving and building their own renewable energy projects are:

  • The 18-month environmental impact assessment requirements;
  • The lack of clarity around the use of Eskom’s transmission to wheel or send power from these plants to their mines;
  • The sale of excess power into the national grid;
  • The limited capacity of transmission lines from provinces like the Northern Cape (solar), Western Cape (wind) and Eastern Cape (wind) to supply inland provinces.

“The measures that could be employed to speed up the mining sector’s investments in renewable energy projects include the provision of emergency tax incentives, such as a s37E income tax write off equivalent, shortening environmental authorisation and Eskom related grid-tie connection processes, providing a clearer framework of wheeling on the national grid, and ensuring a shortened smart tape process,” said Baxter.

Read: South Africa risks creating ‘ghost towns’ in power shift: Eskom CEO

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