South Africa needs R1.2 trillion to end the energy crisis: Eskom

 ·28 Sep 2022

Eskom chief executive officer Andre de Ruyters has outlined what South Africa needs to overcome the current energy crisis, saying that the country will need to spend close to R1.2 trillion by 2030 to ensure it has enough generation, transmission and distribution capacity to meet the demand.

Presenting at the Africa Renewable Energy Investment Summit on Wednesday (28 September), the embattled Eskom chief said that renewable energy is the quickest and most cost-effective way to resolve the country’s crisis.

Compared to coal, renewable projects like wind and solar farms cost less to build, can come online in less than two years, and can ensure that the country can protect its power exports amid rising carbon tariffs.

In contrast to this, de Ruyter noted that new coal builds would come at double or even quadruple the cost, take up to 12 years to complete – which would result in even more load shedding – and would put 46% of South Africa’s exports at risk as the country would fail to decarbonise.

De Ruyter stressed that South Africa is running out of time to act. Already in 2022, one of Eskom’s coal plants is at or beyond its end-of-life status, with 1,000MW scheduled to go offline. Carbon emissions across the fleet also remain high.

By 2035, however, nine plants will be at end-of-life, with 19,000MW going offline, putting 55,000 jobs at risk. By 2050, 12 plants will be offline, pulling 33,000MW off the grid.

Eskom’s proposed solution to this is to lean heavily into renewable energy and other planned projects. By the end of 2024, de Ruyter said that most of the 33,000MW shortfall will be covered by new projects, including:

  • 3,500MW from the Seriti renewables projects
  • 1,440MW from Kusile entering full operation
  • 2,000MW from independent power producers (IPPs) on leased land
  • 3,500MW from new pumped storage
  • 1,500MW from municipal procurement
  • 2,600MW from REIPPP 5 projects
  • 5,200MW from REIPPP 6 projects
  • 7,000+MW from other projects

This energy shift is not cheap, however, with the CEO pointing out that R1.2 trillion will be needed to realise the transition.

Adding firm capacity of 7,000MW, variable capacity from renewables totalling 50,000MW and storage capacity of 10,000MW will cost approximately R990 billion to realise by 2035, he said.

Expanding and strengthening the power utility’s transmission network over 8,000km of new lines and installing 101 new substations will cost another R130 billion. Boosting the distribution capacity will add another R56 billion to the mix.

Much of Eskom will change, he said, with the group needing to repurpose its facilities, reskill its workforce and also create entirely new industries – all while decarbonising and meeting international requirements for carbon emissions.

Eskom will change

Speaking to ENCA, Intellidex analyst Peter Attard Montalto said that Eskom is going through “managed decline” – which is not a bad thing – and that the company as it exists today is not what will emerge from the energy crisis.

He said that the company will still have an important part to play in the energy landscape, but it won’t have the same role as it does now, getting smaller over time as independent energy players enter the market, and its unbundling into three entities progresses.

According to Attard Montalto, the power crisis is having devastating short-term and long-term effects on South Africa’s economy and its people. The short-term impact on GDP is that the economy is suffering seriouslosses of between R150 million and R200 million daily.

“The economy is adapting relatively well to load shedding,” he said. A few years ago, these losses were estimated at around R1 billion per stage, each day.

However, it’s the long-term impacts that are doing the most damage, he said. The energy crisis is dissuading foreign direct investment and local investment in the economy – and more companies are opting to take their money and business elsewhere to get their foot into Africa.

Acting urgently

The Minerals Council South Africa says the private sector needs to urgently assist in resolving the country’s deepening electricity crisis, noting that its members have 6,500MW of energy in the pipeline, which would help ease demand pressures on Eskom.

Last week, the government launched power purchase programmes for 1,000MW of emergency capacity from companies with existing generation capacity and to secure imports from neighbouring countries.

However, these projects are only expected to connect to the grid in October 2024, while preparations are still underway to sign with the remaining 22 preferred bidders.

The Implementation of Ramaphosa’s electricity recovery plan has been criticised as being too slow, with the renewable projects, for example, meant to have been finalised by now.

“We know load-shedding will be a risk for the next two years, and we need a supplemental supply from the private sector on stream as quickly as possible,” said Minerals Council CEO Roger Baxter.

There is still unnecessary red tape holding back the private sector’s ability to participate in South Africa’s energy generation.

“There has been encouraging progress from the government around the time it takes to register private renewable energy projects, access Eskom’s grid, and relax environmental permitting, but there are still unnecessary bottlenecks that are delaying investments,” Baxter said.

Speaking to Bruce Whitfield on The Money Show, energy analyst and MD at EE Business Intelligence Chris Yelland questioned why the government’s and Eskom’s plans are only happening now.

“We had Stage 6 load-shedding two-and-a-half years ago, and only now are we thinking of going to the market to find out what is out there for us to use,” said Yelland. “We need to treat this as an emergency, and it’s important that the President signals that he is concerned with the need to end load-shedding now,” he added.

Read: Worries over matric exam disruptions due to load shedding

Show comments
Subscribe to our daily newsletter