Meeting South Africa’s electricity demand: why the numbers are not likely to add up

 ·12 Oct 2022

The Government’s Integrated Resource Plan (IRP), gazetted in 2019, states that 78GW of energy capacity is needed by South Africa by 2030 – but the sheer estimated costs involved, coupled with the underwhelming progress of government projects, suggests a bleak future for the country.

Currently, Eskom is unable to accommodate the country’s energy demand. According to Eskom spokesperson Sikonathi Mantshantsha, on Monday (10 October), the power utility’s generation capacity was 28.8GW while the total demand was 29.4GW – moving the country into stage 2 load shedding.

Although Eskom’s coal fleet can generate around 52GW, almost half remains inoperative, and the energy availability factor is unlikely to improve, given the deteriorating performance of the country’s coal power fleet and ageing infrastructure.

An example of what Eskom is up against was on full display on Tuesday evening (11 October) when an explosion at the 275kv Klaarwater major substation in Durban caused widespread power outages in large parts of the city.

The IRP, which outlines the technologies needed to ensure supply security by 2030, assumes an energy availability factor of at least 70%, rising to 75% by mid-decade (2025) and a shortfall supply of around 2GW.

The reality, however, is a long way off those targets. The supply deficit is double and triple than initially planned, with Eskom calculating the shortfall at between 4GW and 6GW.

Additionally, for the year ended March 2022, the state-owned utility reported an overall EAF of 62%, but load shedding has intensified since then, with the coal fleet’s EAF dipping well below 60% at times.

According to the CSIR, the outlook for the next year shows that Eskom will face a deficit of 2,001MW or higher for 49 out of the 52 weeks.

Intellidex chairman Stuart Theobald said that even if the sabotage and poor management of stations were to be fixed, the ageing coal fleet performance is unlikely to change. “The energy availability factor of coal plants everywhere falls as they age, and it deteriorates particularly fast after about 50 years of life, and most Eskom plants are older,” he said in a note this week.

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

Even if Eskom miraculously got Medupi and Kusile fully operating and extended the Koeberg nuclear plant’s life, South Africa will still need 50GW to 60GW of new power generating capacity to be built over the next eight to 12 years, said Theobald.

The staggering amount of money needed to ensure supply security

Presenting at the Africa Renewable Energy Investment Summit last month, Eskom chief executive officer Andre de Ruyters said that renewable energy is the quickest and most cost-effective way to resolve the country’s crisis.

He said South Africa 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.

However, Theobald noted that much depends on the type of technologies used and their pricing, and the estimated investment required to deliver the 50GW to 60GW is a concern, saying that what is required may be a little more than what de Ruyters believes it to be.

“Based on current global capital costs for different technologies, we need to invest R1.8 trillion to R3 trillion to build that capacity, depending on technology spread,” said Theobald. “And that doesn’t even consider the investment required to expand the grid to handle the volumes.”

It’s an unfathomable amount of money. If South Africa had to invest this estimated amount over ten years, the amount invested each year would amount to 5% of GDP or about one-third of the annual total capital investment in the country.

Theobald pointed out that it is more than it would cost to build a Medupi every year.

The current capacity the government has managed to procure

The analyst noted that South Africa had built an embarrassingly trivial amount of energy capacity.

He noted that an “urgent” risk mitigation round was launched in 2020 to acquire 2GW of new capacity rapidly, but that Turkish floating gas turbine producer Karpowership won most of that capacity.

Round five of the renewable energy independent power producers’ procurement programme was held in 2021 – but delays created by the Russian and Ukrainian war saw only three of the 25 projects announced having managed to achieve financial close to date with a mere 420MW, Theobald said.

He also said that Round Six has called for 4.2GW of new supply, with an additional 1GW procured. “We are waiting for the results after proposals totalling 9.6GW were submitted earlier this month,” he said.

Theobald, however, pointed to one significant supply source in the mix: embedded generation, which could generate much of the country’s supply. The National Electricity Regulator of SA has registered about 800MW of such projects thus far in 2022.

He added that if a proper wheeling framework is established that enables companies to sell power to each other over the grid, there could be an explosion in the number of such projects.

Efficient Group chief economist Dawie Roodt is less optimistic and believes Eskom is financially and operationally unsalvageable and will come to the same end as South African Airways (SAA). Roodt said Eskom will get privatised, whether the government likes it or not.

“Eskom has been run into the ground, and the only way to get reliable electricity is for the private sector to provide it,” he said. If you add what the government has managed to deliver so far, it comes to a very alarming 1.4GW of new procurement in 2022.

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