THEBE MABANGA
GOVERNMENT’S move to renewable sources for electricity generation is commendable and probably ahead of minimum required standards for a developing country with high unemployment, but it is fraught with risks.
The biggest of these risks is that taxpayers and consumers might end up subsidising the move to renewables through sustained higher prices.
In his weekly letter, President Cyril Ramaphosa reminded us that government has gazetted ministerial determinations that will enable the development of more than 11,800 megawatts (MW) of additional power generation.
This is just over a third of installed grid capacity on any given day without load shedding.
Government has also made it easier for small scale operations to generate their own power by removing the licensing requirements for projects of less than 1 MW.
Ramaphosa says thus far 156 self-generation facilities under 1 MW have been registered, with a total installed capacity of 72 MW.
“For facilities that can generate above 1 megawatt, the National Energy Regulator of South Africa is improving its licensing processes to improve turnaround time. So far, five such facilities, with total installed capacity of 25 megawatts, have been licenced,” says the president, of a move that represents 100 MW of self-generated capacity.
This represents a commitment to self-generation that is not yet funded.
The pace and cost at which these projects go ahead will depend on how long their owners believe load shedding will be a feature of South African life.
At the height of the lock down, Eskom CEO Andre De Ruyter told parliament that from August this year, Eskom will undertake what is known as “reliability maintenance” which will resolve load-shedding permanently with a year to 18 months.
No one believes that timeline now with many companies budgeting for loadshedding to be with us for at least three years and get worse before it gets better.
The analyst Chris Gilmour says loadshedding will be our reality for some five years at least.
The longer you believe load shedding will be around, the more likely you are to invest in self generation capacity.
The first reality to accept is that coal remains a significant part of South Africa’s energy well into the second half of this century, when renewable resources may prove sufficiently established and cost effective.
Until then, or rather if that happens as hoped, South Africa should not be forced to abandon coal at a rapid rate than its already planning to.
According to the Integrated Resource Plan of 2019 over the next ten years, coal will decrease from the current base of 37 149 MW to 33 364 MW in 2030, accounting 43 % of installed capacity.
All renewable sources see their share of generation capacity increased over the next decade.
Hydro sees its contribution increase from 2300 MW to 4600 MW in 2030. Storage moves from 2900 MW to 5000 MW over the same period, and account for 6,35%.
Photo Voltaic moves from 1474 MW to 8288 MW and wind moves from 1980 MW to 17 000 MW, accounting for 22%.
Gas and Diesel increase by 3000 MW from 3880 to 6380 MW.
Curiously, nuclear, the most established and proven of clean energy sources, remains stagnant at 1860 MW, or 2,35%.
This is probably because of lingering safety concerns around nuclear and the embarrassing meddling by Russians during the Zuma administration.
What appears to have happened is that the renewable energy lobby has succeeded in convincing government to jettison coal on the promise of cheaper energy and a cleaner future.
But the reality many times, the promised price reduction from renewable energy does not materialise, or at least not at the promised rate.
And when one points this out, proponents of renewable energy argue that you need more of it to realise the benefit of lower prices.
The truth is that the adoption of renewables depends on a direct or indirect subsidies, starting for example with the hasty and mandatory of the agreement signed between Eskom and 27 Independent producers to purchase power at a cost much higher than Eskom produces electricity, even with its new build programme.
Notice how IPPs threaten to withdraw their investment unless government agrees to their usually higher prices.
Ramaphosa also announced that regulations will be promulgated to allow municipalities to source power from independent producers.
It is not inconceivable for residents of an affluent suburb like Dainfern – no, sorry not Dainfern, they cannot pay for their current electricity – to convince a municipality to source power from an IPP only for the municipality to find it cannot afford to subsidise free basic electrify at a higher price and you literally have a section of the municipality residents not affording electricity.
Government must let an IPP make its case based on transparent market based prices, not direct and indirect subsidies.
The world needs to revisit the principle that underpinned the Kyoto Protocol, the climate change framework which expired in 2019 to be replaced by the now disputed Paris Agreement.
The Kyoto Protocol said developing countries, like South Africa and India, must pursue their path to industrialisation at a path that is most cost effective, which would likely entail fossil fuels.
This would be until the more cost effective cleaner technology is researched, developed and commercialised.
That is partly why the Green Fund was established.
The reality is that South Africa can shut down its two biggest emitters, Eskom and Sasol, as its contribution to cleaning up the environment, a move that would cost many jobs in the shirt term.
But if larger emitters like the United States continue to reject the Paris agreement as it has done under Donald Trump, SA’s noble efforts will be in vain.
South Africa’s rapid move away from coal brings to mind the country’s actions in the mid to late 1990s when it removed tariffs on imported textile at a rate faster that it needed to in order to fit in with the global trading order, which South Africa re-joined as it opened its economy after 1994.
That led to flooding by cheap imports that decimated the textile sector.
All this happened because South Africa was wrongly classified as a developed country rather than developing when the General Agreement of Trade and Tariffs (GATT) was agreed upon at the Uruguay round in 1993, when the foundation for the World Trade Organisation (WTO) was laid.
Theirs was probably a cynical act by an apartheid government official designed to hobble a future democratic government.
South Africa must not repeat such a costly error.
(COMPILED BY INSIDE POLITICS STAFF)
