There’s a growing awareness that significant investment needs to be made, not just to meet existing demand, but also to meet the future needs of the economy and its population. Moreover, it needs to happen within a context of the move towards net zero emissions by 2050, envisaged by the Paris Agreement on Climate Change.

The good news is that many of the obstacles for independent power suppliers to supply power are being removed, opening the way for the private power suppliers to provide embedded power generation, with the potential to enter into regional wheeling agreements. Much of this is in renewable energy forms.

The creation of the National Energy Crisis Committee (NECOM) should allow for many of the roadblocks in the way of addressing South Africa’s energy needs to be addressed.

56,000MW
Wind and Solar PV generation needed
8,000MW
Battery storage needed
5,000MW
Gas driven power needed

The Energy Council of South Africa estimated in February that South Africa would need 56,000MW of wind and solar PV generation, 8,000MW of battery storage and 5,000MW of gas-driven power to “provide an appropriate balance between energy security and energy sustainability” by 2030.

This would allow for the decommissioning of 12,000MW of South Africa’s older and more emission-intensive coal generation and help South Africa to comply with its commitments.

The Energy Council puts the cost of the above at R1.2 trillion (about US$70bn), including “enabling investment in transmission, distribution and utility reform”.

 

Meanwhile Engineering News reports that some 66,000MW of wind and solar projects are at different stages of development with many envisaged to be coupled with battery storage. That’s according to the 2023 South African Renewable Energy Grid Survey, compiled by Eskom, in conjunction with renewable energy suppliers.

18,000MW
Advanced stage of development
21,000MW
Under development
27,000MW
Early stage of development

Of this, about 18,000MW is at an advanced stage of development, 21,000MW is under development and 27,000MW is at an early stage of development, according to the report.

Hydrogen remains a small part of the mix for now, but could grow in the coming years. A number of companies, such as Sasol and Anglo American, are currently working on hydrogen projects.

On top of this, the separation of Eskom into three operational entities is underway, with the creation of a distribution company set for February or March next year, while the City of Cape Town recently gave the green light for commercial electricity suppliers to start wheeling electricity through Cape Town’s grid infrastructure. 

Dieter Matzner
Dieter Matzner, Consultant, Investec’s Power and Infrastructure Finance

This is likely to be rolled out across the Western Cape and over the next 10 years the region could export power to other provinces.

 

There are of course a number of challenges that South Africa will need to overcome to bring these projects to fruition and to put the energy crisis to an end. One is the upgrading and extension of transmission lines to ensure the grid works well with the new generation system. This will require a significant investment, argues Matzner, of at least R130bn. 

“This includes the creation of servitudes, environmental impact studies and so on, in addition to the costs of the construction,” he says.

This has relevance for key industries such mining, which are increasingly concentrated in the Northwest and Northern Cape provinces, and which will be major users of new energy sources.

Other challenges include having to navigate a tougher global regulatory environment as the world pushes for a net zero emissions world. As the world’s 12th largest carbon emitter, South Africa will need to act decisively to reposition its energy sources to avoid carbon taxes imposed by leading trading partners.

Equally, the local motor industry (and export market) is geared towards internal combustion engines, which are likely to be phased out in the coming years in favour of electric vehicles. For example, the European Union has banned the sale of internal combustion vehicles from 2035. 

“Can South Africa make the transition to manufacturing electric vehicles? Is there a sufficient local market for them?” asks Matzner.

What’s clear is that, for South Africa to thrive in the coming years, then clean, affordable energy is essential for both economic growth and the development of its people. As a recent UNCTAD report noted, reliable energy supplies are essential for driving industrialisation, boosting productivity, economic growth and human development.

It is essential that South Africa seizes the energy opportunities and helps lead the way for the rest of the continent to benefit.

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