South Africa will never again have one stable government centralized power grid, but rather a decentralized network in which different public and private players supply the electricity needs.
Connie Mulder, head of the Solidarity Research Institute, shed light on the extent of the energy crisis as well as possible ways out of it during a presentation for the Free Market Foundation.
The status quo
According to Mulder, we are currently stuck in load shedding because the amount of power that Eskom sent out over the past decade has drastically reduced.
“Eskom sends out less power today than ten years ago, while we now have a larger economy and a larger population that must be supported by it.”
According to Mulder, this growing discrepancy between the available electricity and the true electricity needs is a growing crisis.
“Even with the worst growth prospects for the South African economy, the gap between electricity needs and what Eskom can deliver is getting bigger.”
According to Mulder, Eskom’s inability to meet electricity needs on the one hand and market monopoly on the other are systematically crippling the prosperity of South African citizens by paralyzing the economy.
“In real terms, South African citizens are as poor today as they were ten years ago. This means our reduced electricity output together with a growing population is eating up citizens’ potential to build wealth in a substantial way,” Mulder believes.
A stagnant economy in turn leads to an extremely unfavorable labor market in which almost half of adults who can work are currently not working.
Where are we going?
At this stage, according to Mulder, the prospects for Eskom don’t exactly look amazing either.
“Eskom’s so-called energy availability factor was just above 60% last year. It looks like it is close to 50% by 2023. The minimum standard for this factor is actually 75%.”
According to Mulder, the energy availability factor is also not something that will be improved in the foreseeable future.
“Eskom is currently faced with the problem that by 2035 it will have to start decommissioning 22 GW of coal-fired power stations (decommission). Due to poor long-term planning by the Minister of Mineral Resources and Energy, Eskom may not have built any new power station to replace this depleted capacity.”
Eskom does plan to add certain renewable energy sources such as solar power and wind power to its energy supply – something that, according to Mulder, will in no way satisfy the country’s energy needs.
“According to its own planning, as set out in the Integrated Resource Plan 2019 (IRP-2019), even in the best possible scenario, Eskom will still experience a generation deficit of at least 6 GW.”
If everything planned according to the IRP-2019 is carried out absolutely “perfectly”, South Africa’s generation capacity will increase by just 43% while demand will increase by an estimated 40%. This scenario is made unlikely by the fact that solar and wind power have energy availability factors of 30% and 40% respectively.
“Considering that the sun will not shine 24 hours a day and the wind will not blow all day, the ‘perfect’ implementation of the IRP-2019 will only add 15% new capacity. Even the government’s best plans are not going to solve our problems.”
How are we going to get out of here?
“We are going to have to look at the way in which Vietnam came out of a similar power crisis.”
According to Mulder, in 2007 Vietnam was plagued by up to 14 power outages (rolling blackouts) per day as their state-controlled power monopoly could not keep up with electricity needs.
“The difference is Vietnam grew into their power crisis – their population and economy simply grew too fast. We have systematically shrunk in our crisis.”
In 2011, Vietnam broke the power monopoly by allowing wholesale electricity competition. After opening the market, the government introduced feed in tarrifs in 2017 with additional tariffs in 2019.
“The result of this was that Vietnam added 4,500 MW of electricity to the grid in 2018 alone. The project was repeated in 2019 with even greater success, in total 101,029 solar panel projects were added on people’s roofs with installed capacity of 9,296 MW in one year – of which 6,000 MW were added in one month.”
According to Mulder, Vietnam has succeeded so well in solving its electricity deficit that it now has a surplus of electricity.
“South Africa can only dream of having such a ‘problem’.”
“This is good news for us, because South Africa is one of the best places in the world to solve our crisis with thousands of solar panel projects on people’s roofs.
“South Africa’s so-called global irradiation for optimally tilted surfaces (GTI Opta) is higher than anywhere else in the world apart from the Sahara desert. This means that our land surfaces and weather conditions are of such a nature that we can generate a lot of electricity from the sun per square meter.”
|Pretoria||2 249,9 kWh/m²|
|Nelspruit||2 037,4 kWh/m²|
|Nama Khoi||2 621,6 kWh/m²|
|Cape Town||2 142 kWh/m²|
|Ho-Chi-Minh (Vietnam)||1 824,7kWh/m²|
|Berlin (Germany)||1 261,1 kWh/m²|
|Edinburgh (Scotland)||1 065,3 kWh/m²|
“Vietnam’s best performing city does not come close to South Africa’s average GTI Opta. Even in Berlin and Edinburgh, where they have large incentives for similar projects, cities in Europe are of all places – somewhere where the sun doesn’t exactly shine terribly faithfully.”
Mulder breaks down the solution to our electricity crisis into three stages.
In 2023 to 2026, mere emergency generation should take place, involving small-scale embedded generation. After that, scalable private solutions must be developed between 2026 and 2029 with built-in profit incentive measures. From 2030, the focus must then be on wholesale electricity competition and the transmission network.
“The tax benefit that the government announced in the budget speech is a good start. However, this is still not enough and the energy regulator Nersa must now be pressured to announce supply rates.”
At this stage, the feed rates vary significantly between municipalities with some municipalities not even having available rates. According to Mulder, this is an essential regulatory gap that will have to be filled.
According to Mulder, the prospects of private generation look good.
“In all of 2022, given Ramaphosa’s announcement, 1,600 MW of private generation projects have been registered. Just since January this year, more than 1,000 MW have already been registered.”
This indicates that the initiative and private sector capital are ready to enter the market.
“The generating capacity is going to be there. Now we just need to clear the regulatory transmission bottlenecks. The private sector is ready to solve the problem, the government just has to step up or step aside.”
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