It has taken far too long, but there is finally some positive momentum building in the electricity sector.
Cause for optimism has arisen as a result of confirmation by the Department of Mineral Resources and Energy (DMRE) that the National Energy Regulator of South Africa had, on September 2, concurred with a Section 34 Ministerial determination that opens the way for the procurement of 11 813 MW of new capacity. This milestone should have been met months earlier, given that Mineral Resources and Energy Minister Gwede Mantashe sought the regulator’s concurrence all the way back in February. Nevertheless, it represents progress, as without the determination there is no way of implementing the Integrated Resource Plan of 2019 (IRP 2019).
The DMRE has since confirmed that it is aiming to release bid documentation for the next renewables bid window by December, while also preparing for the procurement of other technologies outlined in the determination. Besides the 6 800 MW allocation for onshore wind and solar photovoltaic (PV), the determination also caters for 3 000 MW of gas to power, 1 500 MW of new coal and 513 MW of energy storage.
Equally important was the statement of support for the determination by Eskom, which has been the single buyer of power from independent power producers (IPPs) ever since government began procuring electricity from private generators in 2011.
While there has been some debate as to whether Eskom will continue in that role, the utility’s backing is important for two reasons. Firstly, changing the buyer model now would lead to yet more delays, which power-short South Africa can ill-afford. Secondly, the utility’s previous hostility resulted in the programme stalling for more than three years, undermining investor confidence and the industrialisation that had started to emerge around the industry.
The importance of Eskom CEO Andre de Ruyter’s statement that he welcomed the determination cannot, therefore, be overstated. Nor can his assertion that the country is in immediate need of 5 000 MW of additional generation capacity to keep the lights on. This second statement indicates that Eskom has finally come around to the fact that its coal fleet is unlikely to recover its energy availability factor to the 75% level assumed in the IRP 2019.
The good news is that the quickest way of filling the void is also now the cheapest and cleanest: solar PV and onshore wind, supported by flexible generators, such as gas, batteries and pumped storage. The bad news is that, instead of moving decisively to procure these generators, the DMRE’s IPP Office has its hands full with a scheme to procure 2 000 MW of dispatchable power – a programme that seems structured to favour expensive fossil-fuel options that are not aligned to a least-cost pathway.
Be that as it may, there is now some hope that South Africa is poised to move into a new era of consistent procurement; a powering up that is sorely needed to create the platform for a post-Covid recovery.