South Africa’s electricity crisis and the future of supply

During his State of the Nation address last week South Africa’s President Jacob Zuma promised to do “everything we can” to resolve the country’s energy challenge, including: to develop a large nuclear fleet; construct yet more coal-fired power plants; import hydro from the Democratic Republic of Congo; import gas from neighbouring countries; develop the country’s shale gas reserves; continue to develop a privately generated renewable energy sector; and undertake demand side management measures such as solar hot water heaters, and roof top solar PV. An impressive shopping list indeed, particularly given that coal-dependent South Africa is currently facing its worst electricity crisis in 40 years. With load shedding taking place most days, the country has been relying heavily on expensive diesel peaking plants to make up the short fall.

Load shedding, or planned outages which have been taking place regularly across the country since mid-2014 are now predicted to last until 2018. In addition to arguments over what the country’s electricity demand should be, national debates rage over which options are the quickest to construct, the most affordable, the most technically feasible. The country’s 20-year national electricity master plan, the ‘integrated resource plan’ for electricity first approved in 2011, has been under revision since late 2013. Decision-making over the ideal electricity mix often reflects deeper struggles over what gets supported by the state, who gets to build it and who gets to benefit.

The electricity crisis has contributed to lowering growth rates, discouraged private investment, exacerbated the country’s large current account deficit and pushed the cost of electricity way beyond the reach of the poorest households who are connected to the grid. Approximately 25 per cent of the population, 12.3 million people, lack access to electricity in a country where 40 per cent of the electricity is consumed by the country’s energy-intensive industrial users. The country’s historical dependence on cheap coal was, under apartheid coupled with cheap labour to generate cheap electricity for the primary benefit of export oriented industry and wealthy households. The monopoly utility Eskom which to date generates 90 per cent of the country’s coal-fired electricity, is cash strapped and crisis ridden. Since 2005 Eskom has been struggling to build an additional 17000 MW of generation capacity by 2018 whilst facing a funding crisis. Electricity tariffs have tripled in real terms since 2005 and will increase by a further 12.8% from April 2015. By January 2015, one third of Eskom’s installed capacity, approximately 15,000 MW was down and the country’s reserve margin on a knife edge.

The causes of the country’s current supply side crisis are complex and deep seated. They include: decades of mismanagement; a failure by government to approve the construction of new capacity in the early 1990s and disagreement over who should do this; inadequate maintenance of the utility’s older power stations; the recent collapse of the coal silo for the Majuba Power Station in November 2014; rising coal costs; increased international demands for the country’s coal; and climate change mitigation commitments pledged in 2009. A further R23 billion has been promised by government but this won’t last long, not least because the country has long exhausted its diesel budget for the financial year.

Big coal…

Delays in the construction of the 4,800 MW Medupi coal-fired power plant, the largest coal-fired power plant on the continent have exacerbated the crisis. A controversial World Bank loan for Medupi was approved in 2010, but the plant is now three years behind schedule and subject to significant cost overruns, technical glitches and labour unrest. By January 2015 Eskom had failed to meet all previous deadlines to synchronise Medupi’s first 794 MW unit with the grid, which was originally to have been carried out in 2011. Another power station of similar size and also delayed, Kusile, is anticipated to be one year behind Medupi.

An excellent report by the Energy Research Centre of the University of Cape Town details the significant planned expansion of South Africa’s coal mines, power plants and related infrastructure for both export and domestic purposes. Among other findings the report uncovers glaring inconsistencies between the country’s coal road map, a process driven and funded by the coal mining industry, and national climate change mitigation commitments. Similarly it finds that planned investment in export infrastructure for coal is potentially incompatible with required global reductions in fossil fuel combustion. In a potential illustration of ‘unburnable carbon’ this either risks new coal developments becoming stranded assets in the medium-to-long term, or the country becoming locked into a high-carbon emissions trajectory that prevents it from meeting its own mitigation imperatives.

…big networks, big nuclear

Reflecting what academic Anton Eberhard has referred to as a national paradigm of “big coal, big nuclear, big networks”, President Zuma reiterated the promise to construct a 9,600 MW nuclear fleet. It is estimated that this will cost the country R1 trillion ($85 billion) with a target to connect this fleet to the grid by 2023. The government has courted representatives from the ‘big five’ nuclear generating countries, China, France, Russia, the US and South Korea with whom it claims to have signed inter-governmental agreements . But according to Earthlife Africa, Russia is now being favoured based on an agreement designed to sidestep the constitutional requirement for open and competitive tendering. This would give Russia power of veto and prevent South Africa from entering into a contract with any other nuclear vendor.

For some environmentalists, nuclear energy has become the preferred option as a techno-fix to prevent runaway climate change. But I have never managed to find a satisfactory response to fundamental questions of finance, governance and accountability such as: who will build it, how much will it cost, who will pay for it, who will take liability for accidents, how will the R&D be shared, where will the waste be stored and how do you avoid the corruption and cost and time overruns that often go hand in hand with large infrastructure projects? Rather than a simple case of coal v nuclear, to which pro-nuclear arguments are often reduced, there are other issues at stake here relating to democratic decision-making in energy, bargaining power within contractual agreements, allocation of risk and how limited public subsidy for energy development should be distributed. See Philip Johnstone’s blog in relation to the UK’s Hinkley C for some more thoughts on this.

Renewable

More positively, in the last three years South Africa has become one of the leading destinations for renewable energy investment. According to UNEP/BNEF investment went from a few hundred million dollars in 2011 to $5.7 billion in 2012 and $4.8 billion in 2013, of which $1.9 billion for wind and $3 billion for solar. This investment is largely due to the take off of the country’s Renewable Energy Independent Power Producers’ Programme (RE IPPPP), launched in August 2011. RE IPPPP is a tender system based on competitive bidding which means that potential project developers bid for a renewable energy contract below a certain cap and must meet potentially progressive socio-economic criteria in order to qualify. Successful projects sell electricity to Eskom’s grid under a 20 year local currency denominated, government-backed power purchase agreement (PPA). Just under 4,000 MW have thus far been approved and by December 2014, 21 projects had been connected.

As a colleague and I discussed in a working paper last year, while the programme has brought a diversity of new players and investment to the country, the ownership of this new sector could become dominated by international companies rather than national players who are struggling to retain a share in the market. Moreover fundamental tensions have been identified between the demands of finance and investment for ‘bankability’ and the progressive socio-economic criteria of the programme that include minimum requirements for community ownership, job creation and participation of historically disadvantaged individuals.

So technology choice is about a lot more than just technology. There is no panacea, and without discussing the other various options Zuma has so confidently promised the country (I ran out of blog space), it is clear that disagreement, uncertainty and speculation over the country’s electricity are reflected in competing political and economic interests at the national level and beyond.LucyBaker Sussex

Lucy Baker is a Research Associate in the School of Global Studies at the University of Sussex, currently working on an ESRC-funded project, Rising Powers and the low-carbon transition in Southern Africa.  She has a PhD in The political economy of socio-technical transitions in South Africa’s electricity sector, from the University of East Anglia. Her areas of expertise include: the political economy of energy; renewable energy development in low and middle income countries and climate change governance and finance. She has worked on issues of  development, environment and human rights for fifteen years, in academia and NGOs.

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One comment on “South Africa’s electricity crisis and the future of supply
  1. Great blog. Wonder what Russia gave ANC to get such a favourable nuclear deal

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