Opportunity and crisis in South Africa’s electricity

In April I wrote a blog in Le Monde Diplomatique about South Africa’s on-going electricity crisis. This crisis has resulted in regular load-shedding across the country since late last year as the country’s cash strapped utility Eskom faces a $17 billion funding gap to 2018. Electricity consumers face a 250 per cent cumulative increase in electricity prices since 2008. The country’s state-owned monopoly electricity sector was almost exclusively coal-fired until a procurement programme for privately generated renewable energy was introduced in 2011. Since writing my blog, there have been a number of notable developments in an electricity sector that is currently subject to constant confusion and very likely, change. Despite the uncertainty it is clear that South Africa’s electricity crisis has opened a window of opportunity for the development of different technologies and the procurement models that facilitate them.

Firstly in mid-April, government announced the winners of the latest round of the country’s renewable energy independent power producers’ procurement programme (RE IPPPP). This takes the total of privately generated renewable energy up to 5.2 GW (the country’s total installed capacity is currently 44 GW, of which only 33 GW is currently available). Government has also announced that a further 6 GW of renewables will be procured by 2020. In the case of electricity generated by wind and solar PV IPPs, the average cost of electricity has now reached grid parity with Eskom’s coal-fired power plants still under construction. When built, Medupi and Kusile will be the largest coal-fired power plants on the continent at 4,800 MW each. However, both have been subject to delays, labour unrest, and continuing cost overruns.

Secondly in early May the Department of Energy stated plans to procure a 9,600 MW nuclear fleet. While government has held a series of ‘vendor parades’ with interested companies and countries, including Russia, China and South Korea, there is no clarity on the model of ownership and significantly how any potential nuclear programme will be paid for. Steve Thomas (University of Greenwich, formerly SPRU) cautions against the escalating cost of the technology and the high cost of capital that the country will need to borrow in order to pay for it. Such costs he argues, risks impoverishing South Africans yet further and diverting national resources away from other options such as energy efficiency and renewable energy.

Meanwhile the country’s National Treasury is considering the sale of some of state-owned monopoly Eskom’s ‘non-core’ assets power stations about which there are conflicting opinions between and within different government departments and members of the ruling party the African National Congress (ANC).That government has gone to great lengths to avoid the word ‘privatisation’ illustrates deep ideological differences within the ANC between those advocating for market reform and those for state control. A key question remains however as to whether there would be sufficient interest from investors in light of the utility’s negative credit rating and soaring tariffs.

Other developments include the announcement of a procurement programme for 2.5GW of privately generated coal-fired power (as opposed to that built by Eskom), 3 GW of gas and 1,800 MW of co-generation, in addition to a consultation process for small-scale roof top solar PV. Whether the national transmission grid can accommodate such moves is a matter for further consideration.

While in the short term at least a potential diversification of the electricity mix may not necessarily signal a move away from the country’s coal-dominated path dependency, nor indeed result in an optimal outcome, changes are definitely afoot. This case raises fundamental debates over the optimal resources for electricity generation, how the electricity sector should be owned, governed and structured, and who should pay. Such developments illustrate the inherently political nature of decision making in electricity that goes far beyond what is technologically feasible.

Dr Lucy Baker

Lucy Baker, Research Fellow at Sussex University

Lucy Baker is a Research Associate 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 inThe 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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