Resource plan sends wrong signals
South Africa’s draft energy plan scales back renewable projects seen as key source of growth
After numerous delays, the highly anticipated revised Integrated Resource Plan (IRP) has landed with a
thud.
Notwithstanding some of its more controversial aspects, such as the paring back of renewables and the fact that it sees load-shedding continuing for at least another three years, the draft energy blueprint was slated for being thin on detail — leaving investors with more questions than answers.
On first read, the draft IRP 2023 seems contradictory insofar as the role it envisions the private sector will play in the country’s energy future, Business Unity South Africa’s environmental and energy manager, Happy Khambule, said earlier this week.
On the one hand, the plan acknowledges the large part of the sector in an energy market that has become more deregulated than ever. “But in terms of the primary technologies which we are meant to be rallying, which is wind and solar, the renewables, it then undermines the potential there,” Khambule said.
The reduction in renewable procurement, compared to the 2019 iteration of the IRP, has been a key feature of the criticism against the updated plan.
The IRP 2019 envisioned the installation of 15.2 gigawatts of wind and solar photovoltaic (PV) on the grid from 2024 to 2030. In the draft plan, this number falls to just eight gigawatts — which is in stark contrast to a recommendation by the Presidential Climate Commission that the adjusted IRP promote 50 to 60 gigawatts of variable renewable energy by 2030.
Commentators have picked up on mixed messages elsewhere, most notably that the draft IRP sees loadshedding continuing until 2027 — an outcome that would further hamstring the country’s limping economy. The National Energy Crisis
Committee (Necom), also established by the president, sees loadshedding ending two years earlier based on the successful implementation of the energy action plan.
Necom’s stated priorities include making it easier for the private sector to invest in new energy sources and to fast-track new generation capacity from wind, solar, gas and battery storage.
“There isn’t a consistent message between the department, the rest of government and its initiatives on when load-shedding is going to be reduced to a manageable rate and when it is going to end,” Khambule said.
“I think it sends the wrong message. It’s really about the message that comes from the different quarters of government. If government is saying there is still going to be loadshedding until 2027, that should be consistent across the board. We can’t have the electricity minister saying one thing, Necom indicating something else, the president saying something else and the department’s planning document saying something totally different.”
This week, Electricity Minister Kgosientsho Ramokgopa sought to clear up confusion — noting that although the draft IRP may contain a less optimistic view, work is being done to bring load-shedding to heel earlier.
Addressing questions about the smaller renewables allocation, the director general of the department of mineral resources and energy, Jacob Mbele, said this is a result of the lower electricity demand projections used to formulate the draft IRP.
“The amount of renewables is a function of the demand you are trying to meet. So if demand is down, obviously the quantum will be less,” he said. “And that is not just for renewables. The overall system requirements or potential generation will be less than what you had before.”
Mbele also attributed the smaller renewables allocation to the fact that more households and businesses are investing in rooftop solar,
the delayed decommissioning of Eskom’s coal-fired plants and a significant expansion of gas projects.
Responding to the flood of criticism surrounding the draft IRP’S vision for wind and solar, energy economist Lungile Mashele noted that state-led renewable procurement has been replete with issues, with many of the approved projects taking years to reach financial close.
Moreover, South Africa’s transmission problems — which need to be fixed to install more renewable capacity — won’t be resolved by 2030, according to Mashele.
Importantly, the scaled-down approach to wind and solar does not bode well for the South African Renewable Energy Master Plan (Sarem), devised through a joint effort between the mineral resources and energy, trade and industry and science and technology departments.
Aimed at driving industrial development through renewable energy
projects, the master plan emphasises the importance of anchoring demand for these investments through public procurement.
Gaylor Montmasson-clair, a senior economist at Trade & Industrial Policy Strategies and Sarem facilitator, said it is critical that the government’s efforts to bring about energy security and grow the economy be in alignment.
The government’s industrial development ambitions arguably fall outside the scope of the IRP, Montmasson-clair said, adding: “But having said that, it can certainly send signals. And it is necessary to send those signals in terms of where the policy mix is going.
“And so, it’s quite clear that there is as we stand misalignments between what is put forward in the IRP and what we need as a country to achieve our ambitions around the industrial development of the renewable energy value chain.”
Montmasson-clair noted that energy security, at the lowest cost, must take precedence in the IRP. The position of a number of experts is that a renewable-heavy energy mix can achieve these goals.
“So we certainly would expect quite a big ambition when it comes to the roll-out of renewable energy, particularly solar PV and wind, as well as battery storage. Because they are affordable. They can be rolled out quickly … And we know that the bonus, as we know from the work we have done at Sarem, we have opportunities on the industrial development side that could materialise if we are serious about the signal that we send.”
The master plan emphasises the need to break away from the stopstart pattern of public procurement, Montmasson-clair noted. “If you want to grow manufacturing, you have to move away from stop-start,” Montmasson-clair said. But the draft IRP seems to entrench this trend.
The document also concedes that the government’s renewable procurement programme has been undermined by a series of problems.
“The programme was stalled between 2015 and 2019 due to institutional issues and the implementation of procurement rounds has been haphazard since then,” the master plan notes. According to the document, local content rules, transmission constraints and delays and changes to the procurement framework have undermined policy certainty — knocking market confidence.
Montmasson-clair said the country’s flawed renewable procurement programme needs to be re-thought. “But that doesn’t take away the fact that public procurement is tremendously important. We need that procurement for the industry to grow.”
Recent history has proven that sound public spending, as well as policy certainty, are vital to fulfilling the private sector’s ambitions. Meanwhile, a number of analysts have pointed to renewable investments as being among the few sources of economic growth.
Stakeholders will have to come to grips with the nitty-gritty of the draft IRP 2023 in the coming months, as they dig into the data underlying the assumptions made in the document.
The mineral resources and energy department has set a 23 February deadline for written comments on the draft, which will also be the subject of discussions at the National Economic Development and Labour Council. The department hopes to wrap up the reviewing process by 31 May 2024, a deadline which would leave little time for stakeholders to find one another.
The approach to wind and solar does not bode well for the South African Renewable Energy Master Plan
‘We need a revised Integrated Resource Plan ASAP … The scary part, by the way, is that every day that goes by without us finalising the IRP, the assumptions get outdated.’ — Jacob Mbele, director general of the department of mineral resources and energy