SA’s new plan to end power cuts is ‘seriously flawed’

South Africa experienced unprecedented electricity shortages in 2023 as ageing coal plants became increasingly prone to breakdowns and the country urgently needs to develop new electricity generation facilities and reduce reliance on coal power.

In the first week of 2024, the Minister of Mineral Resources and Energy, Gwede Mantashe, released a proposed road map for the future of electricity in South Africa.

Unfortunately, the draft Integrated Resource Plan is a major disappointment.

Described by some analysts as “shoddy”, the plan contains, among many flaws, huge errors in costing the different future energy scenarios.

Firstly, the plan’s costing estimates aren’t credible. It does not even consider the most inexpensive combination of new additional electricity – largely wind and photovoltaic solar, with some battery storage.

Instead, the plan claims wrongly that gas-intensive scenarios are cheaper.

Secondly, the plan says that the government must build 6 000MW of new gas-fired power stations by 2030.

This has been vigorously opposed by environmental and other civil society groups on the grounds that increased use of fossil fuels will accelerate global warming.

Another problem is that the gas will have to be imported, leaving SA at the mercy of international gas price fluctuations.

The kind of investment in gas that is needed will require major new builds, which invariably end up with major delays and cost overruns.

The new draft plan could commit SA to unnecessarily expensive solutions.

This will damage economic prospects and drive energy costs to unaffordable levels.

The first scenario is a “reference case”, which proposes that all additional electricity be generated half by gas and half by wind and solar power. The draft plan wrongly claims that this is the most cost-effective option.

The second is a “renewable energy” scenario, where no new coal, nuclear and gas plants are built, but where only about onethird of the new solar power investment will be in the form of photovoltaic technology.

This scenario says the bulk of new solar capacity will be provided by concentrated solar power, which is rarely considered globally these days because it is much more expensive than photovoltaic technology.

Concentrated solar power previously had the advantage of being able to store heat for a few hours, generating electricity after sunset. But this can now be achieved with photovoltaic technology and battery storage.

The third scenario is “renewable plus nuclear” where about 15 000MW of new nuclear builds will provide the electricity attributed to concentrated solar power under the previous all-renewable scenario.

The fourth is a scenario. Under this plan, the life of SA’s coal plants will be extended by several years each, long beyond the projected closure dates for these plants.

The final option is a “renewable plus coal” scenario where new gas and coal plants will replace the capacity attributed to concentrated solar power or nuclear in the other scenarios.

Strangely, there is no provision for what is probably the most cost-effective option – a renewable energy scenario using photovoltaic technology and with increased storage.

We do not know how the government costed these scenarios because the draft plan does not set out the costs per technology.

Instead, it claims to have used the April 2023 Lazard Levelized Costs of Energy report to calculate how much each new form of energy would cost.

But this doesn’t appear to have been the case.

Lazard is the world’s largest independent investment bank. Its reports are widely recognised as authoritative. The costs Lazard has calculated for the various technologies – renewable, coal, gas and nuclear power – are very different to the costs that the government must have used in the draft plan.

If the department’s planners had used the Lazard energy costing, they would have reached a very different conclusion.

There are three possible explanations: that the planners didn’t use the Lazard costing; used it incorrectly; or that their cost calculations are wrong.

Lazard sets out these costs per megawatt hour of electricity.