Integrated resource planning a dangerous failure
THE INTEGRATED Resource Plan (IRP) does not serve the best interests of South Africa and its citizens.
It gives cold comfort to the poor and unemployed. It does not in any way present a plan to increase economic growth and to foster and encourage investment, domestic or foreign, in revitalising South Africa’s goods-producing industries, particularly general re-industrialisation, manufacturing and mining.
Major criticisms of the IRP include: The plan appears to be primarily dependent on the work and models prepared by the CSIR Energy Centre. Many people consider this centre to be totally biased towards, and in favour of, renewable energy sources, primarily wind and solar supported by gas as a back-up.
The centre has been strongly influenced by the German “Energiewende” programme. This programme is increasingly considered to be a failure.
The IRP has made use of a planning computer model. By using certain biased assumptions, it has led to a biased outcome in favour of renewables. The problem is the output of such models is determined by the input. The outcome has effectively gutted the country of any plan of using High Efficiency Low Emissions (HELE) or clean coal and any use of nuclear.
There is no example in the world where high-penetration renewables have enhanced economic growth, employment and/or brought electricity prices down on a sustained basis.
In many instances, the reasons given for the lower gross domestic product (GDP) growth from 2010 to 2016 are incorrect and have resulted in a flawed analysis of future ongoing lower GDP and electricity growth.
The IRP makes the bland statement that the historic electricity intensity trend has continued to decline over the past years. South Africa has been de-industrialising rapidly and its manufacturing and mining industry have been static or in decline for more than a decade.
Far from reflecting the required future trend to be used for planning purposes, it reflects failed political, economic and energy policy on a massive scale and not surprisingly of insufficient electricity supply.
The IRP offers no plans to encourage investment and development of the nation’s mineral resources. It has coal assets amounting to more than R6.5 trillion.
The coal alone, using clean coal technologies, would give power to South Africa for more than 100 years, offering employment and security of supply of electricity at competitive prices.
Yet the IRP, clearly supported by the Renewable Lobby, wants to bury them for ever. Many high-growth developing economies (India, China and the Asean countries) have policies of developing their coal electricity-generating potential. Yet South Africa exports coal to these countries but does not use these resources internally. This is at best a mindless policy outcome.
The IRP offers no solution to resolving the key problem of insufficient secure of electricity at a competitive price. No wonder the poor and unemployed are concerned and find the revised IRP unacceptable.
In fact, it can more or less safely be said that IRP has no clear-cut objective with a plan of action to achieve a positive objective.
The IRP lacks analysis of the real reasons for its economic and energy failures and offers absolutely no solutions how to overcome these failures on a sustainable basis.
There are strong feelings that this IRP is an IPP renewable plan led by overseas suppliers and financial advisers who will then be able to pick up the damaged assets it causes at bargain basement prices.
Finally, the IRP has no plans for achieving the higher electricity supply required by higher economic growth targets after 2025.
South Africa must aim to lift its GDP growth rate to between 4 percent and 5 percent a year. If this is not done, unemployment will increase substantially. There are no plans in the IRP to build, by 2025, a solid base of secure base load electricity.
This can only come from high efficiency, low emission coal and nuclear power. It is well known that such projects take five to seven years to complete and bring the necessary power to the grid. In other words, the IRP should have plans to start such projects within the next year. This is not the case.
The IRP is a vital component in resurrecting economic life and optimism in this country and hence encouraging the domestic and foreign investment so necessary to revitalise the economy. The current IRP does not achieve that. It needs clear-cut objectives and a clear plan of action to ensure that the economy is backed by secure, lowcost electricity supply. Unless the IRP is radically changed, this country will go into an economic death spiral of its own creation and you can kiss South Africa goodbye.
Rob Jeffrey is an independent economic risk consultant. He is the former managing director of Econometrix and continues to consult for them.