IRP 2010 energy strategy must be revised
THE debate over the future of renewables in SA can easily detract attention from the bigger picture — the country’s longer-term energy requirements and how they will be met timeously and efficiently.
Some might say South Africans have short memories because just more than six years ago rolling blackouts (load shedding) suddenly became part of our national discourse and magnified a desperate shortage in energy production.
But contrary to public perception, this crisis did not suddenly happen in 2008. The seeds were planted many years earlier, compounded by inadequate foresight and planning, a shocking level of complacency by the government about the sufficiency of SA’s energy supply, and our historical reliance on coal power.
Thankfully, a single form of technology is no longer part of our country’s future energy mix as set out in the government’s Integrated Resource Plan (IRP 2010) for the next 15 to 20 years.
Although IRP 2010 is at least three years out of date, renewables are not any less important in their contribution to the power that keeps our lights on these days. But then, they were never intended to be the only alternative to reducing our dependence on coal.
Renewables, nuclear and natural gas power are all included alongside coal in the longer-term energy mix. Comprising 13% of future energy generation, nuclear and natural gas are important planned contributors towards the base-load energy mix to reduce our dependence on coal.
Given the lead time for rolling out new sources of energy generation, it is critical that the IRP 2010 be updated as soon as possible and new procurement programmes implemented to ensure future energy requirements are met.
In the meantime, the renewable procurement programme has been an incredibly successful initiative by the government, resulting in almost R200bn of fixed investment in projects mostly located in rural areas. These have contributed to the creation of thousands of new jobs over the past four years.
The programme has also provided a speedy introduction of new power to the grid during a period when it was desperately needed, and has contributed to the stability of the country’s electricity system.
Some important lessons have been learnt from the programme, most importantly the strength of a public-private partnership. The government will do well to repeat the following principles when procuring new forms of power in future:
Ensure there are transparent rules of engagement with the private sector;
Constantly communicate updated planning with all stakeholders;
Clear bid qualification and evaluation criteria supported by standardised documents drafted in consultation with the industry; and
Make a commitment to dealing with corruption promptly and with serious legal consequences.
At the heart of the programme’s success is the trust that has been established with the private sector. This has promoted a huge increase in the competition to build projects and supply energy to Eskom in each subsequent round of bidding, resulting in some of the cheapest electricity being procured globally today.
Unfortunately, the recent statements by Eskom about the future of renewables, and the lack of clarity about additional bidding rounds, has severely shaken the private sector’s confidence in the programme.
Whatever the updated decision on the most appropriate future energy mix, SA is at risk of repeating the complacency that led up to the most recent electricity crisis.
Clarity over IRP 2010 is urgently needed, together with a commitment by the government to pursue the same principles that have worked so well for the renewable procurement programme, to encourage further private sector involvement in the energy sector.
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Semple is Futuregrowth’s portfolio manager of the Power Debt Fund and an investment analyst.
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