Global energy crisis ‘far from over’

Fossil fuel prices are likely to remain elevated at least up to 2025 as countries across the world continue to grapple with energy supply constraints.

An ongoing problem in SA and across Africa, energy security and access concerns now also plague many countries across Europe because of supply issues caused by Russia’s war in Ukraine. For this reason, many countries have shifted their immediate focus to energy security rather than the energy transition.

“In the short term, the focus on energy security at the expense of energy transition has led to a delay in plans to phase out coal-fired power generation in some European countries, but over the long term it will have the opposite effect — accelerating a move to renewables,” said Nicolas Daher, lead energy analyst at the Economist intelligence Unit.

“Even though we are now in the middle of the energy transition we still expect overall fossil fuel demand to grow for the next 10 years. This does not mean that the transition will stop moving forward at a fast pace,” said Daher.

The energy crisis is “far from over”, he said, leading to a push for energy security which was increasing investment in domestic renewable energy generation as countries move towards energy self-sufficiency.

Almost all expansion in power generation across the world is expected to come from investment in renewable energy.

“Renewable energy is increasingly seen as a way to increase energy security. Consumption of non-hydro renewables will grow at 10% per year over the next 10 years.”

Global solar power generation installed capacity alone was expected to double over the next 10 years from 1,140GW to 2,285GW, said Daher who was speaking at the Middle East & Africa Energy Conference in Dubai recently.

SA’s energy crisis might have been caused by a unique set of circumstances, but the way out of the crisis is similar to the type of solutions being implemented in other countries that are facing their own energy crises.

Kesh Mudaly, climate, sustainability and energy principal at the Boston Consulting Group, who spoke at the Africa Energy Indaba in Cape Town last week, told Business Day that closing the energy supply gap, that sits at the centre of SA’s energy crisis, and getting to a low carbon future were not mutually exclusive targets.

“Over last 15 years wind and solar resources have got cheaper than a typical base load power station run on fossil fuels. Renewables are intermitted, but because it is the least-cost option, a predominantly renewables system that includes other technologies for peaking and balancing is by far the cheaper option to achieve energy security.”

To close the electricity supply gap SA needs to deploy at least 5,000MW of renewable energy every year for the next 30 years, said Mudaly.

This requirement more than doubles to about 12,000MW that needs to be added every year when taking into account the renewable energy that will be needed to reach the lower end of what is possible in terms of green hydrogen production in SA.

For this to happen SA will have to invest in expanding and upgrading the transmission grid. Already, some of the capacity earmarked in rounds 5 and 6 of the Renewable Energy Independent Power Producer Procurement programme could not be awarded because there was not sufficient grid capacity available, said Mudaly.

Another challenge to the fast rollout of renewable energy is financing for large-scale projects.

Monetary tightening has resulted in the “disappearance of cheap money” in many countries, said Daher.

But especially in a high interest-rate environment, it now made more sense to invest in “cheaper” renewable generation capacity, that can be deployed quickly, rather than large fossil-fuel powered stations that will take longer and be more expensive to build, said Mudaly.

“It is important to remember that much of the new renewable capacity can be financed off of government’s balance sheet by the private sector. This means financing is not that much of an issue given the strength of the banking sector in SA,” he said.

erasmusd@businesslive.co.za