JAMES MACKAY: How to navigate the latest IRP to reach a sustainable future

The Energy Council of SA has been mandated by Business Unity SA (Busa) as the business lead on Integrated Resource Plan (IRP) engagements at Nedlac, ensuring that the voice of organised business is effectively represented in shaping the country’s future energy planning and policy direction.

This year has delivered a significant step forward in our energy reform journey with the promulgation of the Electricity Regulation Amendment Act (ERA Act) and Climate Change Act. These bills essentially legislate the shift to clean generation technologies and the transition from a centralised energy sector to a liberalised and competitive electricity market.

International experiences demonstrate that such reform steps enhance system efficiency and price discovery, which significantly lower long-term system costs and are also important for enabling system changes to accommodate increasing levels of decentralised private investment, higher system digitisation and highly distributed connectivity.

With this dynamic in mind, what is the role of the IRP? The plan has traditionally been a government central planning tool for public procurement, even limiting private investment to within set technology limits. However, that approach has become increasingly obsolete. With the government’s energy action plan advancing energy reforms, the IRP needs regular updates that optimally support and guide implementation of the government’s objectives, support market-led growth and signal system impacts and risks.

Another key change is the role of ministerial determinations under the ERA Act, which should now be used to mitigate market failures, but without robust modelling of technical options, impact and risk, oversight and reform leadership becomes speculative. While reducing carbon emissions and system costs are ideals everyone aspires to, powering the economy (investment) and keeping the lights on (security) will be prioritised, but not at any cost

Integrated planning and modelling also assist in quantifying the numerous implementation challenges, including fiscal limitations, capacity and skills gaps, lost time and optimising recapitalised aged coal generation.

The IRP approach must reflect the changing environment and needs. A critical model starting point should be the government’s legislated and stated policy ambition. Such a “policy compliant” reference case should also be aligned to a national integrated energy plan and should directly consider the following.

Economically:

• Support demand growth aligned with 3% — 5% GDP growth targeted in the NDP.
• Support the transition to a fully competitive electricity market by 2031.
• Enable market-driven procurement models that shift investment risk to the private sector.
• Promote efficient price discovery, operational cost discipline and investor confidence.

Socially:

• Prioritise local job creation and skills development across the energy value chain.
• Stimulate manufacturing through stable procurement linked to the SA Renewable Energy Masterplan.
• Promote inclusive economic participation, particularly in areas affected by de-industrialisation.

Environmentally:

• Ensure compliance with emission-reduction obligations and carbon budget.
• Integrate clean technologies such as solar, wind, storage and demand-side measures.
• Avoid stranded assets by sequencing decommissioning in line with system readiness.
• Show climate-aligned risks and system impacts to guide responsible transition decisions.

The modelling must go beyond simply testing energy adequacy and cost to analysing implementation impact and risk. This should include testing for emissions, overbuild, delays and stranded assets. Technology risks are key to optimal decision-making, improving investor confidence, ensuring policy consistency and clearly identifying where ministerial intervention may be required under ERA-legislated authority.

There are several key issues in the draft IRP that require further analysis to meet this outlined approach and support optimal decision-making:

• Application of least cost. The IRP’s shift from least-cost planning prompts important queries as to which other system variables are being prioritised, and the implications for consumers and the economy.
• The central planning approach remains. Though there are policy commitments to liberalise the electricity sector, the IRP still follows a centralised planning and procurement model. This differs from the government’s stated direction of market liberalisation and private sector participation.
• Technology bias. The shift from coal baseload to alternative baseload technologies reflects a preference, rather than a system optimisation. Consistency in bias is also not evident, demonstrated by a highly optimistic 10-year timeline for nuclear development, though extremely conservative view of coal energy availability factor (EAF) and grid expansion.
• The long-term EAF for coal is capped at 72% until the end of 2050. This is below the ministry’s and Eskom’s targets for improving coal fleet performance and would cause major inefficiency and cost.
• Renewable build downturn from 2028. The projected drop in renewable energy build from 2028 to an average of under 1GW per year falls significantly short of the minimum 4.3GW per year indicated in the IRP as being needed over the same period. Such a downturn is likely to trigger investor withdrawal and job losses as well as insufficient generation by 2030, potentially forcing a further extension of coal generation.

We are in the early stages of our energy transition implementation, with many complexities and challenges still ahead of us. The IRP remains a key policy guideline but must still progress through a policy alignment process under the energy & electricity minister before being presented to cabinet for approval.

The IRP is an opportunity to create national alignment and confidence in the government reform agenda, co-ordinate investment, signal market opportunities and manage the complex trade-offs inherent in SA’s energy transition.

• Mackay is CEO of the Energy Council of SA.