In the blinding dust of the electricity crisis kicked up by some politicians, former utility CEOs trying to avoid serious jail time and many vested interests, it is easy to miss important information when it is released.
A draft report, “Electricity planning & recommendations for SA’s electricity future”, dated April 6 and produced by the Presidential Climate Commission under the executive directorship of Crispian “Chippy” Olver, found its way onto my desk. It uses the latest scientific modelling and consensus to debunk many of the myths being flung about in the arena as the battle of ideas continues.
The authors note that climate change will drive low carbon transitions across the economy and energy sector, but focus this report on the electricity sector — for obvious reasons as we slip meekly into stage 8 load-shedding amid Eskom’s silence after the trip at Koeberg unit 2. The prospect of stage 10 load-shedding this winter looms large.
The Integrated Resource Plan (IRP) 2019 provides that most new generation will be from renewable-based technologies (wind and solar). However, there is debate about whether SA is moving fast enough to meet climate commitments and the requirements of science. Stakeholders also advocate for additional new generation to close the supply gap and ensure reliable, sustainable electricity into the future.
The report was compiled to help policymakers consider the climate constraint (carbon budget) and key elements of a just energy transition when undertaking the electricity planning process. It reviews current initiatives and studies and has canvassed broadly to make its recommendations. The recommendations are a mix of support for existing no-regret measures, suggestions on new ways forward, and thoughts on what requires additional study or attention.
While the authors acknowledge that the uncertainty in models often increases as events get further away in time, all the local and international models used and assessed in making the recommendations in the report conclude that even if no climatic constraints are imposed, a least-cost power system consists of variable renewable energy (wind and solar), storage (batteries and pumped hydro), and peaking support (usually, but not always gas).
Even though coal and nuclear are technological possibilities in the models, none of them — including the IRP 2019 least-cost scenario — develop additional coal or nuclear. This is simply because these technologies are not the most affordable solutions. The basis for evaluating various power futures thus depends on other factors that may cause a variation from the lowest cost.
Limiting borrowing
SA is in effect designing its economy by allocating the carbon budget across economic sectors to maximise economic and social return. However, if fossil fuels are added to the mix this would reduce the carbon emission allowance available to other economic sectors that are harder and more expensive to decarbonise. Exceeding the budget would worsen climate impacts, with dire economic and social consequences. Accelerating the coal transition would also incur additional costs and render the electricity system cost more expensive. So settle down all those who froth at the mouth that we are ridding ourselves of coal too quickly.
Meanwhile, SA’s current electricity crisis requires urgent immediate interventions. While electricity minister Kgosientsho “Sputla” Ramokgopa is advocating for increased investment in our ageing coal-fired power stations, finance minister Enoch Godongwana has stated categorically that no more funds will be made available apart from the R254bn detailed in the 2023 budget, with all its conditions to focus on serving existing debt as it matures, and limiting Eskom’s capital expenditure borrowing to investment in transmission and distribution, with no new generation projects funded.
Additionally, any funds raised from the sale of noncore assets must be put towards debt relief, which can only be used for debt repayments and interest. And Eskom may not make any adjustments to remuneration that negatively affect its financial position. Godongwana said in an interview at the IMF spring meetings on Friday that the utility “does not require any further cash injection”.
It is stated decisively in the report that electricity policy decision changes in the short term to address the urgent need for electricity access will not compromise the long-term, least-cost and climate-compatible energy mix. This is because in the short term the least-cost, no-regret option remains renewables, batteries and peaking support from gas, with the exact amount still uncertain and in need of further study and sensitivity analysis.
“Not only are these the cheapest, most secure options but they are also the only options with build times short enough to make a meaningful impact on load-shedding. Furthermore, they are the options that will attract the best finance terms. It is possible that new coal is not financeable.”
Given all of this, one has to question why the electricity minister is on a mission to sell red herrings and fallacies as real solutions to the crisis. Surely this puts paid to his plan A of increasing investment in the coal fleet, apart from what the Treasury said about assessing which are salvageable for concession to the private sector?
These are dark times. What is Sputla’s plan B?
• Avery, a financial journalist and broadcaster, produces BDTV’s Business Watch. Contact him at badger@businesslive.co.za.
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