LUNGILE MASHELE | ‘We should question how the National Planning Commission comes to its conclusions’

The role of the National Planning Commission (NPC) is to provide strategic planning for the country. However, in recent weeks it has found itself breaching the lobbying, policy advocacy and policy review line.

In SA, energy policy and planning is done by the department of mineral resources & energy (DMRE). It is centralised here to ensure consistency and forward planning cognisant of all government and private sector interventions.

The key document emanating from this energy planning department is the Integrated Resource Plan (IRP). The key function of the IRP is to give technology and capacity allocations over a defined period. To model the IRP, a system called PLEXOS is used. This system considers technology cost, tariffs, emissions, transmission constraints, economic outlook, energy trading, electricity production, energy availability, fuel costs, demand and generation profiles, decommissioning, growth in population and GDP. It even forecasts, which is what makes it valuable.

These inputs are provided by a broad number of partners and refined by inputs from Eskom, the DMRE and CSIR. Energy planning concerns itself with political, regulatory, technical, economic and social parameters, which is why each country’s energy plan is unique to its conditions and developmental aspirations.

Over the last week, the NPC announced a broad number of interventions to curb load-shedding — one of these was a rather odd request for the procurement of 5GW of battery storage and 10GW of renewables within 24 months. Bar that none of this is based on any engineering or economically sound solution and will not solve load-shedding, but:

The first question would be, is the NPC recommending procuring for capacity or for energy? Why are they specifying what technologies should be deployed? Is their role not to call for electrons on the grid and remain non-partisan to the technology source?

Second, is this capacity part of the existing IRP or are they calling for something outside the national plan?

Third, how was this capacity requirement modelled and by whom? Did this NPC call for accelerated procurement undergo any external validation, stakeholder engagement or must we assume that the NPC trumps all ministries and industry bodies?

Now what makes the NPC request devoid of any common sense:

1. The timelines presented. SA has over the last 10 years of the Renewable Energy Independent Power Producer Procurement Programme only managed to install about 6000MWp of renewable capacity. The NPC makes the claim that it has evidence this can be done in two years — where is this evidence of auction processes taking less than two years from RFP to commercial operation date? Where is the evidence of how grid constraints in areas like the Northern Cape, as well as other coastal regions that are fast facing constraints with evacuating renewable energy generation capacity, will be resolved to expedite the connecting of projects that are immediately available for building? (Noting that the preparation of projects, from land acquisition to resource management and environmental and other authorisation processes is a multiyear process). If some of the proposed capacity is to come from private PPAs, what solution is being proposed to capacitate Nersa and municipal functionaries to deal with the anticipated volume of licensing, registration and use of systems applications?
2. Battery is not cheap. The overall capital cost for a 4-hour utility battery system is above $350/kWh (about R5,977/kWh) based on research done by the National Renewable Energy Laboratory. Costs are predicted to come down over the next 30 years however this is predicated on global supply chain issues, raw material inputs, mass adoption etc. The NPC wants to procure 5GW of battery storage. To provide some comparison, the US has 2.5GW of battery installed and globally only 20GW of utility scale battery has been installed. If we use the current Eskom battery procurement (360MW with 4-hour capacity for R11bn) that means a 5GW battery is therefore over R150bn and with a 15-year life. The NPC wants SA to procure a quarter of global capacity in 24 months with nary a mention of what this will do to tariffs or whether globally this can even be supplied. Additionally, no thought has been given to where the inputs for this additional 10GW and 5GW storage are going to come from. Where are the mines and supply chain systems that are ready to provide this?
3. To suggest that our policies and legislation should be subverted and that our people doing a thankless job at Nersa, the DMRE, National Treasury and other bodies, are anything but “red tape”, is simply shocking to say the least. These suggestions are nothing but policy-making through the back door.

SA is the most unequal society in the world and has the world’s highest rate of youth unemployment.

When the NPC speaks of scrapping local content requirements, who are they pandering to? If SA is to embark on a very ambitious 10GW renewable energy build programme to be executed in 24 months, why would the focus not be on ensuring optimised jobs and economic growth through local manufacturing and industrialisation — especially in light of the much touted ‘post-Covid economic recovery’?  Why can’t both accelerated deployment and industrialisation be pursued with the same vigour?

While I support the call for the 100MW embedded generation cap to be dropped and the private sector to be allowed to procure as much as they want, the reality on the ground is very different. A month ago, Nersa approved 16 embedded generation projects, the total capacity was 211MW. Despite the cap allowing for a whole lot more, very few entities have gone that route.

We would be wise to remember that the amendment to schedule 2 of the Electricity Regulation Act which called for a 100MW cap was not based on any modelling but rather on lobbying and the four private companies who wanted a higher allocation. This ultimately is the problem of not having evidence-based decision and policy-making but rather lobbied stances.

There is also the oft harpooned cost of renewables which are in decline. This is not true any more. This is evidenced in the postponement of Bid Window 5 of the REIPPPP because their bid tariffs were unrealistically low.

Should a concession be made to these BW5 participants, and a tariff review be introduced, what is to stop future window bidders from bidding low and requesting tariff revisions before financial close? Does this not create moral hazard?

Furthermore, looking at levelised costs of technologies alone is a fallacy because it does not consider transmission costs, variability and backup costs which have invariably driven up tariffs in places like California and Germany.

It is becoming apparent that the NPC is driving a personal agenda that is both unfounded and devoid of any common sense. One must wonder where the NPC is deriving their mandate or better yet, who are they listening to?

It is also curious that the NPC, with all due respect, has no discernible energy experts on board and yet makes recommendations that are oddly exactly the same as those made by discredited institutions, whose funding and ulterior motives remain rather murky.

Has the NPC in their recommendations — especially in such difficult times in SA and with the destruction of the July 2021 social unrest still gripping hearts, minds and businesses — considered the social, economic and political ramifications of their proposal? Have they considered what their recommendations mean for a country where only 1% of the working class earn above R10,000 per month? Does the NPC know that Ghana’s energy debt caused by capacity payments, accelerated procurement, dubious contracts and sovereign guarantees is what has now led them to the IMF?

Revolutions as what we’ve recently seen in Sri Lanka stemmed from inequality, deepening poverty, worsening unemployment, inflation, high electricity and fuel prices. Energy being the backbone of any modern-day economy means that energy planning considerations must be especially inclusive and consider the most vulnerable members of our society. In a bid to “end load-shedding”, the NPC should not lead SA with promises of trinkets only for those to be an albatross around our necks for the next 20 years.

Mashele is an independent energy expert

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