GAVIN NOETH | SA is sitting in a power black hole when it could easily be a world leader

From a renewable energy perspective, SA is perfectly positioned to make electricity generation a major economic driver

09 November 2021 - 20:14 By Gavin Noeth
The dramatic easing of restrictions for self-generation of electricity in SA is a very positive signal to investors.
POWER PLAY The dramatic easing of restrictions for self-generation of electricity in SA is a very positive signal to investors.
Image: 123RF/Vaclaw Volrab

For a while, and particularly during the last few weeks, it’s clear that SA is in the midst of a power crisis. Eskom’s ageing infrastructure, reduced reliability and inferior quality of coal, and the significant gap between power generation capacity and demand, have left the country in the grip of regular rolling blackouts. It is this reality that has made the government face the fact that the national power utility is not in a position to easily or quickly turn its situation around.

However, President Cyril Ramaphosa’s announcement in June increasing the electricity generation threshold for private energy producers from one to 100 megawatts (MW) could signal a new dawn for SA.

This announcement enables private producers to generate up to 100MW of power capacity without needing to obtain a licence from the National Energy Regulator of SA (Nersa). To put this into perspective: 1MW is enough to power a small shopping centre, 10MW can easily power a mine, and 100MW can provide enough electricity for around 3,000 homes.

The 100MW rule change will significantly reduce red tape for many independent power producers (IPP) and could mean increased privatisation of electricity generation in SA. It is definitely a game-changer for SA’s energy industry, businesses and everyday South Africans.

The 100MW self-generation threshold has the ability to act as a catalyst by enabling a significant increase in the establishment of renewable power plants across the country.

If private producers take advantage of the opportunities that this exemption introduces, we could potentially see a reduction in blackouts and strain on the national grid. But the greatest impact is likely to be seen in its facilitation of the development and growth of SA’s renewable energy industry and in helping to move the needle towards the establishment of a more environmentally friendly country.

SA has the potential to become a global leader in renewable energy generation due to the country’s geographical position, available natural resources and access to both domestic and external expertise.

The country has a wealth of large open spaces available for the construction of power generator plants, while an average of 2,500 hours of sunshine per year and radiation levels make it an ideal fit for solar power. Additionally, the country’s total wind power potential is estimated at 6,700 gigawatts — on par to compete with solar potential.

Europe and Japan are rapidly developing green hydrogen and green ammonia technologies, and are promoting them as future sources of fuel to replace, or at least significantly reduce, reliance on oil and gas as fuel sources. The market for renewable energy power generation has huge potential growth in line with the move towards green hydrogen and ammonia. The northern hemisphere is not well endowed with sunshine, and countries such as SA have been identified as being well-placed as a major exporter of green hydrogen and ammonia using solar energy to produce them. The significant potential of green hydrogen and ammonia has already been recognised by the South African government with it being on the radar of the ministries of higher education, science and technology, and trade, industry and competition, which are engaging with European markets in this regard. Most importantly, I understand this is on the radar of the Presidential Infrastructure Coordinating Commission.

The 100MW self-generation threshold has the ability to act as a catalyst by enabling a significant increase in the establishment of renewable power plants across the country. In turn, it could allow the country to position itself as a forerunner in the manufacturing of renewable inputs such as solar panels and wind turbines.

As a result, skills and expertise capacity in the local industry would be built up, boosting employment, and local science and research capabilities in renewable and green fuel technologies would be developed.

The country’s domestic electricity generation capacity now stands at 58,095MW, with coal accounting for 80% of the national energy mix, while renewable energy only makes up 10%. This reliance on coal in what is an energy-intensive economy has resulted in the rise of SA’s carbon emissions over the past few years, despite pledges to adopt more ambitious climate action.

The country sits at the top of Africa’s big carbon emitters, with a record 471.6-million metric tons of carbon emitted in 2019. The environmental organisation Greenpeace also notes that SA’s coal-fired plants emit 10 times more nitrogen oxide than China and Japan.

Growth in the number of renewable energy plants will ensure a more sustainable and diverse energy mix, accelerating efforts to meet climate change and carbon commitments to cut greenhouse gas emissions by 28% before 2030. 

Energy demand in SA is on the rise. The 100MW exemption opens up new opportunities to close the gap between capacity and demand, but there will be a need for significant investments in the industry to realise the future that this rule change could make possible.

As it is likely to take a minimum of two years to build a plant that can generate 100MW of electricity, the private sector must grab this opportunity with both hands and gear up to embark on sizeable renewable power projects in the forthcoming years. However, it’s important to note that we will probably only start to see the benefits in the next decade or so, as the market reforms now under way need to reach their conclusion and grid capacity constraints need to be resolved. 

SA is now sitting in the era between industrialisation and the fourth industrial revolution, and energy has a critical role to play in the country’s transformation. If IPPs can effectively take advantage of the doors that the 100MW announcement has opened, we could not only overcome our power challenges as a country but reimagine the energy industry in SA and the wider world within the next decade.

Gavin Noeth is senior consultant: infrastructure and projects at CMS SA.

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