Energy policy uncertainty is being addressed. And the energy reform process is well under way, and is at the centre of the country’s economic recovery effort, said President Cyril Ramaphosa in his weekly newsletter to the nation on Monday morning.
“The progress we are making in the area of energy policy reform isn’t just critical to fixing the current power supply crisis. It will begin to reduce the impact of electricity interruptions on businesses. It will create investment possibilities – and upstream and downstream industrialisation opportunities – as we build new generation capacity and expand the electricity grid in the years ahead,” he said.
Ramaphosa believed that power and other economic reforms would establish a “firm and enduring foundation for the return to growth and job creation that South Africa sorely needs”.
It all starts with the integrated resource plan, he said, and addressing and overcoming the financial, structural, managerial and operational challenges at Eskom has taken place alongside fundamental structural reforms to assure the future of South Africa’s energy supply.
These are the steps Ramaphosa outlined to ensure South Africa gets the power it needs to rebuild the economy:
The integrated resource plan
The crucial first step in this reform process was the release of the integrated resource plan last year. The plan updates the national energy forecast and provides a road map for our energy sector for the next decade.
It clearly outlines our energy mix, sets out key policy supply and demand decisions to support electricity infrastructure development, and paves the way for investment in low-carbon, climate change resilient energy sources and technologies.
Stabilising South Africa’s state-owned enterprises is an important part of the reform process. In this regard, government is working to restore Eskom’s operational capabilities and restructure Eskom to fundamentally change the way in which we generate and transmit electricity in our country.
“Our vision is to lead South Africa though a just transition which ensures that as many people as possible benefit from the investment, growth and job-creation that we can achieve through expanding our electricity generation capacity,” said Ramaphosa.
He believed the progress was being made to overcome the challenges that Eskom had faced.
“As part of the necessary restructuring process, separate governance structures in the form of boards have been appointed for the power utility’s generation, transmission and distribution divisions, as we announced at the state of the nation address. Improvements are continuing in municipal debt collection. Despite recent challenges we have faced with load shedding, maintenance work is continuing at power stations,” he said.
The procurement of power from independent producers will significantly increase investment in the sector, particularly in renewables and gas. This will attract greater investment in energy and create much needed jobs, and spur business development and localisation.
“As we begin the long and difficult recovery from the coronavirus pandemic, we can draw encouragement, confidence and hope from the measures we are taking now to address our immediate electricity challenges and secure our energy supply well into the future,” said Ramaphosa.
“As we know only too well our energy security is precarious and load-shedding imposes very high costs on our economy. Our fleet of coal-fired power stations is ageing, vulnerable to breakdowns and incurs significant maintenance costs,” said Ramaphosa.
“Reliable, secure and affordable energy supply is the lifeblood of any economy. To limit the impact of climate change, it is equally important that energy is sustainable and environmentally sound.”
South Africa has one of the most energy-intensive economies in the world. Although its energy sources have become more diverse than before with the increasing inclusion of renewable energy sources, the country remains heavily dependent on fossil fuels, mainly coal.
It is a water-stressed country and coal power generation consumes vast quantities of water.
Nearly 12MW more power
“We have decided that to grow our economy and attract investment, secure and sustainable energy supply is paramount,” Ramaphosa said.
“It is therefore vital that we significantly, and speedily, increase our electricity generation capacity.”
Following the commitments made in the state of the nation address in February, government has gazetted ministerial determinations that will enable the development of more than 11 800 megawatts (MW) of additional power generation. South Africa currently has in the region of over 30 000MW of electricity available on the national grid each day.
“This signals government’s clear intention to move ahead with one of the key reforms that is needed to unlock the growth of our economy and attract much-needed investment,” said Ramaphosa
“This new energy will be procured from diverse sources, including solar, wind, gas, coal and storage. While meeting our energy needs well into the future, this new capacity will also help us meet our international obligations to reduce carbon emissions.”
This electricity will be procured through a transparent tendering process that prioritises competitiveness and cost-effectiveness.
Most importantly at a time when energy supply is severely constrained, new generation projects that can be connected to the grid as soon as possible will be prioritised. The next step, which will be following soon, is to initiate various procurement bidding windows including opening Bid Window 5 of the renewable energy independent power producer programme.
This is in addition to the 2 000MW of emergency power that is being urgently sought through the risk mitigation procurement programme to meet the country’s current energy shortfall.
In an effort to facilitate electricity self-generation and as part of the reform process, we have removed the licensing requirement for self-generation projects under 1MW. So far 156 self-generation facilities under 1MW have been registered, with a total installed capacity of 72 MW.
“For facilities that can generate above 1MW, the National Energy Regulator of South Africa is improving its licensing processes to improve turnaround time. So far, five such facilities, with total installed capacity of 25 megawatts, have been licenced,” said Ramaphosa.
“Work is being undertaken to reform the regulatory environment to ensure that we make fuller use of the great potential in this country for self-generation among commercial and industrial users.”
As part of the regulatory reforms, draft amendments to regulations that would enable municipalities in good standing to procure their own power from independent power producers will soon be gazetted.