Diversification of SA’s energy mix is the answer to future coal shortages

03/07/2018 (South Africa)
Diversification of SA’s energy mix is the answer to future coal shortages

With winter on our doorsteps and coal shortages at several of Eskom’s power stations threatening to bring back electricity blackouts, South Africa has once again been woken up to the importance of having a diversified energy mix that is not heavily dependent on one energy source.

The recent media reports about coal shortages at seven of Eskom’s power stations have brought back the unpleasant memories of 2008 power cuts, which were caused by electricity demand outstripping supply due to decades of underinvestment in our country’s energy generation, transmission, and distribution infrastructure.

The underinvestment in energy supply cost our country jobs as many businesses were forced to shut down after suffering financial losses because of disruption of operations by the blackouts. 

While the coal shortages may be able to be resolved in the short term, the risk of excessive reliance on coal needs to be curtailed by ensuring that SA has a balanced energy mix that accommodates various energy sources from renewables, gas and hydro to nuclear and coal. 

This ensures that not all our eggs are in one basket.

According to the Department of Energy (DoE), about 77% of SA’s electricity is currently generated from coal, but coal is a fossil fuel that emits large amounts of greenhouse gases that cause climate change. 

It is therefore imperative that we reduce our exposure to carbon emissions by switching to cleaner energy sources such as solar power, which could be complemented by natural gas. Operating an energy grid that is fed mainly with low-cost, clean energy will enable SA to cut its carbon emissions.  

An analysis conducted by the Council for Scientific and Industrial Research (CSIR) shows that the least costly energy mix for SA by 2050 is the one based on renewables making up the bulk of the portfolio, with the remainder taken up by natural gas, hydro, and cleaner coal. 

The CSIR is not alone in calling for an energy mix that is predominantly based on cleaner energy sources. 

In countries like Australia and the US, the debate has swung firmly in favour of energy portfolios that are based on a combination of renewables and gas because this combination of energy sources results in a lower levelised cost of energy. 

Importantly, it is also far less harmful to the environment, thereby contributing to the reduction of climate change.

In the case of SA, renewables currently make up 5% of the energy mix while gas accounts for less than 3%, according to the South African Oil and Gas Alliance (SAOGA). 

There is room to drastically increase the share of renewables and gas to lessen our reliance on coal, so that when economic growth improves there is enough power supply to meet demand.

The recent signing of the R56bn power purchase agreements by energy minister Jeff Radebe for the procurement of 2 300 megawatt (MW) of renewable energy from 27 power plant projects will go a long way towards boosting the portfolio share of renewables, but there is still a big requirement to ramp up the rollout of solar and wind energy. 

An estimated 58 000 jobs will be created by the 27 projects. 

Radebe has also indicated that the government was considering expediting the signing of projects in the next window of the independent power producer procurement programme (REIPPP) for an additional 1 800 MW of renewable energy. 

These bids were originally submitted to the department in November 2015, but no successful bidders have been announced yet. If these agreements are signed and the projects go ahead, an additional R63.4bn of investment and 80 000 new jobs could be unlocked, Radebe said.

On the gas front, more progress needs to be made by the DoE in the execution of the LNG-to-power (liquefied natural gas) programme, which could complement renewables and could be used as SA’s new baseload power source. 

Gas could also be used to stimulate industrial development and contribute positively to the transport sector. 

Nothing much has happened with the LNG-to-power programme since the DoE released the preliminary information memorandum in October 2016, whereby the department provided details about the programme to facilitate industry feedback and interest. 

The DoE has, however, maintained that it has continued to work on this procurement programme despite what seems like delays. 

Given the drive by President Cyril Ramaphosa to attract $100bn of foreign direct investment (FDI) into SA over the next five years, we are likely to see a spike in energy demand as the FDI comes in and the economic growth outlook improves. 

We need to ensure that we have a diversified energy mix that meets SA’s needs and supports growth. 

The renewable energy sector will not only contribute to power generation, but it could also be a vital source of the investment that SA’s economy seeks. 

The sector has already pumped over R250bn into our country’s economy and an energy policy that provides certainty could bring more investment into our country. 

The promulgation of the updated Integrated Resource Plan is crucial if we are to attract more investment into our energy sector.  

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