Big problem with government’s energy plan

Asset management firm Futuregrowth said the biggest issue with the government’s latest Integrated Resource Plan (IRP) is that it minimises the role of the main solution to South Africa’s energy challenges – renewable energy.

Futuregrowth’s Bonga Maliwa said South Africa has been heavily impacted by load-shedding over recent years.

The energy crisis has had serious negative consequences for the country’s GDP growth and the general economic well-being of the South African population.

Therefore, in October 2019, the Department of Mineral Resources and Energy (DMRE) published the IRP 2019 in response to the country’s energy generation challenges.

This plan set out South Africa’s energy generation plans for the next 11 years. 

At that point, renewable energy projects were proposed to provide in excess of 25 GW of new generation by 2030 to offset the decommissioning of Eskom’s ageing coal plants. 

According to the DMRE, the IRP “is a living plan that is expected to be continuously revised and updated as necessitated by changing circumstances.” 

In January 2024, the DMRE released the draft IRP 2023 for public comment, which raised major concerns among energy experts.

The IRP 2023’s proposed solution to the country’s energy challenges is to prolong the life of the ageing Eskom coal plants and use unproven “clean coal” technologies to mitigate against adverse environmental impact from these plants.

“Coal plants have long been synonymous with negative environmental impact due to the reduction in air quality and health risk to surrounding communities,” Maliwa said. 

“The plants have also been shown to be very unreliable due to the ageing infrastructure and historical maintenance neglect.”

This was seen in 2023, when South Africa suffered from severe load-shedding related to a large increase in unplanned plant breakdowns, even during low periods of energy demand. 

This was mainly attributed to the frequent breakdowns of the ageing power plants.

“We, therefore, do not think it pragmatic to rely on Eskom’s ageing generation units, or their refurbishment, to solve South Africa’s energy challenges,” Maliwa said. 

“There is no evidence that the unplanned breakdowns will be solved in the medium term, as set out in the draft IRP 2023.” 

“The consensus view by energy experts across the country is that the only way to solve load-shedding is from new investments into renewable energy projects.” 

He said this is in addition to the feasibly high costs of keeping the existing plants running. It also seems likely that the mooted “clean coal” technology would be uneconomically expensive, assuming it could even be executed.

Maliwa said the biggest issue with the IRP 2023 is that it minimises the role of renewable energy as the main solution to South Africa’s energy challenges.

This is despite the PCC’s conclusion that electricity planning should consider the requirements of mitigating climate change and be anchored on least-cost pathways. 

According to the PCC, “The least cost, no-regret option remains renewables, batteries, and balancing and peaking support, for example, from gas.” 

“Not only are these the cheapest, secure options, but they are also the only options with build times short enough to make a meaningful impact on load-shedding.” 

“It is clear that the proposal to prolong the use of unreliable coal plants goes against the recommendations of both the IRP 2019 and the PCC and is also in conflict with the National Development Plan goals set by the President,” Maliwa said.

He added that some of the other proposals in IRP 2023 are also impractical, such as the assumption of 3 GW coming from a new Eskom-built gas plant in 2028. The IRP does not explain how this will be funded. 

Eskom’s R254 billion treasury bailout precludes the group from spending the bailout funds towards new capex beyond transmission and distribution.

In addition, in the first round of public engagements after the release of the IRP 2023, the DMRE admitted that it had identified a 100 GW pipeline of private power projects. 

About 53 GW of these are considered firm prospects, having secured the sites and clear operational dates or having reached a financial close. 

“It seems strange that this aspect was not included in the draft IRP 2023,” Maliwa said.