Will the Integrated Resources Plan of 2023 sufficiently address loadshedding?

Regarding politics, 2023 was a significant year for South Africa as President Cyril Ramaphosa boldly decided to appoint a Minister of Electricity. His mandate was to come up with a plan to address the Energy Crisis and to come up with a plan that would hopefully (eventually) eradicate loadshedding.

To expect instant results was ludicrous. Yet this was the frustration of most South Africans. According to Eskom Se Push, the country spent 408 390 minutes in loadshedding; this translates into 6 806 hours and 30 minutes which translates into almost 284 full days of loadshedding.

Let that sink in. Out of 365 days, South Africa only had a cumulative 81 full days of no loadshedding.

Considering the above statistic, there was always going to be plenty of pressure on Kgosientsho Ramokgopa’s (the Minister of Electricity) energy plan which hopes to address loadshedding. A plan has been published, and scepticism is already being highlighted regarding its efficacy.

The Integrated Resources Plan of 2023

A News24 article points out that the IRP2023 maps out the expansion of generation capacity over two-time horizons – one from 2023 to 2030 and the second from 2031 to 2050.

While the aim of the plan is to ultimately balance the supply of electricity with demand, it anticipates continuing power problems.

“Analysis of the period between now and 2030 highlights a concerning electricity supply and demand deficit. While ongoing additional generation capacity initiatives are expected to alleviate unserved energy, they do not fully address the underlying system adequacy,” it states.

For the period between 2023 and 2030, Government has modelled five different scenarios or supply options to determine their effectiveness in ensuring energy security.

The article adds that one scenario considers projects which are already under construction such as those from Bid Window 5 of the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), the emergency procurement round of 2021 (RMIPPPP), and business projects. The results of this scenario showed that there would still be a “very high level of unserved energy”, and the power system would still be constrained. In this scenario, the use of peaking power stations, such as Open Cycle Gas Turbines that run on diesel, would be very high, at levels above 80%.

A second scenario builds on the first, with the addition of Bid Windows 6 of the REIPPPP and the battery energy storage procurement programmes. The analysis reflects a marginal improvement in energy supply but still high levels of unserved energy or a supply and demand deficit. The use of peaking power stations still remains high.

The third scenario adds to the mix of the recently launched Bid Window 7 of the REIPPPP. In this case, there is an improvement in unserved energy levels from the year 2028, but it’s still an inadequate option for energy security.

The News24 article points out that a fourth scenario models the impact of adding new gas projects to the energy mix of scenario 1 (Bid Window 5 and the emergency procurement round). In this case, the power system will remain constrained until 2027. “Supply-side initiatives deployed are not adequate to eliminate unserved energy and restore the security of supply,” the IRP2023 reads. But it suggests gas would help improve the status of energy security significantly:  from year 2027, additional supply side initiatives in the form of new dispatchable gas restores security of supply with low or unserved energy. The usage of peaking power stations also reduces to 30%, but this is still high, the IRP2023 notes.

The final scenario models the energy mix in scenario 1 and the impact of the improvement in the performance of Eskom’s existing coal-fired power stations or the Energy Availability Factor (EAF). The EAF for 2023 averaged around 54%, down from 58% in 2022 and still much lower than the target of 70%.

The future of electricity supply

The News24 article points out that, according to the IRP2023, the future of South Africa’s energy security by 2030 relies heavily on the improvement of Eskom’s power stations (the EAF) which is considered “crucial” to making a “significant contribution” to restoring security of supply. The “accelerated” deployment of dispatchable capacity – namely gas – is also important.

The proposed energy mix highlights the need for additional generation sources such as solar PV, wind, and battery energy storage projects.

The article adds that the proposed plan also takes into account the addition of the last two units of Kusile (coal), solar PV procured from Bid Window 6, priority projects by businesses, and forecasts of rooftop solar PV.

Government also expects more solar PV and wind to be added by business from 2027 – but this is not included in the plan.

The article points out that the IRP2023 also highlights the importance of Koeberg nuclear power station securing a licence to continue operating beyond 2024 – otherwise the country would lose 1 800MW and the expansion and strengthening of the grid to connect new projects. The power station’s Unit 1 recently successfully completed a critical test following the installation of its steam generators as part of efforts to continue operating beyond 2024.

Scepticism has already reared its head

Another News24 article points out that there is plenty of scepticism about whether this plan will work.

Some analysts point out it is difficult to interrogate the proposed energy mix, without being provided the assumptions used in the modelling – this information has been provided in previous iterations of the IRP. “It lacks detail. There are a lot of unanswered questions, and there is a lack of clarity when it comes to the assumptions,” Gaylor Montmasson-Clair, a senior economist at independent think tank Trade and Industrial Policy Strategies, told News24. He added that the costing is also not clear because no financial or economic information is provided.

Independent energy analyst Clyde Mallinson pointed out that the document was an “extremely shoddy piece of work”, lacking references to sources and costing used, and came to “unsubstantiated” conclusions. “We can’t test the modelling because we are not provided with the input assumptions.” He expressed little confidence in the proposed energy mix.

Montmasson-Clair, however, found it “strange” that most of the scenarios modelled for the short term do not achieve energy security, especially because this should be the primary goal or bare minimum that must be achieved before the least-cost and low-carbon options for the energy mix are considered. “Why are we bothering with scenarios that do not achieve energy security?” he asked. “It is very strange to me, and I do not have an answer,” an exasperated Montmasson-Clair said.

Let’s get serious about diversification

Last year, Turnaround Talk published several articles which highlighted the lengths that some companies went to in order to mitigate the harshest impacts of loadshedding. Massive retailers such as Pick ‘n Pay and Checkers are spending billions on generators so that their stores remain open during loadshedding. Other companies are investing in solar, which will power the essential components of their business so that the wheels of industry remain turning.

However, the harsh reality is that many other companies cannot afford either of these options. These companies face the harsh reality of financial distress and the emotional turmoil associated with either business rescue or liquidation.

Economists and the African National Congress have highlighted the need to diversify the country’s economy in the past. Small, Medium and Micro enterprises (SMMEs) can play a significant role in this diversification, provided they have the tools to trade. We cannot build a strong economy when the majority of SMMEs are financially distressed because of electricity issues.