Business Maverick

POWER CRISIS OP-ED

SA lags behind in facing up to the magnitude of global energy insecurity

SA lags behind in facing up to the magnitude of global energy insecurity
(Photo: Unsplash / Alex Goman)

Acute energy insecurity threatens much of the world right now. But there appears to be some light at the end of the tunnel in the hardest-hit developed economy, Europe, where countries are putting in place measures to reduce their dependence on Russian oil and gas, and avoid labour strikes. South Africa, however, is not showing anywhere near the same level of determination to turn around its dire situation.

The International Energy Agency defines energy security as “the uninterrupted availability of energy sources at an affordable price” – and the world is fast moving to the other end of the spectrum, where acute energy insecurity threatens to undermine the already shaky foundations of the global economy.

Governments around the world are grappling with how to cope with constrained supply, with Europe in effect at ground zero as countries in the region race to reduce their dependence on Russian energy sources without plunging the Eurozone into recession.

In South Africa, we’re also in the thick of it. Decades of underinvestment and corruption, and now strikes, threaten a complete shutdown of the entire power grid. Also, fuel prices have doubled in a year, putting disposable incomes under tremendous pressure.

A US Congressman encapsulated the global position well: “I think if you’re at this moment in energy security, it’s very precarious.”

This week the National Planning Commission expressed its grave concerns about the electricity crisis, recommending government put in place urgent measures to stop the load shedding that has plagued the country since 2008. 

Calls for President Cyril Ramaphosa to declare a state of emergency are growing louder too. 

It highlights the most immediate priority – ensuring new generation capacity “is rapidly and urgently brought on to the grid, together with significant new storage capacity”. 

Evidence suggests it is possible to do this within 24 months if 10,000MW of new generation capacity is rapidly constructed and commissioned, as well as 5,000MW of storage capacity.

Is there any light at the end of the tunnel? Just as with any threat to survival, it sometimes takes staring down the barrel of a gun before people are kicked into action to do what it takes to survive.

Europe has moved mountains in less than five months to materially reduce its dependence on Russian oil and gas, and the US, UK, Netherlands, France and Germany have crafted solid plans to set them down the path towards achieving energy security again.

Germany, which in effect outsourced its energy needs to Russia, has seen its dependence on Russian oil decline to 12% compared with the 35% in 2021. According to an Economic and Climate Control Ministry report, it is now realistic to end Europe’s dependency on oil by late summer (our late winter). 

Weaning Europe, and particularly Germany, off Russian gas is far more of a challenge. 

According to a Brookings article, “Putin’s War and European Energy SecurityA German perspective on decoupling from Russian fossil fuels, the gas imports from Russia have fallen to 26% from 40% before the war. It says EU’s Estonian energy commissioner, Kadri Simson, believes Europe is on target to reach 13% and aims to phase out gas completely by 2027.

The decline in the region’s reliance on Russian gas has been forcibly accelerated by Russia reducing gas supplies to Europe in reaction to the Eurozone imposing oil sanctions on the warring nation. 

Oxford Economics analysis this week found that by the last week of June, Russia had cut its supplies of gas to Europe by 70% compared with last year, “with risks skewed towards even more reduced supplies”. 

Daniel Kral, senior economist, says: “Given the limited scope to offset the fallout from other sources and infrastructure constraints, gas shortages this winter in Germany, Italy and some central eastern European economies are increasingly likely.”

Kral expects gas storage levels of 60% in early July are expected to remain below the 80% storage levels mandated by the EU by November. 

He is less optimistic than Simson about how quickly Europe will be able to get on an even keel without Russian gas supplies, predicting that there will be gas rationing in the region this winter but, more hopefully, he adds that the large investments under way suggest gas rationing is not likely the following winter.  

The US is playing a key role in facilitating the decline in Europe’s dependence on Russian gas. A joint US-European Commission statement on European energy security says that, since March, there has been a 75% increase in global liquid natural gas (LNG) exports to Europe, while US LNG exports to Europe have nearly tripled. 

In contrast to South Africa, where the Eskom labour strike has crippled energy supply over the past few weeks, government this week stepped in to stop an oil and gas labour strike in Norway, now a crucial supplier of gas to the rest of Europe.

In a similar vein, the UK, in its landmark Energy Security Bill, enshrined into law new powers “to help prevent disruption to fuel supply because of industrial action, malicious protests and on grounds of national security”.

The bill is also intended to unlock “the most ambitious package of energy measures” to increase the UK’s energy security by attracting private investment, reindustrialising the economy and creating jobs through new clean technologies.

Back home, South Africa is still trying to rally the same sense of urgency and determination to get the country and economy moving towards much-needed energy security, even though we are currently plunged into darkness for at least five hours a day. 

Thus, it’s likely to be a rocky road, but, as the NPC estimates, it would be possible to rapidly construct and commission 10,000MW of new generation capacity and 5,000MW of storage capacity within 24 years. 

But we need to start now. BM/DM

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