Business Maverick

POWER CRISIS

Ramaphosa’s energy plan will add 1,950MW in the next three months – not enough to end rolling blackouts

Ramaphosa’s energy plan will add 1,950MW in the next three months – not enough to end rolling blackouts
From left: Minister of Police Bheki Cele. (Photo: Gallo Images/Beeld/Deaan Vivier) | Minister of Forestry and Fisheries and Environmental Affairs Barbara Creecy. (Photo: Leila Dougan) | Finance Minister Enoch Godongwana. (Photo: Gallo Images / Brenton Geach) | Minerals and Energy Minister Gwede Mantashe. (Photo: Gallo Images / Jeffrey Abrahams) | Public Enterprises Minister Pravin Gordhan. (Photo: Waldo Swiegers / Bloomberg via Getty Images)

The interventions made by President Cyril Ramaphosa to deregulate the energy sector and include the private sector to play a major role in ending the 14-year-old electricity crisis are set to yield an energy supply of about 1,950MW in the next three months. At worst, Eskom faces a shortage of up to 6,000MW.

President Cyril Ramaphosa’s energy plan, which embraces the private sector in resolving South Africa’s perennial electricity crisis, is set to add nearly 2,000 megawatts (MW) over the next three months, which is not enough to make a dent in or alleviate crippling bouts of Eskom power cuts.  

At worst, Eskom faces a shortage of up to 6,000MW of electricity as many of its creaking power stations are susceptible to breakdowns – as seen in early July when rolling blackouts were pushed up to Stage 6 due to workers of the power utility downing tools. 

The interventions made by Ramaphosa to deregulate the energy sector and include the private sector to play a major role in ending the 14-year-old electricity crisis are set to yield an energy supply of about 1,950MW in the next three months. This, arguably, still creates an energy supply shortfall of about 4,000MW (on the worst days of power cuts), placing South Africa in the precarious position of facing further bouts of rolling blackouts that cripple the economy and stunt investment potential.  

Most of the energy interventions proposed by Ramaphosa are likely to start making a dent in rolling blackouts by 2023, implying that they are here to stay for another 12 months.  

Read more in Daily Maverick: “Here it is: Ramaphosa’s ‘energy action plan’ to end SA’s rolling blackouts

During a press briefing on Monday, Ramaphosa’s Cabinet ministers, including Gwede Mantashe (mineral resources and energy), Pravin Gordhan (public enterprises), Enoch Godongwana (finance), Ebrahim Patel (trade, industry, and competition), Bheki Cele (police), and Barbara Creecy (forestry and fisheries) provided more details about the President’s energy plan.  

Gordhan, who is responsible for Eskom’s operations, said nearly 2,000MW of energy would be added to the national grid by allowing independent power producers (IPPs) to provide solar and wind power, making regulatory exemptions and negotiating with neighbouring countries to supply South Africa with their surplus power.  

Mantashe is responsible for ensuring that surplus power from existing IPPs can be bought. Up to 1,000MW are potentially available in the next three months, which can be connected to the grid. There is potential for another 600MW available to be added to the grid — allowable through certain regulatory exemptions such as dropping localisation requirements that are built into the ongoing process to procure more electricity from IPPs. 

Gordhan said there had been negotiations with neighbouring countries to get between 100MW and 200MW to become available in a month, depending on the contracting mechanisms. Potentially, 150MW from gas can be processed in Mozambique and become available in the next three months. These interventions are set to generate about 1,950MW of energy, which has the potential to power more than 100,000 homes all year round.  

Big changes from next year

But 2023 might be a game-changer year in terms of energy generation. 

The biggest intervention to be made under Ramaphosa’s energy plan is the removal of the 100MW cap on the generation of electricity by private sector players for their own use. There will soon be no cap on private sector energy generation, so an unlimited number of homes, businesses and industries can be powered by renewable energy.  

Read more in Daily Maverick: “Mantashe suggests forming second state-owned power utility to solve energy crisis — Ramaphosa agrees

Ramaphosa is also relaxing regulations that require renewable energy investors to comply with localisation requirements such as procuring raw materials for their energy projects from local communities to protect jobs or create new ones. The energy regulator, the National Energy Regulator of South Africa, is spearheading localisation requirements.  

Renewable energy players often found the localisation requirements to be cumbersome because engaging with local communities and even getting the right skills in communities took a long time, adding to delays at a time when the country desperately needed energy generation. 

But Ramaphosa has stepped in and temporarily relaxed requirements for local sourcing and red tape on licensing. This is particularly relevant for the current round of procurement of renewable energy, known as Bid Window Five, which envisages 2.6 gigawatts — 2,600MW — to be supplied to the country. This round is scheduled to be rolled out between now and September and renewable energy might be ready for dispatch on the grid next year. 

Patel said Bid Window Five would benefit from the relaxation of localisation requirements, especially when it comes to solar energy in the procurement of parts such as photovoltaic modules or panels, which are crucial in solar energy. These panels transform the sun’s rays into electrical energy. 

Current localisation requirements and regulations require renewable energy players to procure all or 100% of photovoltaic panels in South Africa. But Patel said that for Bid Window Five, localisation requirements would be reduced from 100% to 35%. 

“The priority is to get as much electricity into the grid as fast as possible. It is important for the economy and important for growth. The procurement of photovoltaic panels should not retard the speed that IPPs and Eskom get electricity on to the grid,” said Patel.  

There are two main providers of such modules or panels, mainly ARTsolar (based in Durban) and Seraphim Solar (based in Buffalo City). Business Maverick understands that ARTsolar and Seraphim have together invested nearly R80-million since 2018 in the supply of photovoltaic panels and for local capacity. 

“If there are any delays, there will be an exemption facility [from existing localisation regulations] placed. For future bid windows, localisation targets will be reduced,” said Patel. Ramaphosa’s energy plan is aimed at doubling the amount of energy procured in Bid Window Six to 5.2GW, scheduled to be rolled out in April 2023. DM/BM

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Comments - Please in order to comment.

  • Harro von Blottnitz says:

    Sure, this is a slow-burn, systemic crisis that has evolved over 14 years: one presidential announcement won’t ‘fix it’ in 3 months. In fact, much of the improvement we’ll see in late 2022 and through 2023 stems from the September 2021 decisions of the President. The new decisions, e.g. doubling REIPPPP bid window 6, will mean less load-shedding in 2025. In this game, one needs to have a medium to long-term view!

  • Easy Does It says:

    This is a step in the right direction. However, I always have my doubts about ANC positive plans because underneath there is always some hidden truth. My guess is that in a month or 2 another collapse of a power station will take all the advances back to where we are. I will put good money on that.

    • Joe Irwin says:

      I am also sceptical as to whether this will be achieved within this timeframe. There are individuals in powerful and strategic positions who will try to prevent this.

  • Heinrich Heiriss says:

    1,950MW of power in the next 3 – 6 months will make a massive impact on the severity of loadshedding and should afford Eskom a tiny bit of breathing space to increase maintenance. It is welcome news and as Harro says, this is a medium to long-term game. The proof, however, is in the pudding and I am hoping that this useless lot (Mantashe, Patel, et al) prove me wrong. Plenty of good ideas from government, zero implementation.

  • Brian Cotter says:

    “an energy supply of about 1,950MW in the next three months.” Please Cyrils Project Management department publish a “Project 1950MW in the next 3 Months” Plan with completion activity milestones with dates and update us weekly. Make it approx 5 milestones per MW type addition. This was why you were set up Cyril, with great fanfare, to show us your programmes and update the nation with PROGRESS AGAINST BASELINE PLAN. The old type of Gwede’s words of no progress is no longer tolerated. In one month give us the new plan for the rest of all the Ministers promises. Whilst you are at it give us the Plan for Gwede’s cadastral system for his other portfolio.

    • Mario Cremonte says:

      Absolutely agree. I’m not aware of the quantum of funds required , where it is coming from and terms of repayment, who are the shareholders in the new Private Sector project and why they, in particular, were chosen to be the providers. The world is full of capable enterprises to fulfil what’s required etc.
      I don’t believe one iota of what’s been put out there by these totally incompetent people who have misled the whole country for a long, long time now, whilst wastefully spending many, many billions and enriching who knows whom.
      And the shambles continues.

  • Peter Dexter says:

    I may be a cynic but the state’s obsession with controlling everything is at the heart of the problem. A second state owned power utility is pointless. They have proven they cannot run one, how will they run two? Allow the private sector to raise funds for onw or more major privately owned power utilities to compete with Eskom! That would be a game changer. Eskom would have to become efficient or the private sector would quickly replace them. The state should not be in business.

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