Drought could hurt SA’s energy mix almost as much as it does agriculture

Climate change is having a deleterious effect on the country’s energy mix and as global warming intensifies, extreme weather events such as droughts also become more frequent and their economic damage more significant.

Agriculture comes to mind first when climate is mentioned, as this sector is highly sensitive to weather variability, with the fall in crop production the first direct sign of water shortage. However, the energy and transport sectors are also affected by droughts, says Irene Lauro, environmental economist at Schroders.

“Parts of Johannesburg were facing water shortages last month due to increased demand and decaying infrastructure, including water storage, supply and treatment. Power cuts made these issues even worse in the middle of a heat wave and led to Rand Water imposing 30% water restrictions.”

Now, South Africa’s economic hub is facing a water crisis, in addition to its ongoing electricity woes. South Africa is not alone. In northern Italy, higher temperatures triggered the worst drought in 70 years, with the Po, Italy’s longest river, hitting record low water levels after months without heavy rainfall and little snow in the mountains.

The river is a vital source of water for drinking, agriculture and energy production in northern Italy and the ongoing water crisis is heavily affecting the energy storage of its hydropower system. More than 85% of the 4 000 hydroelectric power plants in Italy are located in the northern regions.

Lauro says hydro is the oldest source of renewable energy, accounting for around 35% of the total green energy production and usually meets over 15% of Italy’s energy demand. The ongoing water shortage is exacerbating the energy crisis as the drought is hitting the economy at a time when gas supply is squeezed by the Russia-Ukraine war.

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Droughts curtail hydro power generation

She says Spanish hydropower generation, which accounts for more than 11% of total energy produced in the country, is also running at very low levels, with hydro more than 30% below its past 7-year average this summer.

“Droughts are also causing significant disruptions in hydropower generation in China and particularly in Sichuan, a province that gets more than 80% of its energy from hydropower where the drought is the worst in more than 50 years.”

Restrictions on power supply were implemented due to low water levels, with some key automakers such as Toyota reporting they were forced to halt production for several days at their factories in the region.

Lauro says the western states of the US have also been hit by droughts. The United Nations Environment Programme (UNEP) recently highlighted that, due to more than 10 years of dry weather, the two largest hydroelectric reservoirs in the US are currently at their lowest levels ever.

Lake Mead and Lake Powell provide water and electricity to tens of millions of people in Nevada, Arizona, California, Wyoming, Colorado, New Mexico and Mexico. The UNEP has also warned that if drought conditions persist, these reservoirs could eventually reach “dead pool status” when the water level in the dams fall so low it can no longer flow downstream and power the hydroelectric power stations.

Natural gas generators are used to offset the reduction in low-cost hydroelectric power. The US Energy Information Agency (EIA) analysed the effects of drought in California and its analysis forecasts wholesale electricity prices in the state will increase by 5-7%.

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Climate risks add price pressure in times of drought

“The EIA analysis highlights how physical climate risks can add pressures on prices at a time when many economies are battling with already elevated inflation. Switching to gas to replace the loss of hydroelectric output also threatens to worsen the climate crisis as it leads to higher carbon emissions, with the EIA expecting CO2 emissions in California to be 6% higher than in the median case,” Lauro says.

She says to avoid this rise in carbon emissions, countries could turn to other zero-carbon sources of energy. France, for example, meets 70% of its electricity needs with nuclear power, but France is also struggling as nuclear power production is also restricted by drought.

“French nuclear reactors rely on rivers for cooling and output must be reduced when river temperatures reach certain thresholds to ensure the water used to cool the plants will not harm the environment when it flows back into the waterways.”

Lauro points out that this is happening at a time when EDF, the French energy supplier, is already reducing output as some of its nuclear reactors are under maintenance for corrosion issues. So far this year, 15% of the 56 nuclear units in France were forced to curb output due to environmental issues.

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Droughts and transport

Drought also affects the transport sector, particularly in particular inland waterways where low water levels can reduce the navigability of vessels, as ships must now operate at limited capacity with restrictions to the cargo they transport.

“Inland waterways play a critical role in freight transportation in many countries around the world, but this has become an acute issue in Germany in recent years. According to the federal ministry of transport, approximately 240 million tonnes of bulk goods are transported per year on German waterways, equal to almost 75% of the goods transported by railway in the country.”

Lauro says almost 70% of transport of industrial goods such as coal, crude oil, coke oven products and chemical products takes place on the Rhine, one of the longest rivers in Europe.

Drought also affects the energy sector due to reduced freight transportation, as the Rhine is used to transport hard coal from the ports of Amsterdam, Rotterdam and Antwerp by barges. “The Rhine is drying up due to higher temperatures and low rainfall and its critically low water levels are causing difficulties for coal to be delivered to German coal-fired plants.”

Some German power producers recently warned that they will generate less electricity at their coal-fired power plants due to reduced fuel supplies.

According to Lauro, physical risks already affect the global economy significantly, but their importance is likely to increase. “As global warming intensifies, we are likely to see more frequent droughts over the next decade that will limit activity in the energy sector, highlighting the need for diversification in power supply.”

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What SA can learn from these countries

South Africa must learn from what is happening in other countries. According to a report by the National Business Initiative (NBI), as much as 150GW of solar and wind capacity must be installed by 2050 and at least 30GW of battery storage for South Africa’s ideal power system to achieve net-zero emissions by 2050.

“Wind and solar are not only the winners from the energy transition, but they can also improve energy security, insulating economies from geopolitical risks by reducing their reliance on imported fossil fuels, while an increased use of zero-carbon power sources such as wind and solar will help limit global warming and therefore the impact of physical risks on economic activity in the long term.”

Lauro says enhancing flexibility in the grid and investing in energy storage technologies will also have to be part of the solution, particularly when it comes to storage mechanisms and back-up power stations that will fulfil a critical role in periods of prolonged low wind speeds and low sun exposure.