Stick to the plan and leave nuclear and coal, says BLSA

The hopeless power outlook for this winter would not be quite so bleak if the country was sticking firmly to Necom, the plan to deal with the energy crisis. It is critical that government consolidates around the plan and delivers on the implementation timelines as they stand now, says Business Leadership South Africa (BLSA).

Busi Mavuso, CEO of BLSA, says in the organisation’s latest newsletter that stage 8 rolling blackouts are all but certain this winter. “Eskom’s expected outages of 15GW will put us on stage 5 and any further breakdowns will ratchet up from there. At 18GW we will be on stage 8 and given recent performance, unexpected outages are very likely.”

She warns with 3GW less available generation than there was during last winter, it seems certain that we are heading for that higher peak.

The National Electricity Crisis Committee (Necom) pulled together the best minds on electricity last year and set out a plan to tackle the crisis in the short and long term. Business rallied to support the plan, setting up the R100 million Resource Mobilisation Fund. BLSA is a major contributor to provide resources to fund expertise into government to implement the plan.

ALSO READ: Cost of rolling blackouts exceeds R1.2 trillion, small business suffers most

Business confidence will suffer

Mavuso writes that stage 8 will obviously be a serious challenge for business, as it implies no electricity for half of the day. Companies running diesel-powered generators will use more fuel, creating logistics and storage challenges, as well as extensive costs.

“The cost of dealing with rolling blackouts is already a major driver of inflation and is doing serious damage to the profitability of companies. This will require extensive contingency planning by businesses across the country.”

The impact on already weak business confidence is obvious, she writes, as this is not the environment where businesses will make new investments and that will feed into weaker overall economic performance with growth facing yet another setback.

Necom’s Energy Action Plan had some successes, including important amendments to the Electricity Regulation Act to free up the private sector to build new generating plants at scale. A request for proposals for battery storage has been published, with bids due in July.

“However, key further steps are now mired in confusion and political contestation. For one thing, the Integrated Resource Plan (IRP), the roadmap for the entire energy sector, is meant to have been updated from the 2019 version but we are still waiting for the document to be released despite promises that we would get it in March.”

In addition, there should have been significant progress on the unbundling of Eskom’s transmission, distribution and generation units, largely to set up an independent system operator. Requests for proposals for new gas power generation was also meant to have been launched.

ALSO READ: Ramokgopa’s deviation from Necom plan ‘disconcerting’, says BLSA

Stage 8 not the lowest point

“The painful experience of stage 8 would be easier to endure if we had high confidence that it was the low point in our electricity recovery plan. We could by now have a new IRP to guide the whole nation on what to expect from our future electricity system.

“We could have had a clear path to an independent system operator that could be a neutral operator of the grid, allowing both public and private electricity generators to compete to supply the system at the best levels of reliability and cost.

“Instead, the plan is buffeted from various sides, apparently unmoored from its political anchors. Last week minerals and energy minister Gwede Mantashe announced an RFP for 2.5GW of nuclear power will be launched by the end of this year – this was not part of any plan.”

However, she writes, the minister did say the gas-to-power RFP will still come in this quarter and the new IRP will come in the third quarter. “That IRP, which should reflect the least cost outlook for new sources of energy, must be the basis for any move toward nuclear. Given the high costs of nuclear and low costs of renewable energy, experts agree that nuclear is likely to be too expensive.”

Mavuso writes there were further departures from the plan led by electricity minister Kgosientsho Ramakgopa, with new talk of extending the lives of Eskom’s coal plants, in conflict with transition plans that have already been agreed on.

“Global funders have taken note of the shifting goal posts, threatening the just energy transition partnership (JETP) that was formed at COP26 to raise $8.5bn of funding for South Africa’s transition. These missteps are going to be harder to bear as stage 8 is implemented.

“Business is an eager partner, ready to work where appropriate to ensure the goals are met. A sense of progress is the one comfort we should be able to have during the dark days ahead.”