Presidency must intervene now, or load shedding could increase ten-fold

Load shedding can be stopped by 2024, but that will require strong leadership from the presidency to see that extraordinary interventions on many fronts are implemented without any delay, says think tank Meridian Economics.

This includes lifting the licensing exemption for generation plants from 100MW to 1000MW.

It says that without any intervention load shedding will likely increase up to four-fold in 2023, compared with 2021, up to five-fold in 2024 and up to ten-fold in 2026.

Meridian Economics’s suggested solution includes a drastic escalation of wind and solar energy, changes in the tariff regime to incentivise owners of distributed generation to push excess energy into the grid, and the removal of stumbling blocks in current government procurement from independent power producers (IPPs).

Meridian, led by respected energy expert Dr Grove Steyn, is releasing two reports (‘Resolving The Power Crisis’) that explains its research and proposals on Monday, June 13.

Go-slow consequences

In the first report, the think tank investigated what the load shedding picture would have looked like if government’s procurement of renewable energy from IPPs continued without the interruption that came after Eskom refused to sign power purchase agreements in 2016.

They were eventually signed in 2018, but the procurement programme only recently restarted at a slow pace.

Meridian found that, if the system operator had access to 5 000 MW (equal to about two bid rounds) of additional wind and solar energy in 2021, it would not only have prevented the worst year of load shedding ever – it would have eliminated 96.5% of load shedding that year.

Figure 11: Summary of results: 5GW Additional renewables would have reduced load shedding by 96.5% in 2021.

Combined with “a modest expansion” of Eskom’s programme to buy power back from industrial customers, demand management as well as 2 000 MW of one-hour batteries, load shedding could have been completely eliminated.

That would have come at no cost to Eskom. The utility would in fact have saved R2.5 billion due to more economical use of its coal-fired power station, open-cycle gas turbines and pump-storage plants, Meridian found.

Power proposals

In the second paper Meridian identifies problems in the current steps aimed at alleviating the electricity crisis. It develops a solution and adjusts it to mitigate against several execution risks and then develops an ambitious game plan to eliminate load shedding by 2024.

The paper also sets out the assumptions regarding demand growth and other crucial variables.

According to Meridian, it is unlikely that the decline in the availability of Eskom’s power stations will be contained to less that 2% per annum while the pressure on the system leaves the utility with little space to do proper maintenance. It further expects demand to grow to pre-Covid levels.

The think tank points out that government’s 1 850 MW emergency power purchase programme (RMIPPPP) and the fifth renewable energy bid round (BW5) featured aggressive pricing that was calculated before the Covid-19 pandemic resulted in supply chain disruptions and huge price increases.

This, together with unrealistic and impractical requirements for local content relating largely to solar panels and bad procurement design, will lead to many of these projects failing, according to Meridian.

It proposes the following urgent measures as a game plan to eliminate load shedding by 2024 and ensure energy security by 2025:

• Eliminate or drastically reduce local content requirements on PV modules.
• Fix RMIPPPP design flaws to enable all the projects with PV, wind and storage to proceed and the entire project energy and capacity to be made available to the system.
• Implement across the board price increases for BW5 projects to compensate for large cost escalations to ensure viability.
• Accelerate uptake in the distributed generation market by implementing further licence exemptions up to 1 000 MW and net feed-in tariffs and further tax incentives.
• Accelerate uptake in the distributed generation market by implementing further licence exemptions up to 1 000 MW and net feed-in tariffs and further tax incentives.
• Expand REIPPPP (Renewable Energy IPP Procurement Programme) BW6 to double its current size and launch it in time with stronger incentives for early energy.
• Expedite the procurement of additional peaking capacity, demand response capacity and storage;
• Implement Eskom’s Just Energy Transition (JET) renewable energy public-private partnership (PPP) projects.
• Clarify and unlock the opportunity for municipalities to rapidly procure new capacity.
• Bolster the Eskom grid connection process.
• Fix and establish key institutions, including ironing out issues in the IPP Office and energy regulator Nersa.
• Expedite additional amendments to Schedule 2 of the Energy Regulation Act and issue new ministerial announcements/determinations.
• Establish a dedicated well-resourced power crisis implementation unit inside the presidency to drive and monitor the implementation of these measures.

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• This article originally appeared on Moneyweb and has been republished with permission. The original can be read here.