May 11, 2012
Progress and risks as SA moves to deal with power crisisBack
SECURITY|Africa|CoAL|Development Bank Of Southern Africa|Eskom|Industrial|Ment Corporation|Projects|Renewable Energy|Renewable-Energy|Security|Step Strategic Venturing|Water|Africa|South Africa|Security|Electricity|Energy|Energy Consumption|Energy Efficient Solutions|Energy Industry|Energy Needs|Energy Sector|Energy Sources|Green Solutions|Obvious Solutions|Potential Energy Developers|Power Producer|Security|Francis Gray|Mike Bean|Power|Security|Water
© Reuse this
Research conducted by professional services company Step Strategic Venturing shows that South Africa has been in a precarious position for the last eight years, with the reserve margin – the level of extra power capacity above what is expected to be needed – falling below the globally accepted safe limit of 15%. This margin has been steadily decreasing over the last ten years and is currently sitting at only 3%.
Director Francis Gray believes consumers and businesses have been lulled into a false sense of security that the issue of load- shedding is a thing of the past. But he also says that there are a number of obvious solutions available. “It is 50% cheaper to gain the energy needed from saving energy than from building new energy sources in South Africa. This is particularly relevant for the residential sector, which is the most inefficient in terms of energy consumption. Often residential consumers are put off by the upfront costs of installing green solutions, so there is a need for, innovative business models to allow end-users to access energy efficient solutions cost effectively.
Gray stresses, too, that the additional R4.7-billion for solar geysers should be coupled with regulatory reforms that facilitate growth. The industry, he argues, is also currently structured to contradict its own mandate. “Particularly looking at parastatal Eskom, in many respects, they are there to build and supply megawatts; however, government is calling for the saving of megawatts.
Meanwhile, on the supply side, government is expected to announce more details on its independent power producer (IPP) procurement process, following a request for information (RFI) from potential energy developers and suppliers that closed in March.
Step’s Mike Bean says the IPP process will enable a greater number of private companies to participate in the energy sector, which is critical if South Africa is to meet its energy needs in the future.
“Three significant factors are shifting the energy industry, namely an ever-increasing demand for electricity, depleting fossil fuels and the ominous signs of climate change,” says Bean.
“These undercurrents are driving significant price increases and it is becoming increasingly critical to find ways of generating power that are less hazardous to the environment as well as technical innovations that enable us to achieve more with the power we are already generating.
“In South Africa, demand for electricity is also showing no sign of slowing down. In fact, it is expected to grow faster than any other final form of energy. Power shortages, rising prices and government commitments to reduce our reliance on coal power mean that South Africa, and indeed the African continent, are not immune to these changes in the energy industry.”
Bean says this presents a significant number of opportunities for those companies ope- rating within the clean energy and energy efficient space. “Government has demon- strated a clear commitment to growing alternative sources. Significant change carries with it tremendous opportunities. Traditional energy companies need to consider how these factors will affect their businesses into the future, while new entrants and investors both have a window of opportunity to break into an industry where traditionally the economies of scale were significant barriers to entry.”
He says that while start-up costs for businesses operating within the energy space may be significant, there are a number of options available to access capital from both private and public sources. “Development finance institutions such as the Industrial Develop- ment Corporation (IDC), the Development Bank of Southern Africa (DBSA) and gov- ernment bodies have set funds aside to specifically innovate in the energy space. The IDC has announced that it intends to spend approximately R25-billion over the next five years on green projects, including financing for 12 of the 28 IPP projects in the country.”
There is a vibrant and active renewable- energy community in South Africa. Technical industries attract technical people and there may be a tendency to overinvest in the technology without clearly understanding the basic needs of the target market.
“In order to increase the benefits available, it is crucial that emerging energy businesses ensure they have a well-structured business model and growth strategy in place in order to raise the capital necessary to reach an attractive scale. In our experience of a number of capital projects in the renewable-energy sector, while the technology may be innovative, the benefits still need to be communicated effectively in order to access capital and ensure buy-in from key stakeholders.
“As a result, it is important for new energy businesses to ensure they carve out their own space in the market now, as growth in the renewable-energy industry is set to accelerate,” concludes Bean.
Edited by: Martin Zhuwakinyu© Reuse this Comment Guidelines (150 word limit)
Other Electricity News
Updated 4 hours ago South African utility Eskom said on Monday that a report in a business newspaper that power supply would be "highly constrained" for the next five years was a "worst-case scenario." "It would not be correct to say categorically that it would take five years. That is...
Article contains comments
Updated 7 minutes ago Statistics released by the Department of Trade and Industry on Monday, showed that August new vehicle sales declined by 1.4%, to 55 722 units, compared with the same month last year. Assisted by the car rental market, the South African new passenger car market, at 37...
Updated 7 minutes ago The 14 350 km Sat-3/Wasc/Safe cable system connecting Europe to the west coast of Africa has been successfully upgraded, doubling the system capacity. The fourth upgrade, undertaken by Alcatel-Lucent and the Sat-3/Wasc/Safe consortium, which includes Telkom, had seen...
Updated 45 minutes ago As telecommunications group Telkom continued the turnaround that raised its share price from R11 a few years ago to the current R55 a share, the previously beleaguered group aimed to play a significant role in the provision of broadband to all South Africans....
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
South African State-owned defence industrial group Denel has announced its fourth consecutive year of profits. The group's results for the financial year 2013/2014 were recently announced at its head office in Centurion, south of Pretoria. Revenues grew by 17%, net...
There is little opportunity for JSE-listed infrastructure company Group Five to grow shareholder value in the domestic market, says CEO Mike Upton. He says value can still be found in the private sector, in the renewable and industrial power sector, as well as in...
The National Association of Automobile Manufacturers of South Africa (Naamsa) has announced the event dates of the 2015 Johannesburg International Motor Show (JIMS). The event will take place from October 14 to October 25, 2015, at the Johannesburg Expo Centre, Nasrec.
UK engineering support services provider Babcock is set to deliver the largest order of global truck manufacturer DAF’s truck tractors in Southern Africa to bulk carrier road-based logistics company Ngululu Bulk Carriers (NBC), with 133 trucks to be delivered in...
Digital radio communications in the African local government space can open up the world, but have many challenges to overcome, notes integration and migration of legacy radio communications infrastructure with digital mobile radio company Emcom Wireless head of...