Although 2020 was a year unlike any other – ushering in both a health and economic crisis – we saw continued momentum for the energy sector’s “just transition” from fossil fuel-generation sources toward renewable energy, as well as greater levels of private sector participation. Highlights were the increased presence of independent power producers (IPPs) selling power to commercial businesses, the increased uptake of batteries with solar installations, the visible recovery in air quality and in the environment globally, as well as the jobs created by the construction of wind farms nationally. The expectation is that this momentum will continue in 2021 as we ensure continued progress of our economic recovery.
Despite historic declines in gross domestic product and lower economic activity in 2020, we saw a high intensity in load-shedding. Eskom continues to record declining energy availability factors (i.e., the amount of energy available compared to the total energy generation), far off its 80% target. To limit the risk of load-shedding in 2021, we need new generation capacity because we cannot rely on the old and poorly maintained fleet.
In 2020 we saw a changing approach by Eskom towards competition and renewable energy. Eskom’s management has acknowledged its constrained power system and confirmed that load-shedding will affect us for the next few years, until substantial new power capacity is available. We expect that Eskom will continue to play a positive supporting role, through a continued collaborative approach, in the adoption of renewable energy by the private sector and in the procurement of power from IPPs.
A key ingredient to South Africa’s recovery is regulatory reform. Regulatory reform and private sector participation in the energy sector has not progressed at the pace we needed to avoid our energy crisis, fortunately this has now been actioned. There is a base from which the sector can, and is, addressing our energy crisis and private sector balance sheets can be used to build new generating capacity. The latest developments in procuring new power over the coming years, as well as supporting jobs in the sector in 2021, are the determination to procure additional utility scale power (including emergency supply) as well as the announcement by the National Energy Regulator of South Africa that it can issue the licences for 1 MW to 10 MW installations.
Municipalities remain key role-players in, and enablers of, the energy transition. Many municipalities have rules guiding households and businesses installing solar. This year, we will likely see that list grow. Municipalities will hopefully take the view that load-shedding puts pressure on the profits of businesses invested within their boundaries and means that no power can be consumed during that time, which is not good for either the municipalities or their customers.
Finally, a potential 15% increase in Eskom tariffs will drive a strong focus towards energy efficiency in order to lower operating costs. Tariff increases, the declining price of batteries as well as batteries’ abilities to provide greater resilience against load-shedding will lead to a stronger business case. Therefore, many factors are supportive of 2021 being an important year for renewable energy in terms of enabling of our energy transition as well as our economic recovery.