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BLSA reiterates call for govt to stick to Necom's Energy Action Plan

Eskom's Lethabo power station

Photo by Creamer Media's Terence Creamer

22nd May 2023

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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It is critical that government consolidates around the National Electricity Crisis Committee (Necom) plan and delivers on the implementation timelines as they stand now.

"Given that there is 3 GW less generation available than during the past winter, it seems certain that South Africa is heading for Stage 8 loadshedding this winter. Business is an eager partner of the plan, ready to work where appropriate to ensure the goals are met, and a sense of progress is the one comfort we should have during the dark days ahead," says business lobby organisation Business Leadership South Africa (BLSA) CEO Busi Mavuso.

Necom in 2022 pulled together the best minds on electricity and set out a plan to address the crisis in the short term and long term.

Business rallied to support the plan, setting up the R100-million resource mobilisation fund, to which BLSA is a major contributor, to provide resources to fund expertise into government to implement the plan.

Necom’s Energy Action Plan has 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. 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.

"We are also meant to have made 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 were also meant to have been launched," Mavuso said.

"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 public and private electricity generators to compete to supply the system at the best levels of reliability and cost.

"Instead, the plan is being buffeted from various sides, apparently unmoored from its political anchors. Last week, Mineral Resources and Energy Minister Gwede Mantashe announced a request for proposal (RFP) for 2.5 GW of nuclear power will be launched by the end of this year, which was not part of any plan. Mantashe did, however, 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 emphasises.

South Africa has also had 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.

"Global funders have taken note of the shifting goal posts, threatening the just energy transition partnership that was formed at COP26 to raise $8.5-billion of funding for South Africa’s transition.

"These missteps are going to be harder to bear as Stage 8 is implemented," she says.

Stage 8 implies half of the day will be without electricity. For business, this will obviously be a serious challenge. For firms running diesel-powered generators during loadshedding, consumption is likely to spike, creating logistics and storage challenges, as well as extensive costs.

Already the cost of dealing with loadshedding is 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. This is not the environment in which businesses are going to undertake new investment. That will feed into weaker overall economic performance with growth facing yet another setback," she highlights.

This outlook would not be quite so bleak if South Africa stuck firmly to the plan to deal with the energy crisis, she emphasises.

The painful experience of Stage 8 would be easier to endure if South Africa had high confidence that it was at the low point in the electricity recovery plan, Mavuso says.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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