South Africa urged to leverage the full industrial potential of the IRP 2019 as part of post-Covid recovery

12th May 2020

By: Terence Creamer

Creamer Media Editor

     

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The allocation, in the Integrated Resource Plan 2019 (IRP 2019), to renewable energy represents a major opportunity not only to diversify South Africa’s coal-heavy electricity mix, but also to create new domestic industries and jobs, Kearney senior energy principal Prashaen Reddy argues.

To fully leverage these opportunities, however, the authorities need to begin moving more assertively to enable investment, particularly in smaller self-generation projects, which could immediately help ease pressure on the grid when demand recovers post-Covid-19.

In an interview with Engineering News, Reddy, who is also a South African National Energy Association board member, says that, while some positive policy progress has been made, the focus should now shift to implementing the IRP 2019 and to linking that implementation to the country’s industrial and employment strategies.

“It’s our time to take not only the energy generation opportunities of renewables, but the full value chain, especially manufacturing. Let’s look at the multiplier effects of renewables and really maximise it,” Reddy appeals.

Global analysis conducted by Kearney into the prospects for renewables in light of the Covid-19 pandemic suggests that the outlook remains positive, notwithstanding the collapse in electricity demand, as well as disruptions to new projects as a result of supply-chain interruptions and the lack of access to project sites during lockdowns.

“Although the magnitude of the impact of Covid-19 on projects, developers, utilities, and equipment manufacturers is still unclear, the medium-term fundamentals are optimistic,” Reddy says, noting that the share of renewables will continue to climb in the decade ahead.

This view is reinforced by a report published recently by the International Energy Agency (IEA), which states that renewables will be the only energy source to experience growth in 2020, as Covid-19 lockdowns precipitate a plunge in demand for all other energy sources.

Based on an analysis of 100 days of real energy data in 2020, the IEA forecasts a collapse in energy demand during 2020 that will dwarf the impact of the 2008/9 financial crisis. Nevertheless, the IEA is still forecasting that solar photovoltaic (PV) and wind are on track to help lift renewable electricity generation by 5% in 2020, aided by higher output from hydropower.

In a separate report the agency argued that post-Covid-19 stimulus packages would provide countries with an opportunity to prepare the world’s electricity infrastructure for a future that will require strong grids and greater sources of flexibility to accommodate increasing shares of variable renewables such as wind and solar PV. “Governments can enable these technologies to emerge from the crisis with renewed momentum and play an important role in the global economic recovery.”

Kearney’s own analysis points to the contribution of renewables to the European energy mix climbing to above 32% by 2030, while the outlook in South Africa is for renewables to comprise about 26% of the domestic mix by that date – a remarkable shift given the dominance of coal currently.

In the short-term, however, the pace of the transition to renewables could well be slowed, partly by delays to projects and project approvals and partly by the fact that the use of fossil fuels may be attractive in the short term, owing to precipitous falls in the price of oil, gas and coal. That said, the levelised cost of renewables will also continue falling, which should further consolidate its advantage in the medium term.  

The sustainability of renewables businesses also presents a near-term risk, with Reddy arguing that assets and project portfolios will have to be closely managed, with priority given to projects that have the greatest chance of progressing economically.

In addition, renewables enterprises may need to adapt their project execution strategies in such a way as to promote “agile execution”, incorporating modular plant designs and layouts so that capacity can be added more incrementally and in a way that is sensitive to demand.

“Developers may need to scale down to facilitate a scaling up,” Reddy asserts.

That said, he remains convinced that electricity demand will return and argues that South Africa will need to begin adding new capacity to replace capacity removed from the system as some of Eskom's older stations are decommissioned and to accomodate any possible future growth in demand.

“Renewables, especially these smaller, modular, agile-type projects, will actually be a solution for many companies to bring back production and ensure reliability of supply as the pandemic recedes,” Reddy says.

Self-generation projects can and should take precedence over larger utility scale developments in the initial recovery phase, but will only play their rightful role if prevailing legislative and regulatory hurdles are cleared.

In the longer term, renewables, supported by gas and other flexible-generation solutions, will emerge as the dominant sources of electricity generation in South Africa, which will not only facilitate decarbonisation, but will also create major industrial and employment opportunities.

“We are a country blessed with renewable resources, we have to leverage that opportunity.”

Edited by Creamer Media Reporter

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