The continued absence of a long-term vision for South Africa’s energy sector is creating a policy “vacuum” and undermining investment, the 2021 edition of the South African Energy Risk Report states.

Published by the South African National Energy Association (Sanea), the report highlights that the country still has no overarching policy that offers an integrated approach to the energy sector.

Neither an integrated energy plan, or a gas plan had yet been finalised making it impossible to align these with other key policies, including the Integrated Resource Plan (IRP), the country’s revised Nationally Determined Contribution (NDC) on decarbonisation and the emerging just energy transition plan.

“This drives high levels of uncertainty in the market and discourages investment (foreign and local), hampering decision making and allowing parochial interests to slow progress because of conflicting stakeholder objectives.”

The resulting lack of focus, the report adds, means that South Africa’s limited economic resources are sparsely distributed across too many initiatives, some of which are not viable or scalable.

The consequence is “shallow change in numerous areas, rather than deep change in a select few areas” that could help shift the energy sector on to a new trajectory and realise the “new gold rush” in green energy identified in the 2020 edition of the report.

“Integrated infrastructure plans are not in place, meaning that sector coupling, one of the key opportunities of the energy transition to lower-carbon technologies, is not being prioritised.

“For example, to retain jobs in the manufacturing sector, the energy-transportation nexus should be highlighted as a key mechanism for clean molecule development and localisation of new value chains.”

The expert group assembled by Sanea to review the prevailing energy risk environment, in light of changes that had arisen in the environment since 2020, said that uncertainty had escalated over the past year.

The report attributed this escalation primarily to Covid-19, which dramatically lowered global and domestic energy demand in 2020.

“Covid-19 has increased the levels of uncertainty and its effects will be felt for years to come. The opportunity for post Covid-19 economic stimulus, using clean energy and its access to capital markets, has not been sufficiently leveraged.”

That said, the report, which is the fourth to be published by Sanea, also points to some areas of progress over the past 12 months.

These include the regulatory reform enabling distributed electricity generation plants of up to 100 MW to be built without a licence, the publication of the National Climate Change Bill, the release of the 2019 IRP and the depositing of an updated NDC with the United Nations Framework Convention on Climate Change.

These reforms were not always backed by “timeous implementation”, however, reducing the impact of the changes.

The expert group, which included members from both the private and public sectors, also identified two new uncertainties that had emerged during 2021, namely regional geopolitics and the outlook for energy storage technologies, including green hydrogen and other clean molecules.

The group concluded that unless the identified risks were addressed urgently, several adverse impacts could arise, including continued weak economic growth; a failure to meet energy demand; an inability to raise sufficient capacity for investment; a threat of carbon tariffs being imposed on exports; a deepening skills deficit; a rise in parochial interests; and escalating civil unrest.

Several opportunities could flow from managing the risks, however.

These ranged from reduced emissions and higher levels of localisation and beneficiation, through to improved investor confidence and the repositioning of South Africa as a leader in new and emerging markets, such as green hydrogen.