Energy plan comes under spotlight

Comment on this story
PowerLines Reuters.

South Africa was cavalier about its dwindling electricity supply, until the lights went out in 2008. Rolling blackouts, coined load-shedding, had the nation angry and frustrated as the government had not heeded Eskom’s warnings that its capacity would not be sufficient to power the country’s growing economy.

Since that wake-up call, which, by the way, cost the state more than R50 billion in lost output, the Department of Energy (DoE) and all its stakeholders have been gung ho on making sure the lights stay on. But Eskom could not possibly build new power stations fast enough to meet demand.

It established an integrated demand management division dedicated to ensuring short-term security of electricity supply by co-ordinating and consolidating various initiatives aimed at optimising energy use and balancing electricity supply and demand.

These included providing financial incentives for consumers to switch to solar water heating, and power alert messages displayed on television during peak consumption periods to inform households of electricity usage levels, giving directions on which steps to take to relieve the national grid.

Ideally, Eskom would like to save 10 percent of electricity demand to keep key growth-driving sectors such as mining, beneficiation, agriculture and manufacturing, from experiencing unexpected outages.

This is one of the few options to cope with the growing demand until Eskom’s two new large coal-fired power plants, Medupi and Kusile, start operating as expected next year and in 2014 respectively to reach full generation by 2017 and 2018.

In the meantime, the economy will have to grow not much more than 3 percent or else revisit the dark ages. The problem with this is that, in order to meaningfully tackle unemployment, gross domestic product must grow at more than 7 percent a year. So what is the solution?

Energy economist Jeremy Wakeford said the conventional wisdom (that a rate of growth of at least 7 percent a year is required to reduce unemployment) assumed business-as-usual types of economic and employment policies, which did not necessarily have to prevail.

“If there were major changes for example to labour legislation, allowing greater flexibility for firms as well as employment incentives, together with a shift in focus in state expenditure from capital intensive to labour intensive activities, we could make a meaningful dent in unemployment with lower growth rates,” Wakeford said.

Cannon Asset Managers chief investment officer Adrian Saville said the economy would never grow at 7 percent unless more power stations were built within a short period.

“(The government) can draw up as many policy documents as it likes, but without power stations… we’re trapped,” he said.

Saville added that the bulk of power stations were approaching the end of their 40-to-50-year life span.

In 2010, the DoE launched the Integrated Resource Plan (IRP), which aims to guarantee security of energy supply, diversify the country’s energy mix and reduce carbon dioxide emissions over the next 20 years.

It proposes to generate 9.6 gigawatts of nuclear power, 6.3GW of coal-fired, 11.4GW from renewable resources, as well as 11GW from other sources by 2030.

Energy Minister Dipuo Peters, who declared March 2012 as energy month, is charged with ensuring that South Africa plays its part in recognising the UN’s declaration of 2012 as “the year of sustainable energy access for all”.

However, while the IRP is the only strategy to expand energy generation capacity, there are suspicions regarding whether it is a good one.

The nuclear power strategy, for example, is of concern, particularly because of its price tag. The R300bn budgeted for the nuclear power stations is far less than the going price for the generation capacity forecast.

And, given that the World Bank will not lend Eskom the money for such a project as they did for Kusile and Medupi, the question of funding is a big one.

Another contentious issue is that of hydraulic fracturing, which has environmentalists and economists on opposite sides of the debate. - Sungula Nkabinde


sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.