The 20-year energy plan proposed by the Department of Energy in the draft of the Integrated Energy Planning Report, released in June, is disappointingly archaic. It portrays an attempt to solve tomorrow’s problems with yesterday’s solutions.
Given the context of a looming energy crisis in South Africa, one can understand the department’s reaction towards doing what it has always done, just bigger.
But if South Africa is to meet its electricity demands in an environmentally sensitive way that increases the well-being of its citizens, it is going to have to go beyond simply weighing up dirty energy sources versus renewable technologies.
The structure of energy generation and distribution needs to be addressed and the plan fails to do this.
Under the present vision, additional electricity will come primarily from the Medupi and Kusile coal-fired power plants now under construction. Already three years behind schedule, the first power is expected to come online towards mid-2014 and, once operational, they will cumulatively add 8 670 megawatts to the system.
Last month, the cabinet approved the building of a third coal-fired power plant, for now dubbed Coal 3, once Medupi and Kusile have been completed.
The Department of Energy highlights the need for renewable energy sources, primarily solar and the importation of power from the Inga hydroelectric plant in the Democratic Republic of Congo, but higher emphasis is placed on the exploration for shale gas and expansion of nuclear.
All these proposals are expensive mega-projects requiring years of planning and litigation before construction can even begin. Starting next year, Eskom will spend upwards of R23 billion a year to service debt for the Medupi, Kusile and Ingula plants with full repayment expected by 2043. More expensive mega-projects for Eskom results in rising electricity prices and higher rates for the taxpayer.
The draft integrated energy plan lists its objectives as: the security of energy supply, minimising costs, increasing access to energy, diversifying sources, minimising emissions, promoting energy efficiency, job creation, localisation and technology transfer, and the conservation of water.
Mega-projects such as Medupi meet the first objective only. The concern for conservation of water immediately questions the appropriateness of shale gas.
And while this centralised style of infrastructure creates jobs during construction, it requires relatively few employees once up and running, and creates almost no industry up- or downstream of its operations.
A better strategy, and one that meets all the objectives, is to decentralise electricity production and open it up to the market. The department’s model needs to inspire innovation, not enforce reliance on the government. Already in the past two years, 2 500MW of electricity has been supplied by independent power producers who have built and funded their own infrastructure.
The main benefit is innovation. With an efficient pricing mechanism in place, private firms will compete with each other to provide electricity more reliably and at a lower cost. There are many challenges to overcome if independent providers are to become major players in the national energy supply but with profit as an incentive, solutions will be found.
One of the largest obstacles is industrial demand; you cannot run an aluminium smelter off solar panels. But industry only accounts for about half of South Africa’s demand for electricity and residential and commercial needs are well suited to small-scale production.
The role of Eskom needs to change; it needs to become a small player in energy production (retaining enough supply for key industries), and adapt itself to become a distributor and intermediary in the market for electricity trade. In the current and future energy environment, mega-projects are inappropriate and unnecessary.
* Pierre Heistein is the convener of UCT’s Applied Economics for Smart Decision Making course. Follow him on Twitter @PierreHeistein.