By Lebogang Mulaisi
Electricity is a critical input for most, if not all, formal and informal economic activities, and is strongly linked with economic development.
Higher gross domestic product, for example, is correlated with greater electricity use, access, reliability, and affordability.
This is true at all scales and across all sectors of the economy, from large industries like mining, and manufacturing right through to small, medium, and micro enterprises (SMMEs), and the household economy. Electricity is also essential for delivering basic public services.
On January 4, the Minister of Mineral Resources and Energy, Gwede Mantashe, published the draft Integrated Resource Plan (IRP) of 2023, calling for inputs and comments from stakeholders and broader society.
As the deadline for such submissions bolts faster, true to our mandate, the Presidential Climate Commission (PCC) is undertaking a critical appraisal of the draft IRP2023 with practical, fact-based, independent analysis from the perspective of the Just Transition and South Africa’s journey to a low carbon economy.
The updated IRP is being released in the context of a national power crisis, rapidly rising energy costs, and a deterioration in living standards for many South Africans.
For these reasons, stakeholders across the board in South Africa are crucially interested in this updated IRP, and its long-term implications for their well-being and development, and its associated risks and opportunities.
The importance of energy and the IRP
The IRP2023 itself states that “the IRP is a living plan that is expected to be regularly reviewed”, focused on multiple-policy objectives of “security of supply, energy affordability, and carbon emissions reduction”, and that ultimately “final policy decisions must be taken on the basis of a long-term decarbonisation trajectory while improving South Africa’s competitiveness, growing the economy through industrial renaissance as outlined in the NDP (National Development Plan”.
The future of energy generation will also have direct impacts on human health via its impact on air quality and water. Finally, the carbon intensity of the energy mix will determine South Africa’s long-term compliance with our climate commitments and will have a direct impact on our trade competitiveness.
With this in mind, the IRP should as its first pitch, acknowledge its developmental context which is to meet the primary energy security objective and demonstrates how this might be achieved in the short term.
Some positive innovation from the plan
1. The analytical approach of the IRP marks a useful innovation. Splitting the analysis into two horizons allows consideration of both short-term and long-term investment options.
2. The introduction of long term 2050 scenarios allows a far better analysis of climate compatible energy futures. The long-term scenarios demonstrate that extending coal plant and new clean coal are not the least cost options.
3. The least cost mix proposed for horizon one and two is indicated as variable renewable energy plus peaking support plus storage. While the PCC disagree with quantum of each technology deployed the mix of technologies aligns with PCC expectations.
Market signals and technology require further exploration:
Exploration:
1. It is not a least cost solution and fails to address energy access or energy efficiency. This combined with its vulnerability to private sector investment could drive long-term inequality. It effectively ignores the issues of climate change and air quality, putting it in direct conflict with the law and with international agreements. The IRP2023 does not provide sufficient market signals (strength and consistency) to support developmental policies like the South African Renewable Energy Master Plan.
2. The IRP does not fulfil the basic requirements of an IRP as it falls short in its analysis of the emissions trajectories and restrictions applied to the model that cap least cost technologies result in a mismatch between the IRP2023 and the benchmark studies reviewed by the PCC.
Further analysis is required to answer the basic questions that the IRP should address, at the very least a scenario to 2030 that more aggressively addresses load shedding is needed and should be done in the context of different electricity demand forecasts, including demand scenarios aligned with NDP objectives.
The IRP is central to energy security as well as other economic development objectives and is an important signal to the market to encourage localisation and local job creation from construction and maintenance of new generation, however without further analysis and scenarios that don’t constrain technology deployment the IRP2023 cannot be used to make final decisions about a desired short- or long-term energy mix.
Lebogang Mulaisi is the chief operating officer of Presidential Climate Commission.
BUSINESS REPORT