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The publication of South Africa’s 2018 Integrated Resource Plan (IRP) for energy, following some eight years after the much contested 2010 IRP was gazetted, has brought some promise of policy certainty and a much-needed clarity in the market for private energy companies.
In the intervening period, several IPPs had come and gone, shutting doors and letting go of their employees in the face of policy uncertainly and strong signs that government would drive the bulk of its energy investment into a nuclear baseload.
Plans to construct 9.6GW of nuclear power stations have since been ditched by government following much contestation by various interest groups and the general public, fearful of runaway costs and suspicious of possible corrupt deals linked to them.
The 2018-2030 IRP roadmap includes an energy mix that takes into account a number of changes that have taken place over the past ten years, especially the rise of increasingly cost-effective renewable energy options and various global agreements on the need to lessen the emission of toxic gases into the atmosphere - to slow down the pace of climate change.
According to power journal ESI Africa, the latest IRP highlights issues such as new installed capacity versus resultant installed Capacity; changed assumptions made in the earlier version of the IRP (2010); scenario analysis results; dates on which existing power plants will be decommissioned; and embedded generation.
In terms of the 2018-2030 IRP, new installed capacity in 2030 will consist of 34 000 MW of coal (46%); 1 860MW of nuclear (2.5%); 4 696MW of hydro power (6%); 2 912 MW of pumped storage (4%); 7 958MW solar PV (10%); 11 442MW wind (15%); 600MW CSP (1%) and 11 930MW gas (16%).
Opportunities for new players
With soaring electricity and other living costs, the climate is ripe for new investors, especially in the independent power producer environment, to provide cleaner, more cost-effective alternative energy solutions to complement Eskom’s output.
This would enable the country to progressively transition from the status quo of a one-stop-shop for energy generation and distribution into one where constructive disruptors work hand-in-hand with Eskom, the country’s official power utility, to add capacity to the national grid at competitive costs to households, businesses, and other energy consumer groups.
Fortunately, there is a growing list of ambitious players already armed with innovative solutions and investor funds ready to be deployed if government makes the terrain friendlier for them to enter the market and stay for the long-term, creating jobs and opportunities for individuals and smaller businesses in the value chain. Several big institutions have also begun investing big money in alternative power producers to diversify sources of energy. The potential returns are significant.
The disruptors
The leading minds behind Fusion Energy – a company with the tagline "good energy invested in good things" – are Dr Steven Lennon and Demetri Pappadopoulos. Their energy (unavoidable pun) is hard to miss. In short, both men are bullish at the opportunities they expect to be unlocked by the 2018-2030 IRP, and believe the future is fast becoming the new present.
"Something has to give, both locally and globally", they explain. "Various global agreements that culminated in the Paris Accord are clear on the need for people, businesses and governments to change their conduct vis-à-vis the environment.
"That is the responsibility towards the environment. Added to this, rising living costs, driven in part by costs of traditional sources of energy, also demand that we call for the democratisation of energy generation and supply space. This is responsibility to self."
Both Pappadopoulos and Lennon see Eskom continuing to play an important role in the South African energy sector, especially because it manages the national grid and enjoys a national footprint of connectivity that it can leverage to facilitate the integration of IPPs into the energy generation and distribution value chain.
They consider Fusion Energy as their response to recent government calls for investors to pour money into the local economy and help stimulate activity, create jobs and opportunities for smaller suppliers in the energy value chain.
If the above were enabled, it would go a long way towards growing the economic pie, as more investors become aware of growing activity at local and national levels and seek ways to take advantage of a promising new dawn.
Pappadopoulos believes Fusion Energy is poised to be one of the leading generators and suppliers of clean electricity to the entire Sub-Saharan Africa consumer. Accordingly, it has plans to use South Africa as a springboard into the rest of the region.
"Through Electric Fish, our project in the Eastern Cape, we’ve already partnered with several communities and local farmers to develop, construct and operate several hydro-electric projects along the Fish River System. Eskom is a key partner for the distribution of the electricity we generate from these projects to our customers; its grid unit has been very co-operative from the start."
Other Fusion Energy projects include a development of commercial rooftop solar photovoltaic solutions for industrial and commercial clients through Synthesis, another of its divisions. It also has a pipeline of larger wind and solar projects under development beyond 2020 when the IRP 2018 begins to show the demand for large scale wind and solar projects crystallising.
A serious transformation of South Africa’s energy sector will include renewable energy sources such as wind, small hydro, Biomass, and gas.
We will also see low-cost energy storage at a small scale as well as at a grid scale, playing a much bigger role in the next 10 years or so. Lennon and Pappadopoulos anticipate low-cost battery storage replacing some of the gas capacity currently planned in the IRP, and that this will become an important factor in their business. Benefits include lower, more competitive costs, cleaner energy, and opportunities for small businesses. From a job creation perspective, the independent energy producers can have the impact of being one of the leading employers of skilled and unskilled labour, as well as transferrers of skills and knowledge in the South African economy. With the value of nuclear energy having been massively discredited by the previous administration, going the renewable route will give South Africa a good shot at stabilising and growing its energy sector and leading again in this area of development.
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