SA should only invest in gas-fired power in the next decade – report

South Africa’s energy sector should focus on future-proof strategies to end load shedding and curb electricity price hikes as gas is both high risk and will not be necessary in the power sector until at least 2035.

This is according to the ‘Exploring the case for gas-fired power in South Africa’ report by the International Institute for Sustainable Development (IISD).

The report reveals that the country’s energy sector is in a disruptive phase due to rapid advances in technologies that compete with gas functions, and proposes that South Africa’s short-term focus be centred on a rapid addition of least-cost renewable capacity coupled with storage, and increasing energy efficiency.

Billions would be needed

According to the study, introducing the first 3 000 megawatts (MW) of gas capacity and gas supply by 2030 could cost around R47 billion – money that could ultimately be wasted as gas is squeezed out of the market by cheaper, low-carbon alternatives.

To pre-empt the “costly mistake”, the study suggests that a decision on the future requirement for gas should rather be revisited around the 2030s given that wind and solar farms are 57% cheaper than gas plants for bulk electricity supply, while three-hour battery storage is 30% cheaper than gas to cover peak power demand.

In addition, South Africa’s existing electricity system, which mostly runs on coal power, can also provide some of the balancing function in the short to medium term.

‘Likely no logical role for gas’

“When the government reassesses gas investments at the end of the decade, based on the availability and cost of alternative technologies such as green hydrogen, it is likely that there will be no logical role for gas in the mix,” says Richard Halsey, co-author of the report and policy advisor at IISD.

Read: SA energy chief backs oil, gas hunt despite opposition

Halsey, who was speaking on Thursday during a webinar based on the report, says investing in gas-to-power at this time is likely to negatively impact the country’s economy and climate.

He suggests that extensive research be done to better understand how advances in alternatives to gas will influence the optimal energy mix.

“Several important gas-related plans and policies are still under development, require updating, or have not been implemented.

“Overall, the policy framework is incomplete and insufficient to guide sectoral development [as] there is no Integrated Energy Plan,” he adds, also pointing out that the Gas Master Plan has still not been completed.

Value chain considerations

Halsey further highlights the risks associated with gas-to-power investment, saying that the value chain contributes significantly to climate change.

“Methane, the main component of natural gas, has a global warming potential about 85 times that of carbon dioxide over 20 years.

“Value chain analysis [reveals that] methane leaks must be added to the CO₂ released from burning gas. [This] means that electricity produced from gas could have comparable or worse green house gas emissions than that produced from coal when analysed on a 20-year basis.”

The alternative

The report also finds that increasing renewables and storage capacity can address power system challenges that lead to frequent load shedding – the rotational power cuts by state-owned utility Eskom to maintain overall grid stability.

“To solve load shedding as quickly as possible, and to build the foundation of an optimal, low-cost future energy mix, South Africa should significantly ramp up its investments in solar, wind, storage, and technologies that integrate renewables into the grid,” says Halsey.

“Since renewables contribute only a small part of the electricity mix, a combination of existing pumped storage, liquid fuel generators, grid integration methods, and the remaining coal fleet can provide the balancing function for at least the next 13 years.”

Palesa Mofokeng is a Moneyweb intern.