Dire outlook for load shedding unless government acts now

South Africa’s record electricity cuts last year could rise 10-fold by 2026 unless the country rapidly adds generation capacity from renewable energy sources, complemented by battery storage and even diesel-powered plants, a study by Meridian Economics has found.

The bulk of the country’s energy is generated by Eskom, whose poorly maintained coal-burning plants have become increasingly unreliable, while government programmes to secure more power from private producers have been dogged by delays. Last year, 2.52GWh of power was taken offline, CSIR data shows.

While some steps have been taken to bolster output, such as exempting plants that generate as much as 100MW of electricity from requiring a licence, much more needs to be done to stabilise the system, Meridian analysts wrote in a report published on Monday. They estimate more than 15GW of additional solar energy is needed, as well as almost 7GW from wind farms.

“In the absence of further urgent and drastic interventions, load shedding is likely to increase substantially in the coming years,” the analysts said. The addition of about 1.4GW of thermal capacity, which typically sees diesel fuel being burnt during periods of peak demand, could provide backup power as more clean energy generation is added to the grid, they said.

The government awarded contracts to provide 2GW of so-called emergency electricity more than a year ago and while power-purchase agreements were signed with one bidder this month, most of the projects have been delayed by legal and procedural issues. A number of other companies that recently secured tenders to supply renewable energy to the grid under another programme may have difficulty concluding their financial arrangements due to rising supply-chain costs and other challenges, according to people familiar with the details.

Dire

The construction of more than 4GW of private generation capacity secured by the government faces a “high probability” of failing without further intervention, Cape Town-based Meridian found. It warned that local content obligations for plants threatened their financial viability and recommended that the requirements be eliminated or drastically reduced. It also called for power procurement to be expanded, contract prices to be increased and additional incentives to be made available.

A failure to take urgent action could see power cuts rise four-fold next year from 2021 levels and the situation will become increasingly dire from 2025 when a number of Eskom’s coal stations are set to be decommissioned, Meridian said.  — (c) 2022 Bloomberg LP