Eskom RE

Covid-19 yet another incentive for govt to speed up renewables capacity

Covid-19 yet another incentive for govt to speed up renewables capacity

17th July 2020 BY: MARLENY ARNOLDI 

Seizing green energy opportunities through increased private sector investment can contribute to South Africa's post-Covid-19 recovery, especially considering that the country faces a possible gross domestic product (GDP) contraction of up to 16% in real terms because of local supply and demand effects, suppression in prices and lower exports.

South Africa already has the abundant supply of resources needed to fuel the alternative energy space, including solar irradiance in the Northern Cape, local minerals that make up key components of energy storage batteries and untapped natural gas pockets.


A panel of energy entrepreneurs and experts participating in a webinar hosted by business assistance group Covid Business Rescue Assistance War Room (Cobra) on July 17 said the business case for alternative energy is only getting better.

Cobra was launched as a pro bono service to South African businesses in distress to coordinate bank, government and stakeholder support through a structured business rescue process.


New solar photovoltaic (PV) and wind energy plants in the country are already cheaper than running existing coal plants, while energy storage costs also continue to drop, it states.

The opportunities are not just for State-owned entities but for the private sector too – changing regulations are making it easier for large power users to now generate their own power and the private sector can stimulate growth by investing in the green-tech space.

Global management consulting firm Singular Group co-founder LorenzoTencati says South Africa's GDP is expected to contract by between 10% and 16% year-on-year in real terms, and recovery of the lost GDP is only excepted to be achieved from between 2024 and 2026.

“Energy is too important for economic development to not make it a number one priority, especially emerging from a crisis.

“As a key input to value-addition activities, such as beneficiation, smelting and manufacturing, energy is a key enabler of economic growth in emerging markets,” he states.

Tencati adds that load-shedding last year reduced South Africa’s GDP growth by about 0.3%, or R8.5-billion of real GDP. South Africa’s electrical energy constraints resulted in a 7 GW shortfall in 2019.

Power utility Eskom has again been forced to implement load-shedding this month.

Tencati believes South Africa is at a tipping point where renewables can help fill the energy gap and where technologies and policies are converging. “Easing regulations on private electricity generation, climate policies and declining costs of renewable energies are converging to close the gap.”

He explains that, in 2018, auctions for energy and renewables showed the levelised cost of energy for wind and solar PV as R0.62/kWh and R0.79/kWh, respectively, which is about 40% cheaper than the levelised cost of energy for the two coal independent power producer (IPP) projects Thabametsi and Khanyisa.

South Africa is currently the world’s fourteenth largest emitter of greenhouse gases. South Africa’s climate pledge is that emissions would peak between 2020 and 2025, at between 400-million and 614-million of carbon dioxide equivalent.

Gas and helium company Renergen CEO Stefano Marani says South Africa is the fifth worst polluter on the planet in terms of carbon dioxide per dollar of GDP generated, owing to the technology used in old coal-fired power stations.

Government envisions that no new coal-fired plants will be built after 2030 and that 80% of existing coal capacity will be closed by 2050.

Meanwhile, despite some regulatory changes showing promise, Botswana-listed Shumba Energy executive director Thapelo Mokhati says there are still uncertainties hindering self-generation investment in the mining industry.

He points out that self-generation is a game-changer in the industry, allowing miners certainty of power, which, in turn, enables investment in new infrastructure for future production.

“However, when the call was made for miners to do self-generation, it was only discussed at generation level. It is still not clear how far away from site a solar PV plant can be put up and how easily it can be connected to the grid to sell excess supply.

“Once you complete that cycle of generation, transmission and selling back to the grid, it makes it easier for mining companies to model the viability of self-generation,” Mokhati explains.

Further, he notes that even if these issues are cleared up, mines can still not simply invest for more or future production, since it works hand-in-hand with the manufacturing sector.

“If you are going to have increased production, there needs to be electricity and capacity in manufacturing, otherwise it will undermine the whole ecosystem. Any recovering economy will demand electricity and not everyone will be able to self-generate.

“We need to come up with a comprehensive strategy, and not just leave every miner to fend for themselves. Electricity is a utility that needs to be expanded across the economy.”


Apart from the global reduction in renewable generation prices and climate change, another incentive for South Africa to speed up alternative energy generation is the country’s resources.

Tencati says the Northern Cape is more irradiated than the United Arab Emirates, as an example of the country’s solar resources, while there is an abundance of mineral resources that are needed to produce batteries for energy storage.

He explains that, as more renewables capacity is added to the grid, more energy storage will be needed, benefitting South Africa’s miners.

Globally, annual energy storage capacity additions are expected to grow by 21% a year between 2020 and 2024.

South Africa produces most of the input minerals for fuel cell and storage technologies, such as vanadium, platinum group metals, nickel, manganese and copper.

Additionally, Marani and Tencati say South Africa has a large untapped supply of natural gas, such as the estimated one-billion barrels of oil equivalent of gas and condensate in the Brulpadda basin, off the southern coast.  

Currently, about 75% of South Africa’s gas is imported from Mozambique, but that supply is expected to start declining from 2023 by 20% a year.

Meanwhile, Tencati points out that an energy transition will be easier on coal miners if they can move into other mining activities to supply a downstream energy storage market in South Africa.

This move will require less of a drastic change in skill sets, should the country be able to attract investment for manufacturing facilities of batteries and fuel cells.

In the end, Marani believes the South African government still holds questionable ideological convictions and the country’s ability to implement plans is limiting its growth.

“Why do we not democratise power in South Africa? The JSE is imposing limits on companies related to sustainability that cannot be met because government is not allowing it to happen.

"Why not open up the grid to an auction system, with IPPs selling clean power? Why not level the playing field so that Eskom also has to become competitive?” 

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