South Africa signs three renewable independent power producer deals, 22 more coming

S.Africa energy deals

South Africa's Mineral Resources and Energy Minister Gwede Mantashe (right) speaks with Britain's Minister of State for Business, Energy and Clean Growth, Greg Hands during the G20 Energy Transitions Ministerial Meeting in Nusa Dua on September 2, 2022. 

Photo credit: AFP

Less than a day after South African President Cyril Ramaphosa cut short a crucial investment-promotion visit to the United States, to deal with an escalating electricity crisis on the home front, three long-delayed independent renewable power producer contracts have been signed.

In an announcement and contract signing ceremony in Centurion near Johannesburg on Thursday, Minerals and Energy minister Gwede Mantashe claimed that S.Africa’s energy crisis was part and parcel of a global problem.

Mantashe said that, while European and other countries had been urging S.Africa, a relatively high carbon dioxide output country, to cut back on coal usage, with the power producer Eskom using coal for about 95 percent of its electricity output, European governments had recently increased their orders of South African coal four-fold.

Mantashe cited what he termed a “coal mafia” for some supply problems in running South Africa’s ageing fleet of coal-fired power plants.

But his own officials contradicted Mantashe in framing S Africa’s electricity supply issues as part of a “global energy problem”, pointing out that an unacceptably high level of the country’s installed capacity was out of operation at any one time due to breakdowns.

Eskom supplies about 95 percent of South Africa's electricity and over 40 percent of Africa's.

South Africa's installed capacity was 51.6GW as of 2020, of which coal-fired stations accounted for about 38GW.

But as his officials pointed out, and which Mantashe conceded, more than 20GW was effectively “idle”, as Mantashe put it, due to unplanned breakdowns.

Mantashe has been at odds with Ramaphosa and public enterprises minister Pravin Gordhan, among others in Ramaphosa’s cabinet, insisting on the “necessity” of slow-build and hyper-expensive large-scale coal and nuclear power plants, versus quick-build renewable options such as wind, concentrated solar and PV solar, with battery arrays to extend supply periods.

Despite signing today’s deal with three offshore wind suppliers, which will contribute only a small fraction of the daily shortfall on the national grid at any one time and will take around 18 months to become available, Mantashe insisted that Eskom could still fulfil S.Africa’s power needs, if run properly.

The deals signed on Thursday, the first of 25 which will contribute to fulling a looming 40GW shortfall, projected for the late 2020s, had been long-delayed and were due to have been signed in April, but postponed by Mantashe’s department, which many analysts have pointed to in the current intense load-shedding crisis as the primary cause for a lack of power that is crippling the economy.

The 25 wind and solar power projects, worth about US$2.85 billion of investment, will add nearly 2.6GW to the national grid, were announced almost a year ago as an emergency response taken then to the mounting electricity shortage in S Africa.

Operate optimally

Mantashe’s comment on Eskom needing to “operate optimally” was a veiled attack on Gordhan, who has fully backed the executive team at the trouble national power producer, which is much indebted and was heavily ‘captured’ in the era of former president Jacob Zuma.

Gordhan has also contradicted Mantashe on the need for quick-build renewables to fill the energy gap.

While Ramaphosa’s emergency return to the country, despite having important foreign investor meetings lined up while abroad to see US President Joe Biden and attend Queen Elizabeth’s funeral, cannot be directly linked to today’s power supply signing event, there is no doubt that Ramaphosa, with Gordhan and others in his cabinet backing him, have intensified pressure on Mantashe.

The minerals and energy minister whose agreement is needed for new power producers to build and operate private-sector plants, is a former coal mining trade unionist, who against the global trend insists that using legacy coal or unaffordable nuclear power energy sources are the only means to fix S Africa’s dire electricity problem.

Mantashe has repeatedly criticised renewables as being “inadequate” to provide base-load supply to the national grid.

But the current crisis has forced him to allow private sector quick-build power producers, planning mainly PV solar and some concentrated solar systems, with build periods of 18 months to two years, plus more wind farms.

Eskom is also seeking to relieve the pressure created by a demand which peaks daily at around 32GW and supply which can not currently exceed 26GW, out of an installed Eskom capacity of over 48GW.

Some of the shortfall created by over 16GW routinely being unavailable due to “unplanned outages” at mainly old coal-fired plants, where necessary maintenance was for decades ignored or inadequate, has been filled by existing renewables.

The minerals and energy minister also announced that the current bid window for prospective private sector renewable energy suppliers would be extended and that, if any would-be suppliers missed the extension, there would immediately be another window to follow.

Both the private sector power producers involved in today’s event and the energy minister said that supply issues caused by the Covid pandemic’s impact, global inflationary trends and the rising cost of base energy resources had impacted on the signing of the deal.

Eskom is also driving programmes to obtain “excess” electricity produced by co-generational plants used by major industrial and mining concerns.

With respect to independent power producers, initial programmes will focus on generators capable of supplying more than one Megawatt to the grid, with the threshold to be lowered “in time” to enable smaller producers to participate.

The combined impact of the programmes is predicted by Eskom to exceed 1GW, and “will make an important contribution towards reducing the load-shedding burden on consumers”, said the embattled utility.

Independent generators will provide energy daily to compete with the Eskom generators in the “internal market”, supplying the national grid with electricity “based on the offer price and availability provided”.

A Bilateral Power Import Programme, to secure imports of power from neighbouring countries, has received interest from “several countries” wishing to sell surplus power to South Africa.

Eskom is already importing electricity from some neighbours via the Southern African Power Pool, an average 200MW being used to augment Eskom’s generation capacity when the national grid is constrained.

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