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The newly appointed facilitator of the South African Renewable Energy Masterplan (SAREM) expects a draft document to be completed by mid-2023 and for the final masterplan to be negotiated before year-end.

Gaylor Montmasson-Clair has also indicated that the industrialisation plan will be adjusted to the emerging reality that private rather than public procurement is likely to underpin a significant portion of future demand.

Appointed SAREM facilitator by Mineral Resources and Energy Minister Gwede Mantashe in December, Montmasson-Clair tells Engineering News that significant progress has already been made in researching specific industrialisation opportunities linked to South Africa’s public procurement of renewable energy and storage.

Much of this research and coordination work has hitherto been facilitated by GreenCape, which will continue to provide support to the process.

However, the appointment of Montmasson-Clair, who is the senior economist at Trade & Industrial Policy Strategies, is designed to reignite the process “so as to get SAREM across the line as soon as possible”.

He stresses that he intends to build on the work already done, including the framework provided by the draft masterplan published in March 2022.

That document sets an aspirational target to progressively localise 70% of the components used in solar photovoltaic and wind projects procured under the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) by 2030, as well as a goal of localising 90% of the balance of plant by that same date.

During the current phase, however, emphasis will also be given to ensuring that the SAREM is aligned to significant changes under way in the South African electricity sector, including the fact that the development of renewable energy in South Africa is unlikely to continue to be dominated by the REIPPPP alone.

When consultations on the SAREM began, it was assumed that most of the solar, wind and storage would be procured through national programmes, such as the REIPPPP.

Subsequent electricity market reforms – including one allowing private distributed generators to build utility-scale projects without a licence and to use the grid to sell to multiple consumers using private power purchase agreements – has significant implications for the masterplan, as well as the policy instruments to be deployed to stimulate industrialisation.

That reform has reportedly already created a 9 000 MW pipeline of private renewables projects and during the sixth bid window of the REIPPPP last year, the 3 200 MW set aside for wind projects could not be allocated, as the grid required for the projects had been reserved by independent power producers operating outside of the REIPPPP.

Although the reform is recent and was initially limited to projects below 100 MW, that cap is in the process of being lifted. In 2022, the National Energy Regulator of South Africa registered 398 such projects, with a combined capacity of 1 659 MW, including 14 above 50 MW.

Montmasson-Clair says this development indicates that, while there will definitely still be an expansion of the South African renewables and storage markets, the SAREM needs to be realigned to the reality that not all of the demand will arise from public procurement processes.

In other words, while local content could be prescribed under programmes such as the REIPPPP, other industrial policy and trade instruments, such as tariffs, will be required to ensure that the private sector projects can also be leveraged in support of both industrialisation and inclusive development, such as transformation and community upliftment.

“Therefore, the delay in finalising SAREM is arguably a good thing, because if the plan had been concluded ahead of these reforms and developments it would not have been fit for purpose,” Montmasson-Clair argues.

He stresses that any plan to industrialise the renewables industry depends on the demand, as well as the consistency of that demand.

“So, ...

Engineering News editor Terence Creamer discusses the National Energy Regulator of South Africa's (Nersa's) announcement of electricity tariff increases to be implemented by State utility Eskom for the 2023/24 and 2024/25 financial years; Nersa's rejection of Eskom's request for increased funding to cover its anticipated diesel costs; the negative reaction to Nersa's tariff hike announcement; and how Nersa's decision is likely to impact on loadshedding.

A new International Energy Agency (IEA) analysis estimates that the global market for key mass-manufactured clean-energy technologies will grow by more than three times to $650-billion a year by 2030, heralding a “new industrial age” that could offer big dividends for countries that get their clean-energy industrial strategies right.

The ‘Energy Technology Perspectives 2023’ report also estimates that the related manufacturing jobs in the production of solar panels and wind turbines, as well as batteries, heat pumps, electrolysers and electric vehicles (EVs) will more than double from six-million to nearly 14-million by 2030.

The report stresses the need for a greater diversification of suppliers, however, with the three largest producer countries currently accounting for at least 70% of manufacturing capacity and with China being the dominant producer, resulting in supply-chain risks.

“The world is already seeing the risks of tight supply chains, which have pushed up clean-energy technology prices in recent years, making countries’ clean-energy transitions more difficult and costly,” the report notes.

Likewise, mining for critical minerals is also concentrated in a small number of countries, with the Democratic Republic of Congo producing over 70% of the world’s cobalt, and with Australia, Chile and China accounting for more than 90% of global lithium production.

“Increasing prices for cobalt, lithium and nickel led to the first ever rise in EV battery prices, which jumped by nearly 10% globally in 2022.”

The report notes that major economies are acting to combine their climate, energy security and industrial policies into broader strategies for their economies.

“The Inflation Reduction Act in the US is a clear example of this, but there is also the Fit for 55 package and REPowerEU plan in the European Union, Japan’s Green Transformation programme, and the Production Linked Incentive scheme in India that encourages manufacturing of solar PV and batteries – and China is working to meet and even exceed the goals of its latest Five-Year Plan.”

In South Africa, work has been under way for some time on the so-called South African Renewable Energy Masterplan (SAREM), which aims to provide the framework for the development of industrial capacity around the country’s growing renewable-energy sector.

Progress in finalising the masterplan has been slow, but there are hopes that multistakeholder negotiations will be reignited this year following the appointment late last year of Gaylor Montmasson-Clair as an independent SAREM facilitator.

“Project developers and investors are watching closely for the policies that can give them a competitive edge in different markets, and will respond to supportive policies,” the IEA report states.

It notes, too, that only 25% of the announced manufacturing projects globally for solar PV are under construction or beginning construction imminently – the number is around 35% for EV batteries and less than 10% for electrolysers.

The report argues that industrial strategies for clean energy technology manufacturing require an all-of-government approach, closely coordinating climate and energy security imperatives with economic opportunities.

“This will mean identifying and fostering domestic competitive advantages; carrying out comprehensive risk assessments of supply chains; reducing permitting times, including for large infrastructure projects; mobilising investment and financing for key supply-chain elements; developing workforce skills in anticipation of future needs; and accelerating innovation in early-stage technologies.”

Toyota South Africa Motors (TSAM) has retained its number one position in the South African new-vehicle market in 2022, posting its forty-third straight year as the market leader.

This comes despite the company’s Durban plant closing its doors in April last year owing to severe flooding, and only reopening fully in August.

The plant assembles the Corolla Cross, Fortuner, Hiace Ses’fikile minibus and Hilux models, as well as Hino trucks.

TSAM sold 132 035 vehicles in the South African market in 2022, recording a market share of 24.9%.

The company in 2021 achieved a market share of 25.4%, selling 117 659 units.

TSAM’s 12.2% growth in sales in 2022 lags only marginally behind the industry’s total sales expansion of 13.9% for the year.

“We are grateful to the entire TSAM team and dealers across the country for their continued efforts towards making Toyota a market leader, but we have learned from last year that we cannot be complacent,” says TSAM sales and marketing senior VP Leon Theron.

“We emerged out of a tragedy and managed to achieve an overall market share of 24.9% in 2022 – and that’s phenomenal.

“Our mandate this year is to continue making Toyota, Lexus and Hino the brands of choice for our market. We will achieve this by constantly aligning ourselves with customer needs.”

New research from UK-based Interact Analysis shows that hydrogen internal combustion engine (ICE) vehicles are in their infancy in terms of global rollout.

However, mass production is predicted to take off within five years, says the company.

“Although the costs of the engine and the vehicles themselves are relatively low, their running costs are currently high, making the total cost of ownership (TCO) unfavorable.

“This, coupled with the lack of refuelling infrastructure, means they are less attractive compared with fuel cell and battery electric alternatives (BEVs).”

Hydrogen ICE vehicles are likely to remain a niche product until 2030, says Interact Analysis in its report, with shipments to increase from 58 000 units in 2030, to more than 400 000 in 2040.

Hydrogen ICE vehicles require a series of minor changes compared with traditional ICE vehicles, including different spark plugs and other changes to materials.

On their own, individual changes do not present too much of a challenge, but, in combination, the total cost of manufacturing of the vehicle soars.

In addition to this, adding greater complexity increases the potential risks once the vehicle is in mass production.

“Hydrogen ICE vehicles are most attractive to those companies who are most climate aware, or where battery electric alternatives are either unavailable for a particular vehicle or not fit for purpose,” says Interact Analysis in its research report.

“Without either of these catalysts for adoption, uptake of hydrogen ICE vehicles is likely to remain low in the short term.

“Off-road vehicles are perhaps best suited to this technology since battery electric and fuel-cell alternatives face greater infrastructure challenges in off-road environments. “

Although the maintenance costs for hydrogen vehicles will be similar to those of other vehicles, current high fuel costs for hydrogen vehicles mean the TCO for these vehicles will be worse than for diesel and battery electric alternatives, adds Interact Analysis.

Therefore, hydrogen vehicle applications are likely to be limited to applications or regions where diesel has been legislated against or where battery electric alternatives are not available.

“Due to unfavourable TCO and high fuel costs, hydrogen ICE vehicles are unlikely to become the market leader,” summarises Interact Analysis principal analyst Jamie Fox.

“Despite the many environmental benefits to the use of hydrogen vehicles, for mass adoption to occur the refuelling infrastructure required must be developed and customer payback improved.

“We are still seeing many limitations to refuelling infrastructure for battery electric vehicles, so it is unlikely that we will see a significant amount of change in the H2 infrastructure for many years.”

Interact Analysis predicts that the cost of hydrogen will reduce significantly over time. If the price continues to fall at pace, the fuel could become more competitive across a wider range of applications in the future.

South Africa needs to act now and transition to a low-carbon, climate-resilient and competitive economy to unlock new green opportunities and avoid the “massive” cost of inaction around climate change, a report recently published by the National Business Initiative (NBI), in partnership with Business Unity South Africa (Busa) and the Boston Consulting Group (BCG), has found.

The NBI-Busa-BCG Climate Pathways project last week published the ‘Financing South Africa’s Just Transition’ and ‘South Africa’s Net-Zero Transition’ reports.

The ‘South Africa’s Net-Zero Transition’ report states that, in a decarbonised world where trade partners act on their net-zero commitments, about 50% of South Africa’s export value, one-million direct jobs and 15% of gross domestic product could be at risk if current high carbon emissions are maintained.

However, the transition to a net-zero economy can provide a solution to the country’s inequality, poverty and unemployment.

The parties suggest that, first and foremost, the country deploy renewable energy at a ten times faster rate than it currently does, an unprecedented addition of between 6 GW and 7 GW a year, to decarbonise the power sector, and completely phase-out coal-fired power stations by the mid-2040s.

The parties point out that 30 GW of existing connection capacity could be used for renewables, most of which is based in Mpumalanga, if the grid is upgraded. An additional 30 GW of connection capacity needs to be built to achieve the overall 60 GW required by 2030.

The country’s optimal renewable sources are in coastal areas, which currently has limited grid connection.

NBI, Busa and BCG also recommend the rapid electrification of transport, with 700 000 electric vehicles (EVs) on the road by 2030 and the banning of conventional vehicle sales by 2035.

“Even with implementing ambitious actions South Africa will not meet the lower bounds of its internationally committed emission reduction targets. This pathway will result in a 20% reduction in carbon emissions compared with the 2017 baseline,” the authors say, adding that South Africa requires even more disruptive decarbonisation action across all sectors and starting as early as possible.

The partners believe South Africa will not be able to transition its economy without international support, in the form of financing, trade and risk mitigation of foreign currency fluctuations, skills development and technology.

“South Africa’s transition will require more than R6-trillion in investments by 2050, half of which is required by the power sector, However, the annualised investment rate required in power is R100 billion a year, compared to the current primary energy spend of R120-billion a year – the investment into

a renewable energy power system actually saves South Africa money in the long-term,” NBI explains.

Further, in the 2020s, 60% of South Africa’s mitigation investments can be primarily funded from commercial sources. Therefore, many of these investments are already commercially viable.

However, international development finance will be critical to fund ‘non-bankable’ investments, such as social and re-skilling costs, and cover the ‘economic gap’ in new green industries to crowd-in private sector investment – to subsidise green hydrogen costs and stimulate supply-side investments, for example.

South Africa’s net-zero transition will see a fundamental change in the economy – a rapid shift from being the second-most carbon intensive economy in the world to a new green, net carbon-neutral economy within three decades.

NbI reports new green industries such as EV manufacturing, green hydrogen-based industries, and green minerals, among others, can drive job creation, with a renewables-based power system creating about 2.4 million net cumulative job years by 2050 alone.

However, displaced workers cannot simply be ‘absorbed’ by these new jobs due to a difference in skill requirements. Moreover, these new green industries, set against the ...

Development finance institution (DFI) the African Development Bank (AfDB) group has approved a R2.2-billion line of credit to the Development Bank of Southern Africa (DBSA) to expand its portfolio with strategic projects in energy, infrastructure and communications technology in the Southern Africa region and elsewhere in Africa.

The DBSA is seeking to raise $1-billion (R19-billion) in funds over the next three years, to expand its portfolio and focus on clean and renewable energy, infrastructure, information and communications technology and social as well as women-owned projects in the Southern Africa Development Community region.

The facility will provide long-term funding to the DBSA, augmenting internally generated funds, as well as loans from other DFIs and commercial lenders.

The loan also advances three of the DBSA’s High Five priorities, namely to industrialise Africa, improve the lives of Africans and light up Africa.

The Southern Africa region has achieved relatively high levels of economic, financial and trade integration and cooperation.

The DBSA’s strategic priorities also align with those of the government of South Africa, including its National Development Plan and New Growth Path, in addition to the United Nation’s Sustainable Development Goals and Nationally Determined Contributions under the Paris Agreement.

Public Enterprises Minister Pravin Gordhan responded with an “emphatic no” to a question as to whether government considered outgoing Eskom CEO André de Ruyter to be a traitor, as implied in a recent statement by Mineral Resources and Energy Minister Gwede Mantashe, who said “Eskom, by not attending to loadshedding, is actively agitating for the overthrow of the State”.

Gordhan was speaking during a briefing convened by Eskom chairperson Mpho Makwana after De Ruyter’s resignation – submitted at 7:30 on Monday December 12, only days after Mantashe’s comments – was confirmed by Eskom on December 14, following a media leak.

“The emphatic answer is no [and] I'm not going to qualify the answer,” Gordhan said in response to a question on Mantashe’s comments, which Makwana said were not in his “purview” to comment on.

“It is absolutely unfair, and uncalled for, to use that kind of language for somebody who tried their best to get Eskom out of the mess that it was in, and on to a different kind of platform.

“The more knowledgeable people amongst you know that the mess didn't start in 2019 - it didn’t start in 2009, or 2010 or 2011 or 2012, it started a long time ago.

“And there's a long list of people who must be held responsible for decisions that they didn't make the right way.”

Gordhan said the comments by his Cabinet colleague were “unhelpful at a time when we need to engender confidence both in the institution and government”.

He also paid tribute to De Ruyter for the sacrifices he had made in moving from the private to the public sector and for “giving his all to this particular national project”, while acknowledging government failures to ensure that more generation was added in line with De Ruyter’s consistent call for an additional 4 000 MW to 6 000 MW of non-Eskom generation.

POLITICAL SUPPORT CRITICAL

Earlier in the briefing De Ruyter confirmed that his decision to resign had been made because he no longer felt he had the “support of the broader political economy”, which he described as “absolutely critical to enabling the success of Eskom going forward”.

“Given recent media reports, I'm unfortunately currently in a position where I do not regard that position as being tenable and I have accordingly decided to step back to afford the shareholder and the board the opportunity to appoint a candidate to the position of group chief executive who may be better suited, better equipped for the strategic and operational objectives at hand.”

De Ruyter had agreed to remain beyond his two-month notice period and would depart the organisation on March 31, 2023, to facilitate a smooth handover to his successor.

Makwana confirmed that he had accepted De Ruyter’s resignation when it was handed to him during a pre-scheduled meeting with De Ruyter on December 12 and that the board would work “tirelessly to ensure that we secure the next leader of Eskom”.

BOARD TURNAROUND PLAN?

Gordhan went to lengths to stressed that government remained committed to the strategy of improving Eskom’s performance, while reforming the electricity supply industry, including the through unbundling of the utility and the creation of an independent grid company.

However, no firm date was set for the establishment of the independent board of the National Transmission Company South Africa, despite a list of candidates having been compiled and handed to Gordhan.

The Minister also underlined government’s ongoing commitment to the Just Energy Transition (JET) strategy, which was being supported financially by several developed countries and which included plans to repower and repurpose coal stations that were scheduled for retirement.

However, Makwana emphasised that the new Eskom board – which began work on October 1 and which he described as an engaged rather than a passive board – was working on a separate long-term turnaround plan to end loadshedding, which was currently being canvassed ahead of sign-off.

“We're in key consultative engagements with the sharehold...

It's been another extreme week on the electricity front, with Stage 5 loadshedding, the resignation of Eskom CEO Andre de Ruyter and some dramatic Nersa postponements. Terence Creamer discusses this traumatic period.

The National Energy Regulator of South Africa (Nersa) has refused to concur with two electricity procurement determinations submitted by the Department of Mineral Resources and Energy (DMRE) under Section 34 of the Energy Regulation Act – including one for a 3 000 MW Combined Cycle Gas Technology (CCGT) project that Eskom plans to develop in Richards Bay, KwaZulu-Natal.

Earlier this year, the DMRE submitted three determinations for the regulator’s concurrence, which is required before public procurement can take place, including:

a determination for the procurement of 1 000 MW of new generation capacity from technologies such as landfill, biogas and co-generators;

the procurement of 14 791 MW of new generation capacity from renewables and storage by independent power producers; and

a determination for the procurement of 3 000 MW of new CCGT.

During a meeting on December 14, the Energy Regulator voted against concurring with the 1 000 MW determination or the 3 000 MW of CCGT, while approving the determination for 14 791 MW of new generation capacity from renewables and storage in line with the Integrated Resource Plan of 2019 (IRP 2019).

Concurrence was not provided for the 1 000 MW on the basis that a Section 34 determination was the incorrect instrument, as the energy could be procured by Eskom under a Short-Term Power Procurement Programme (STPPP) and the costs recouped through the tariff.

The Energy Regulator made the decision despite the previous STPPP having been mothballed partly because Nersa had refused to treat it as a pass-through cost when making Eskom revenue determinations.

The 3 000 MW CCGT determination was also rejected on the basis that a request to deviate from the IRP 2019 should be pursued as a Section 34 determination.

In its reasons for decision, which were not immediately shared, Nersa would reportedly make a recommendation for the approval to be sought using another section of the Act.