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Although the Afrimat Construction Index (ACI) has marginally outperformed South Africa’s gross domestic product (GDP) growth rate during the first quarter of 2022 on a year-on-year basis, the index has returned to a trend of declining between each year’s fourth quarter and the first quarter of the following year, recording a drop of 3.5% in index value (from 118.8 to 114.7).

The ACI is a composite index of the level of activity within the building and construction sectors and is compiled by economist Dr Roelof Botha on behalf of Afrimat.

Afrimat is a JSE-listed openpit mining company which produces industrial minerals, bulk commodities and construction materials.

Botha says the lifting of most of the Covid-19 lockdown regulations resulted in a V-shaped recovery for most key sectors of the economy during the second half of 2020, including construction. Since then several sectors have fully recovered and progressed to a new phase of expansion, but construction sector activity remains subdued.

In fact, the only sub-indicator of the ACI that recorded positive growth between the fourth quarter of last year and the first quarter of 2022 was the value of wholesale sales of construction and building materials.

However, compared with the first quarter of last year, the picture is considerably more positive, with four of the nine sub-indicators recording positive growth, whilst two others were virtually unchanged (declines of less than 1%).

“Ever since the ACI recorded its highest level yet, namely 143.8 during the third quarter of 2016, a combination of high interest rates, low economic growth, State capture, public sector incompetence and high levels of violent crime have dampened activity in the country’s construction sector,” notes Botha.

Compared with the first quarter of 2021, the shining stars of the latest ACI are the volume of building materials produced, the values of buildings completed in the larger municipalities, and wholesale sales of construction and building materials.

Since the fourth quarter of last year, the worst performing sub-indicator was labour remuneration, which declined by more than 15%.

“However laudable the policy initiatives announced in this year’s State of the Nation Address and National Budget may be, these will essentially remain only promises unless the stated government objective of closer cooperation with the private sector is translated into active public-private partnerships,” says Botha.

“As long as the value of construction work represents only 4% of the country’s infrastructure project pipeline, new jobs will not be created at scale in the construction sector.”

According to Botha, one of the most serious obstacles to the further expansion of construction activity is related to the prevalence of intimidation, extortion and violence on construction sites, which “has reached crisis levels”.

The industry is also having to cope with higher interest rates.

A combination of global supply-side constraints and record high prices of energy commodities, especially oil, has fuelled the highest global inflation rates in more than 50 years.

“The negative impact of higher interest rates is already being felt in a decline, in real terms, of average house prices in South Africa, and also in the value of building plans passed by larger municipalities,” says Botha.

One positive aspect is the fact that South Africa’s public finances are in good shape, with the public debt/GDP ratio having stabilised.

Prominent international credit rating agencies have also acknowledged National Treasury’s sound management of the country’s fiscal affairs by upgrading the outlook for South Africa’s government bonds.

Licence To Plant Hemp

Afrimat CEO Andries van Heerden says Afrimat is investing in a number of green initiatives, the most recent of which is the granting of a licence to plant hemp.

“This product is extremely versatile and is an excellent counterbalance to carbon emissions. Parts of the plant are also used to manufac...

South Africa’s Just Energy Transition Partnership Investment Plan, or JETP-IP, should be geared towards projects that will support the country in meeting the lower end of its new Nationally Determined Contribution (NDC), a senior US Treasury official has indicated.

Ahead of the 2021 COP26 climate talks in Glasgow, Scotland, South Africa made a material update to its NDC target range for 2030, which was improved to between 420- and 350-million tons of carbon dioxide equivalent (Mt CO2-eq) from an initial NDC pledge to lower its carbon emissions to between 614 Mt CO2-eq and 398 Mt CO2-eq by 2030.

This more “ambitious” NDC created the basis for the so-called International Partners Group (IPG) of France, Germany, the UK, the US, and the European Union to sign a Political Declaration with South Africa that included an offer of $8.5-billion in climate finance to support the transition from coal to renewables while protecting workers and communities currently reliant on the coal value chain.

The release of the financing – which IPG participants have indicated is likely to involve a combination of concessional loans, grants, technical support and debt guarantees – is dependent on the finalisation of the JETP-IP ahead of COP27 in Sharm el-Sheikh, Egypt, in November.

The JETP-IP will include a South Africa-developed portfolio of projects that will be funded initially from public financiers in the IPG countries, but could be broadened to include funds from other governments, as well as private financiers and philanthropists, given that South Africa will require far more than $8.5-billion to implement a transition to a low-carbon economy.

A recent study by the Blended Finance Taskforce and the Centre for Sustainable Transitions at Stellenbosch University calculated that transitioning South Africa’s energy system will require $250-billion in climate finance over the coming three decades.

The Treasury official indicated that JETP-IP should include projects that were aligned with the lower end of South Africa’s NDC, which he described as the “North Star” of South Africa’s JETP, which the IPG hoped to use as a template for similar partnerships in other high-emission developing countries.

He added that, while the building of new coal in South Africa was not a “red line” for the IPG it would make it harder for South Africa to achieve the lower end of the NDC, which is said to be compatible with a transition to net-zero by 2050.

Earlier, COP president Alok Sharma, of the UK, who visited South Africa partly to receive a six-month progress report on the JETP since COP26, acknowledged that some European countries were resuming coal operations to reduce reliance on Russian gas, but emphasised that these where short-term measures and that the main thrust in Europe currently was the acceleration of the energy transition away from fossil fuels.

Sharma also questioned whether it was possible to finance new coal and cautioned that it was likely that such assets would become commercially and environmentally “stranded” as the world sought to hasten decarbonisation efforts.

The US Treasury official welcomed South Africa’s decision to update its Integrated Resource Plan for electricity as it would offer an opportunity to integrate the country’s new NDC commitments into the plan, as well as other changes under way in the electricity market.

He added that until the JETP-IP was finalised, it would be premature to state how each IPG partner would seek to honour their funding commitments or to indicate what funding mechanisms would be used.

Asked by Engineering News to define how concessional loans might be priced under the JETP he said one way would be pricing such loans at levels below the “current carrying cost of Eskom debt”.

“That's not a pure definition of concessionality but certainly from a South African Treasury standpoint, if you can lower the cost of Eskom’s current debt, that is a direct saving to the country.

“So, as we think about types of capita...

Eskom CEO André de Ryuter reports that the utility will host its first roundtable with local and international energy experts on Friday, June 24 to discuss solutions to the country’s electricity crisis and ongoing load-shedding.

Speaking during a briefing to explain a decision to extend rotational power cuts, owing to a combination of coal plant breakdowns, delays in returning Koeberg Unit 2 to service, as well as a need to replenish diesel stocks at the open-cycle gas turbines and pump water into the upper dams at its pumped storage facilities, De Ruyter stressed that Eskom had no role in crafting energy policy.

Nevertheless, it was hoping to make solution-oriented recommendations to the Department of Public Enterprises for possible consideration by government, which has made improving the security of electricity supply a top priority.

“We've got a whole day set aside for this consultation.

“The emphasis is going to be on solutions and how we can make recommendations [for removing] roadblocks that stand in the way of the rapid addition of more generation capacity to the grid,” De Ruyter said.

“But again, I want to stress that it's not Eskom’s job to make energy policy, we execute energy policy.

“We're also not in the business of procuring electricity; that is done by the IPP Office, which reports into the Department of Mineral Resources and Energy.”

The utility is on record as saying that between 4 000 MW and 6 000 MW is required to help stabilise the system and to provide it with time and space to conduct proper maintenance across its aged coal fleet.

In the meantime, power cuts have been intensifying, with 2021 having been the country’s most intensive year yet for load-shedding and with 2022 set to be even worse.

By June 22, Eskom had already implemented 54 days of load-shedding during 2022, up from 51 days during the same period in 2021.

Load-shedding has also typically been implemented at higher stages, including periods during which Stage 4 has been declared, representing 4 000 MW of simultaneous rotational cuts.

State-owned electricity utility Eskom has confirmed that it has awarded battery energy storage system (BESS) contracts to two supplies for projects with a combined capacity of 199 MW/833 MWh.

CEO André de Ruyter confirmed on Wednesday that the BESS programme, which is being funded through a World Bank loan, will cost R11-billion. The entire programme is for 360 MW/1 440 MWh and is being delivered in two phases.

Speaking during a briefing hosted to explain another extension of rotational power cuts, De Ruyter said that Phase 1 contracts had been awarded to Pinggao, of China and Hyosung, of South Korea.

Eskom confirmed with Engineering News that Pinggao had been awarded contracts for the 80 MW Skaapvlei, 9.5 MW Paleisheuwel and 5 MW Graafwater projects, in the Western Cape, while Hyosung had been awarded the 40 MW Pongola and the 8 MW Elandskop projects, in KwaZulu-Natal, as well as the 20 MW Hex project, in the Western Cape.

Eskom has indicated previously that the BESS projects will perform various roles from peak shaving and demand management to the provision of ancillary services and local network support.

De Ruyter said the projects were currently the subject of a licensing adjudication by the National Energy Regulator of South Africa, which had already provided its concurrence to the projects.

Eskom is, thus, confident of receiving the licences by mid-September.

“We then intend to commence construction following the award of the licences and depending on the package,” De Ruyter said, indicating that some of the packages should begin later this year and be completed by the middle of 2023.

He noted that the World Bank had been intimately involved in supervising the project and ensuring proper governance.

“We were also very fortunate to secure pricing for the projects prior to significant price escalations that have arisen as a result of a commodity price spike caused by the war in Ukraine, as well as the fact that there is a significant demand now for additional battery storage systems around the world.”

Describing the contracts as large and innovative, De Ruyter said that the installation of the systems would help strengthen the transmission and distribution grids in a number of key areas, including the Northern Cape, the Western Cape and also in KwaZulu-Natal.

This article and the headline have been updated to include new details about the size of the BESS programme, its phased development and the overall capital expenditure involved.

A Just Energy Transition Partnership Investment Plan (JETP-IP), which will seek to unlock $8.5-billion in concessional climate finance to accelerate South Africa’s transition from coal to renewables and support workers and communities currently reliant on the coal value chain, is expected to be finalised by October for sign-off during the COP27 climate talks in Egypt in November.

The JETP-IP, a first draft and revision of which are expected in July and September respectively, is viewed as the crucial next step in the conversion of a Political Declaration signed at the COP26 climate talks in Glasgow, Scotland, last year between South Africa, and the International Partners Group (IPG) of France, Germany, the UK, the US, and the European Union.

An indicative work plan and timetable was released following a meeting on June 21, between COP president Alok Sharma and a delegation of Ministers from the South African government including Mondli Gungubele, Dr Naledi Pandor; Enoch Godongwana, Barbara Creecy, Pravin Gordhan, Gwede Mantashe and Ebrahim Patel.

Prior to the meeting Sharma also held discussions with the head of the Presidential Climate Finance Task Team, Daniel Mminele, the JETP secretariat, led by Ms Joanne Yawitch, as well as with trade union leaders, including representative of the National Union of Mineworkers.

Sharma said that the meeting reinforced the commitment of both the IPG and the South African government to the JETP, which has been held up as a possible blueprint for similar partnerships with other developing countries.

“We had over two-and-a-half hours of detailed discussions with the Ministers in terms of the way forward and I think that's given me a lot of confidence that, firstly, there is a real desire on the part of the South African government to progress this and also to use this to further the energy transition in South Africa.

“But I was also able to reiterate the commitment from the IPG to make sure that we progress this and we're able to show concrete progress by the time we get to COP27.”

Sharma also stressed that the JETP-IP, which would identify the actual projects to be funded over the coming three to five years, was being developed from “the South African side” and that he was optimistic that the plan would also catalyse other financial support, given that the $8.5-billion would be insufficient to fund the country’s multidecade transition.

No details have yet been provided as to what projects will be included in the JETP-IP, but both Eskom and Mminele have indicated that the load-shedding-prone and carbon-heavy electricity sector would be prioritised, with Eskom proposing that repowering and repurposing initiatives at its decommissioned coal plants be included along with the grid investment needed to unlock more renewables.

Some of the funding will also be directed towards supporting the development of local electric vehicle and green hydrogen industries.

The JETP will also build on existing work relevant to the partnership, including existing bilateral and multilateral initiatives. For instance, the Eskom Just Energy Transition Project at Komati power station, in Mpumalanga, will likely be presented to the World Bank board for approval before COP27.

Sharma reported that he toured the Komati site during his visit to South Africa.

A joint statement released following the meetings also underlined the importance of the JETP-IP, which was described as key to realising the finance for projects and activities required to achieve a just transition.

The statement included a six-month update since COP26, which indicated that the Presidential Climate Finance Task Team and the National Treasury were currently analysing the finance instruments proposed by the IPG with a view to ensuring that they meet South Africa’s investment needs and fiscal realities.

The IPG proposal has also reportedly opened the way for more detailed engagements, including with key development finance institutions and multilateral d...

BMW Group South Africa (BMW SA) has added 16 African countries to its existing portfolio of 30 export countries, including Senegal, Nigeria, Angola, Kenya and Ethiopia.

BMW SA produces the BMW X3 sports activity vehicle (SAV) at the Rosslyn plant, in Tshwane.

The plant has produced vehicles since 1968, and was established as the premium car maker’s first production facility outside Germany.

Rosslyn started production of the BMW X3 in April 2018, following a R6.2-billion investment and after almost 35 years of BMW 3 Series production.

More than 300 000 BMW X3s have been produced at the plant since 2018. The facility currently produces the third generation X3, and is able to manufacture up to 75 000 units a year, of which 96% is exported.

The X3s for the newly allocated African markets were previously sourced from the German group’s Spartanburg plant, in the US.

“The BMW X3 remains a crucial vehicle in our global production network and now, with exports to 16 African markets, it is also critical to our success on our continent,” says BMW Group Rosslyn plant director Johan Mouton.

“Ours has been a long-term commitment to the development of this company and the communities it has served for close to 50 years. As such, we are honoured to have the opportunity to build BMW X3s in Africa, for Africa, too.”

“The addition of 16 key export markets is further evidence of the increased trade relations within the Southern African Development Community and the broader African Continental Free Trade Agreement region,” adds BMW SA and sub-Saharan Africa CEO Peter van Binsbergen.

“We all have a role to play in encouraging stronger trade relations on the continent, and I am especially proud of the BMW X3’s ambassador role – both for the BMW Group and South Africa.”

The Presidency’s Operation Vulindlela (OV) has made markable process on accelerating implementation of priority structural reforms since its establishment in October 2020.

Presidency project management office head Rudi Dicks addressed delegates during the Manufacturing Indaba, held in Sandton on June 21, highlighting that much of the constraints mentioned by the private sector within the manufacturing sector, including load-shedding and freight issues, are within the focus areas of OV.

“Although the manufacturing sector led economic growth figures in the first quarter of the year, it was from a low base, with unreliable electricity supply and freight transport remaining binding constraints on industrial growth and manufacturing output,” Dicks acknowledged.

OV aims to get strategic sectors working again and is a major driver of the Economic Recovery and Reconstruction Plan. It follows a government-wide approach, and does not encompass one single entity performing structural reforms, but rather departments working together to effect restructuring, continuously.

Presidency private office director Saul Musker explained during the conference that the five desired outcomes of OV comprise stabilised electricity supply, sustainable water supply to meet demand, a visa regime that attracts skills and grows tourism, competitive and efficient freight transportation and increased quality of digital communications.

To achieve the desired outcomes, OV has penned 26 specific interventions, of which a number have been completed. These are raising the licencing threshold for embedded generation projects, enabling municipalities to procure power from independent power producers, completing the spectrum action, corporatising Transnet National Ports Authority, finalising the White Paper on National Rail Policy, implementing an e-visa system in 14 countries and publishing a revised Critical Skills list.

Musker pointed out that the process of reform is complex and often involves difficult policy and regulatory changes, as well as the establishment of new institutions, or implementing fundamental changes to existing institutions.

Five of OV’s structural reform interventions are experiencing challenges with implementation, including improving the efficiency of ports, addressing institutional inefficiencies in municipal water distribution and addressing institutional inefficiencies in municipal electricity distribution.

This while two interventions are experiencing “critical challenges”, namely the implementation of the Risk Mitigation Independent Power Producer Procurement Programme and improving Eskom’s energy availability factor to more than 70%.

Other reform interventions that are in progress and on track with envisioned timelines are procuring new energy generation capacity in terms of the Integrated Resource Plan 2019, the restructuring of Eskom, improved water-use licence approvals, establishing an independent economic regulator for water and a National Water Resource Infrastructure Agency (NWRIA) and implementation of third-party access to the freight rail network.

Musker highlighted the key reforms to reach fruition in the remainder of the year are completing the analogue switch-off and enabling spectrum in the 700 MHz and 800 MHz frequencies to be used for mobile telecommunications; the amendment of the Electricity Regulation Act and the Electricity Pricing Policy to enable the emergence of a modern and competitive electricity market; enabling third-party access to the freight rail network, allowing 16 slots for private sector to operate the rail network for the very first time; issuing requests for proposals for private sector investment in container port terminals to enable upgrading and expansion of infrastructure; and establishing the NWRIA.

The OV team within the Presidency monitor’s progress on all interventions and engages, seeks consensus and determines what needs to be done and by whom, when required to do so. The team also offers...

Trade, Industry and Competition Minister Ebrahim Patel reports that government is working to find a “pragmatic solution” to the problem where local-content requirements contained in government’s electricity procurement programmes are delaying the construction of utility scale renewable-energy projects.

“I've asked the Department of Trade, Industry and Competition (DTIC) team to meet with the energy team to see how we can ensure that our localisation goals don't retard the development of green energy, and that we find ways to speed up processes,” Patel said in response to a question posed by Engineering News on the side-lines of the Manufacturing Indaba.

The localisation requirement, particularly for solar panels, has been raised as a challenge for both the non-powership projects identified as preferred bids under the Risk Mitigation Independent Power Producer Procurement Programme (RMIPPPP), as well as for the preferred bidders identified following bid window five (BW5) of the Renewable Energy Independent Power Producer Procurement Programme.

Financial close for projects under both programmes has been delayed, with the BW5 projects currently scheduled to close on a staggered basis in July and September and with only three RMIPPPP projects having signed power purchase and implementation agreements with Eskom and the Department of Mineral Resources and Energy, following several delays.

A recent report by Meridian Economics on how South Africa’s load-shedding crisis could be resolved by early 2024 warns that the local-content requirements for solar photovoltaic (PV) panels have emerged as a serious impediment to the projects proceeding and it, thus, recommended that the requirement be scrapped.

The study argues, too, that delaying the projects will cause “greater economic damage and deindustrialisation downstream than the very modest benefits from PV panel localisation”.

“Given that South Africa has absolutely no competitive advantage in manufacturing PV panels, that all the raw materials must be imported and that, to be competitive, the process will have to be highly automated, there appears to be no economic rationale for imposing more load-shedding on South Africans and ‘taxing’ them to subsidise the establishment of local panel manufacturers,” the Meridian report asserts.

Patel said he continued to believe there to be a “big opportunity” in the manufacture of renewables components locally on the back of the investment government and electricity consumers had made to unlock the renewables industry.

He also reported that some industrialists had indicated to him that they could move with speed to establish local production.

“[But] in the end, this will require some pragmatic solution,” he added, without offering specifics.

“The lesson we learned from the early phase [of the renewables roll-out] is that not enough thought had been given to developing industrial capabilities in the generation of clean energy.

“And so, in the next phase, while still wanting to do it as expeditiously as possible, we are working on the localisation elements,” Patel said.

Government and stakeholders have, for some time, been developing a South African Renewable Energy Masterplan, but the social compacting process had not yet been concluded.

Patel reiterated the importance government was placing on these sector partnerships and on the green economy in pursuit of the DTIC’s three priorities of industrialisation, transformation and building a capable State.

He also reported that work was progressing on other elements of government’s green industrialisation drive, including in the areas of green hydrogen production and the local manufacture of electric vehicles.

A draft green hydrogen commercialisation strategy will be presented to Cabinet in August and the electric vehicle (EV) policy is expected by October, with discussions currently under way with the National Treasury and stakeholders following the publication last year of a draft Green Paper on EVs.

Achieving Africa’s energy and climate goals by 2030, including universal access, will require a more than doubling in energy investment this decade, rising to a yearly rate of $190-billion from 2026 to 2030, a new International Energy Agency (IEA) report shows.

It will also require the connection of 90-million people a year, triple the rate of recent years, if Africa is to deliver modern energy services to the 600-million people who currently lack access.

The ‘Africa Energy Outlook 2022’ describes such a step up in investment as a “formidable undertaking” that will require clear strategies and policies from African governments and significant support from international institutions, including in the form of concessional climate finance.

Executive director Dr Fatih Birol says multilateral development banks should take urgent action to increase financial flows to Africa for both developing its energy sector and adapting to climate change, which is already resulting in water stress, reduced food production, an increased frequency of extreme weather and lower economic growth.

The adverse effects of climate change were also fuelling mass migration and regional instability.

“The continent’s energy future requires stronger efforts on the ground that are backed by global support,” Birol argues, while describing the upcoming COP27 climate conference in Egypt as a crucial platform for African leaders to set the agenda.

The IEA also calls for a “sea change” in the way African energy projects are financed, whereby the focus shifts to both electricity, primarily derived from solar, and to meeting domestic demand. Hitherto, much of the focus has been on oil and gas projects, predicated on foreign offtake.

IEA says these shifts underscore the need to fundamentally change the way energy infrastructure is financed.

“Priority needs to be given to making more effective use of public capital, from international and domestic sources, in order to better leverage private capital.”

The IEA’s Sustainable Africa Scenario (SAS) sees electricity, derived primarily from renewables, emerging as the backbone of the continent’s energy systems.

It notes that Africa is home to 60% of the best solar resources globally and that solar photovoltaic (PV) technology is already the cheapest source of power in many parts of Africa and will outcompete all sources continent‐wide by 2030.

“Renewables, including solar, wind, hydropower and geothermal account for over 80% of new power generation capacity to 2030 in the SAS.

“Once coal‐fired power plants currently under construction are completed, Africa builds no new ones, underpinned mainly by China’s announcement to end support for coal plants abroad.

“If the investment initially intended for these discontinued coal plants were redirected to solar PV, it could cover half of the cost of all Africa’s solar PV capacity additions to 2025 in the SAS.”

However, the IEA still sees natural gas playing a role in bolstering Africa’s security of supply.

It notes that more than 5 000-billion cubic metres (bcm) of natural gas resources have been discovered to date in Africa that have not yet been approved for development.

“These resources could provide an additional 90 bcm of gas a year by 2030, which may well be vital for Africa’s domestic fertiliser, steel, cement and water desalination industries.”

The report says that cumulative carbon dioxide emissions from the use of these gas resources over the next 30 years would be around 10-billion tonnes.

“If these emissions were added to Africa’s cumulative total today, they would bring its share of global emissions to a mere 3.5%.”

The report also notes that the goal of universal access to modern energy calls for investment of $25-billion a year, which translates to about one per cent of global energy investment today, or the cost of building only one large liquefied natural gas terminal.

“It is morally unacceptable that the ongoing injustice of energy poverty in Africa isn’t being re...

Before moving ahead with the procurement of gas-fired generation, South Africa should update both its Integrated Resource Plan (IRP) for electricity and its Gas Master Plan to reflect prevailing renewables and battery costs, as well as the country’s carbon constraints, a new Meridian Economics study argues.

Titled ‘Hot Air About Gas: An Economic Analysis of the Scope and Role for Gas-Fired Power Generation in South Africa’, the study warns that the current policy approach of anchoring gas demand in the domestic electricity sector is premised on outdated cost and emission assumptions.

The report has been published following recent confirmation that the IRP of 2019, which has a 3 000 MW gas-to-power allocation to 2030, will be updated and extended beyond 2030, and ahead of a proposed procurement programme for gas-fired generators.

Preliminary work is also under way for the possible development of liquefied natural gas (LNG) import infrastructure at locations such as Coega, Richards Bay and Saldanha Bay, while plans for an LNG import terminal in Maputo, Mozambique, are also progressing.

South Africa’s current gas policy, the Meridian report notes, is based on the 2012 National Development Plan, which predated subsequent “unprecedented” technology cost changes that have since made gas-to-power three times more expensive than renewables. In addition, South Africa’s remaining carbon space has halved over the period.

These economic and environmental realities, Meridian’s Adam Roff argues, should be fully integrated into South Africa’s energy policy before it embarks on any new procurement to avoid the risk of building stranded assets and/or exposing exporters to potential carbon border tax adjustments.

Meridian’s own analysis indicates that, in light of the sharp fall in wind and solar costs, there is no role for large-scale gas-fired power generation in South Africa, and that the only remaining economically rational role for gas in the electricity sector would be for peaking or standby capacity.

Deploying the gas generators as peakers would, thus, be incompatible with the proposal that the electricity sector should anchor demand for LNG imports. Instead, possible industrial and synfuels demand would be required to anchor such imports.

The report calculates that 8 GW of flexible capacity is required by 2030, 5 GW of which is yet to be developed.

If used optimally in an electricity system migrating towards higher levels of variable generation from wind and solar, such generators would stand idle for between 95% and 97% of the time, and would require between 25 PJ and 40 PJ of gas yearly by 2030.

An illustrative analysis in the report shows that deploying the gas generators at higher capacity factors of between 50% and 60% would cost the consumer at least 40% more than a scenario that uses the assets in a way that complements a fleet of variable renewables generators.

This price premium would rise further to about 60% as carbon taxes are introduced at higher prices as proposed by the National Treasury.

DIESEL REPLACEMENT?

“The opportunity for gas in power generation is thus as a fuel for low-utilisation flexible capacity, in situations where it can displace diesel at a lower cost and with lower or comparable emissions,” notes Roff, who co-authored the report with Celeste Renaud, Rian Brand, Lonwabo Mgoduso, Dr Grové Steyn and Dr Emily Tyler.

The authors indicate, however, that replacing diesel with imported LNG at the existing open-cycle gas turbines (OCGTs) is complicated by the fact that these generators are scattered across several locations, making it impractical for the LNG to be aggregated and supplied through the same floating storage regasification unit.

The report, thus, recommends that South Africa also investigates opportunities to use the Strategic Fuel Fund’s crude storage facility in Saldanha Bay to store additional diesel, which could be distributed to peaking plants by vessel or potentially by pipeline to Ankerlig.

S...