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The World Bank has approved a $1-billion development policy loan to support electricity market reforms under way in the country, as well as South Africa's low-carbon transition.

As a development policy loan, the funding will be directed to the National Treasury, which immediately indicated the timing of the loan to be opportune, although no details were immediately provided regarding the loan's terms or its concessionality.

"This operation comes at a crucial time for South Africa as it will provide much needed fiscal and technical support, enabling us to pursue our policy priorities in the energy sector including easing the electricity crisis in the long term, stimulating private sector engagement and creating jobs in the renewables space," deputy director-general for asset and liability management Mmakgoshi Lekhethe said in a statement confirming the loan.

It is the third policy loan extended since the conclusion of a Just Energy Transition Partnership with several developed countries, with the French and German development banks, AFD and KfW respectively, having extended €300-million apiece in November last year.

The loan was a collaborative effort between the World Bank, the African Development Bank, KfW and the government of Canada and the World Bank said it had been informed by South Africa's development priorities, including the Energy Action Plan to tackle loadshedding and the Just Energy Transition.

The funding would support reforms in the electricity market, as well as decarbonisation efforts and World Bank country director for South Africa Marie Francoise Marie-Nelly argued that the reforms would benefit the economy and the environment, while also advancing the energy transition.

The approval comes amid South Africa's worst-ever year for loadshedding, which has severely undermined growth and confidence, with the rotational cuts of 2022 (the previous most intensive year for power disruptions) having shaved an estimated 2% to 3% from gross domestic product.

The bank said the funding would facilitate a restructuring of the power sector through the unbundling of Eskom and support a redirecting of resources toward investments in transmission and plant maintenance.

"Second, the operation supports a low carbon transition by encouraging private investment in renewable energy, including by households and small businesses, and strengthening carbon pricing instruments."

South Africa, the bank highlighted, was amongst the world's top 20 greenhouse gas emitters, with 45% of those emissions arising from the coal-based electricity sector.

The World Bank announcement followed recent confirmation by the South African government that it had received additional pledges, worth nearly $3.5-billion, in support of its Just Energy Transition Investment Plan (JET IP), increasing the overall envelope of concessional debt and grant funding to $11.9-billion.

It also comes ahead of the approval of the JET IP implementation plan, which is expected to serve before Cabinet ahead of the upcoming COP28 climate talks to be held in Dubai, United Arab Emirates from November 30 to December 12.

Electricity Minister Kgosientsho Ramokgopa has described South Africa's highly fragmented electricity distribution industry as a threat to energy security that warrants attention "on the scale and intensity" that has been given to the country's generation shortfall in the recent past.

Delivering an update on the implementation of the Energy Action Plan in Parliament, Ramokgopa said that a significant number of municipalities were in a state of paralysis and unable to perform their mandated duties, including in the area of electricity distribution.

He described a recent six-week outage in the Ditsobotla local municipality as emblematic of the structural weaknesses in the sector.

The crisis was broad-based, however, manifesting in both an inability of municipalities to service their Eskom accounts, as well as a chronic under-investment in new distribution assets and maintenance of existing infrastructure.

Illegal connections were also resulting in a growing failure of infrastructure as demand exceeded capacity, while theft and vandalism was triggering lengthy outages and increases in reactive maintenance expenditure.

He said that, as of July 2023, the total overdue municipal debt to Eskom stood at R63.2-billion, representing growth of R4.7-billion on the figure reported at year-end.

"These conditions have highlighted the threat to energy security and warrant similar attention on the scale and intensity the generation industry has seen in the recent past," he said.

Ramokgopa reported that the following policy considerations were receiving urgent attention in an effort to tackle the crisis:

Deliberations on the future of municipal revenue in the context of revenue migration due to an increased uptake in behind-the-meter, small-scale embedded generation projects;

The funding and project management of investments required to strengthen, expand and modernise the distribution infrastructure to support growth and the future architecture of the industry in line with constitutional directives; and

Moves to bring policy and regulatory certainty regarding feed-in tariffs and wheeling agreements.

"These discussions are at various stages, and members of this house, particularly the Finance and Cooperative Governance and Traditional Affairs Portfolio Committees, must take a keen and robust interest in the discourse."

Transnet Freight Rail (TFR) and Traxtion Sheltam report that they have agreed to terminate the conditional 2022 award of slots to Traxtion Sheltam between Kroonstad and East London on the Cape Corridor amid progress towards a new third-party-access framework.

The joint announcement ends an unsuccessful pilot project, which the two companies dubbed Phase 1, initiated in April 2022, through which TFR sought to sell 16 slots to private operators on its container and Cape corridors through a competitive process as part of an initial effort to open its network to third-party operators.

From the outset, potential participants warned that the two-year slot contract was simply too short to ensure that returns could be made on what could involve significant capital investments in light of limited rolling-stock leasing options.

Only two companies made formal applications - two for the Container Corridor and one for the Cape Corridor - by the August 31, 2022, submission deadline and on November 25 of that same year, TFR announced the conditional award of slots to only Traxtion Sheltam.

The award was subject to the completion of the application process, including the fulfilment of all condition's precedent before the planned start date of April 1, 2023.

In the statement the two companies confirmed that the negotiation phase had been protracted and complex, with various design challenges that made it difficult to finalise a commercial service offering.

"Given the above scenario and the reform work that the Department of Transport, and the Interim Rail Economic Regulator Capacity have embarked on, and which informs Phase 2 of the third-party open access regime, TFR and Traxtion Sheltam have jointly agreed to terminate the current slots awarded under Phase 1," the companies said.

They added that they recognise the increased speed of government's reform agenda in the sector, including moves to separate the vertically integrated structure into one that includes infrastructure owners, infrastructure managers and rail operators.

Under the emerging framework, the rights and obligations of the various participants would be clarified and implemented under what has been dubbed Phase 2.

No mention was made of a proposed 20-year operating lease offer for Transnet's underperforming and crime-ridden container corridor between Durban and Johannesburg, which has also not progressed as initially anticipated.

Traxtion Sheltam said it was looking forward to participating in Phase 2 and the realisation of rail reform in South Africa.

The termination of the slot sale also comes as government is finalising a so-called Freight Logistics Roadmap in response to the collapse of the freight rail service on certain corridors, which also led to the creation earlier this year of the National Logistics Crisis Committee (NLCC) under Operation Vulindlela.

On October 26, the NLCC is scheduled to brief the media on plans for the modernisation of the freight transport system.

Electricity Minister Kgosientsho Ramokgopa says attention should shift to adding new and cleaner generation to the loadshedding-prone electricity system, acknowledging that it would be the "height of folly" to rely on significantly extending the life of the breakdown-prone coal stations.

While much of his latest briefing on the implementation of the Energy Action Plan was dedicated to improvements in the operating performance of some of Eskom's coal units, Ramokgopa said there could be no "overreliance" on the units in future. This, given their advanced age and the fact that many trade-focused domestic industries had to decarbonised to remain internationally competitive.

He refused to be drawn on the contents of a report commissioned by the National Treasury to assess the state of Eskom's coal plants, including the potential for concessioning and some limited life extensions considering the slow pace at which South Africa had added new capacity in recent years.

Eskom's Eric Shunmagum confirmed that the utility had made comments and had also challenged some of the recommendations made by the Vgbe-led consortium that drafted the report and said that Eskom was working with the National Treasury to ensure a "fair and balanced" technical assessment emerged.

For his part, Ramokgopa underlined the need for new and cleaner non-Eskom generation capacity, saying: "We are doing all that we can to restore the reliability of these units, but you can't take away the fact that they are aging . . . [The] only reason we are going this route [of focusing on the performance of the coal power stations] now is because it the shortest way to ending loadshedding."

The future, however, depended on adding new generation and unlocking the estimated 66 GW of mostly wind and solar capacity estimated to be at various stages of development across South Africa, including in areas such as Mpumalanga were there was grid connection capacity available.

"An overreliance on these [coal] units I think is particularly unhelpful; it's the height of folly to suggest that, going into the future, this is going to resolve our problems . . . and that's why we must accelerate the onboarding of new generation," the Minister said.

He again emphasised the importance of expanding the grid to facilitate additional renewables generation. He did not answer a question, however, on when he expected Eskom to publish its updated Generation Connection Capacity Assessment, the absence of which is believed to be one of the reasons why the seventh renewables round was not launched in September as initially scheduled.

Likewise, Eskom has not released its updated approach to the issue of curtailment, which could unlock significant grid capacity even in those areas previously indicated to be oversubscribed.

Interim CEO Calib Cassim did state recently, however, that he saw unlocking immediate grid capacity through curtailment as an urgent priority while Eskom and other stakeholders assessed funding options for expanding the transmission network.

Without offering any update on when South Africa would launch additional public procurement rounds, Ramokgopa reported that 1 338 MW of private generation was expected to connect to the grid in 2023, followed by 3 081 MW in 2024.

He also stated that one project falling under the much-delayed risk-mitigation scheme was on track to reach legal close by the end of October, and two further projects by December. The projects would contribute an additional 424 MW, he said, implying that the 1 200 MW powership projects were not the ones in question.

He added that three more projects from the delayed fifth renewables bidding round were on track to reach commercial close by the end of November, representing 300 MW.

The Minister also stated that the capacity of rooftop solar had doubled since July 2022 to over 4 500 MW, which had helped to reduce loadshedding over the winter months.

He insisted that government remained supportive of yet further rooftop inv...

In an update presented to the Portfolio Committee on Agriculture, Land Reform and Rural Development on October 20, the South African Poultry Association (Sapa) has estimated that 30% of the South African poultry industry has been impacted on by the latest outbreaks of Highly Pathogenic Avian Influenza (HPAI).

Sapa broiler organisation GM Izaak Breitenbach said the current outbreak of the H5N1 and H7N6 strains of HPAI will cost the industry in excess of R1.8-billion, which is the amount of losses the industry experienced during the prior period of HPAI outbreaks in 2019, which saw three-million birds culled.

Sapa egg organisation GM Dr Abongile Balarane estimated that the losses to the industry could be as high as R3-billion, given that a 30% impact to the industry equates to 30% of its yearly revenue of about R12-billion lost.

South Africa had about 27-million layer hens that produce eggs on a daily basis, of which five-million had to be culled for both HPAI strains. Another 2.5-million broiler chickens also had to be culled this year, bringing the total amount of culled chickens to 7.5-million.

The H7N6 strain of the virus was first reported on June 1 on a farm in Mpumalanga. DALRRD animal health director Mpho Mojo confirmed that the H7N6 strain of the virus spreads slower and is less deadly than its H5N1 counterpart, adding that many birds often survive the disease; however, it has nonetheless had a significant impact on the local poultry industry.

Additionally, she said that, because the H7N6 strain only occurs in South Africa and is not closely similar to any other AI strains in the rest of the world, it means that the few vaccines that have been developed against H7 may only have limited efficacy against South African strains.

Before any new vaccine can be registered, they need to be carefully assessed and may require local trial work to confirm their efficacy, which may delay their registration.

Balarane confirmed that locally produced vaccines were being developed but said this was a process that would take some time to complete.

Sapa anticipated that the poultry industry would have been reduced to 17.3-million layer hens by early 2024, down from 27.6-million layer hens in 2019 and 27.4-million in 2022.

Balarane said it would take the industry 17 months to recover lost production, with farmers intending to focus on recouping the 30% impact of the poultry industry next year.

Since HPAI first became a widespread problem in South Africa in 2017, more than 13-million birds had been culled.

With the local poultry production comprising 95% of caged operations, 1% of barn systems and 4% of free range systems, it means that most chickens are in close proximity to each other and easily spread the disease.

Mojo noted that there were fewer cases of HPAI reported in areas where small-scale farmers have free range operations and are based far from other farms.

Breitenbach highlighted that reported cases of HPAI had come down in October, compared with September, which was a positive indicator; however, a new case of the H7N6 virus having been reported in George in the Western Cape was giving rise to concerns that another outbreak would occur in the Western Cape.

HPAI outbreaks had in the year to date predominately been occurring in Gauteng, followed by Mpumalanga.

In fact, 95% of all broiler breeder chickens in Gauteng had been culled in the greater Gauteng region.

HPAI MITIGATION

Mojo explained that HPAI was introduced through emigrating wild birds, with factors such as high rainfall, the presence of wetlands, the presence of irrigated crops and wetlands and chicken density adding to the risk factors for flocks contracting HPAI.

She believed the most effective approach to ensure that HPAI does not spill over from wild birds to poultry flocks was to introduce strict measures to ensure wild and domestic birds do not come into contact, including by feeding birds undercover and removing large bodies of water in the farm's surrounding...

Engineering News editor Terence Creamer discusses the potential implications of Cabinet's approval of the Green Hydrogen Commercialisation Strategy; the components of the strategy; what this means for provinces keen to tap into this emerging industry; and if there is a risk that green hydrogen will compete for precious renewable electricity?

Cabinet has approved the Green Hydrogen Commercialisation Strategy (GHCS) for implementation, with the goal of positioning South Africa as a major producer and exporter of green hydrogen.

Government has estimated that the hydrogen economy has the potential to add 3.6% to gross domestic product by 2050 and create 370 000 jobs.

Minister in the Presidency Khumbudzo Ntshavheni said the draft Green Paper had received extensive feedback from stakeholders and the GHCS would give effect to the Hydrogen South Africa Strategy approved by Cabinet in 2007 to prepare the country for a hydrogen economy.

"It is also framed within the Hydrogen Society Roadmap developed by the Department of Science and Innovation and approved by Cabinet in 2021."

She also said that government had identified possible funding for green hydrogen projects, without offering any details.

However, the approval of the strategy follows on from the the second South Africa Green Hydrogen Summit in Cape Town, where South Africa concluded Heads of Agreements with the intention of launching an SA-H2 Fund that will facilitate the development of the country's green hydrogen sector.

The aim is to attract $1-billion in funding.

The development of a green hydrogen economy is also included in the Just Energy Transition Investment Plan (JET IP), which was endorsed last year by the initial members of the International Partnership Group (IPG), which pledged $8.5-billion in concessional funding to support South Africa's phased transition away from coal.

The Kingdom of the Netherlands and the Kingdom of Denmark have subsequently become members of the IPG, while JET IP pledges have also been made by Canada, Spain and Switzerland.

The Presidency's Rudi Dicks told the Presidential Climate Commission (PCC) recently that that pledges of concessional funding in support of South Africa's JET IP had increased to $11.9-billion.

Most of the funding would be in the form of loans rather than grants and Cabinet said it remained concerned about the non-commitment of developed countries to meaningful grant funding.

Details of the GHCS were not immediately released, but it is understood that the strategy will seek to lock-in price subsidies arising in various developed countries for green hydrogen derivatives exports, support the decarbonisation of domestic hard-to-abate sectors and develop industrial capacity to manufacture components for wind, solar and electrolyser facilities.

Green hydrogen is produced by using renewable electricity in an electrolyser to split water into hydrogen and oxygen. The clean energy carrier and the derivative products are seen as becoming increasingly important in assisting those sectors that are unable to decarbonise directly using renewable electricity, such as steel, petrochemicals, fertilisers, cement, as well as long-haul land, sea and air transportation.

Ahead of the endorsement of the strategy, the Eastern, Northern and Western Cape provinces signed a memorandum of understanding to cooperate on the development of South Africa as a global hub to produce green hydrogen and derivative products, as well as to produce the components required in the green hydrogen value chain.

The three coastal provinces are all playing host to potential multibillion-rand green-hydrogen projects and have been working separately on strategies and roadmaps to capture the jobs, growth and industrialisation opportunities that could flow should the projects materialise.

However, opportunities extend beyond these provinces and also include opportunities in territories such as the Free State and Mpumalanga where Sasol is investigating displacing grey hydrogen produced from coal with green hydrogen to produce sustainable aviation fuels and other products.

Eskom insists its systems and strategies are in place to facilitate the seamless operation of the 6.8-million prepaid meters within its distribution areas after November 24 next year - the date by which the meters will no longer be able to accept electricity tokens unless they have been recoded to do so.

All Standard Transfer Specification (STS) meters globally, including those in municipal distribution areas in South Africa, are subject to the cut-off deadline. The reason being that the Token Identifier, or TID, range, which is set against a base date of January 1, 1993, will be exhausted in November 2024 unless reset.

In the absence of recoding, the STS-compliant meters will stop accepting credit tokens.

Eskom's Velaphi Ntuli says all the necessary back-end investments have been made to allow for the implementation of a Key Revision Number Rollover project and that addition staff have been recruited to ensure the rollover deadline is met.

He did not provide an investment amount, saying that the figure was being finalised, including the budget required to communicate the changes to affected electricity consumers using traditional media, social media, as well as Eskom's Alfred chatbot.

The utility is pursuing a free, do-it-yourself (DIY) implementation process, whereby Eskom's normal vending agents will issue affected prepaid consumers with two 20-digit key-change tokens with their normal credit token.

The consumer is then expected to punch in the numbers on the key-change tokens to recode their existing meter, after which they will be able to load the meter with credit as normal.

Eskom insists that the credit in the meter at the time of reset will be unaffected by the recoding.

The key-change tokens will be available only from physical vending agents, as online vendors are not able to generate key-change tokens.

The DIY approach means that the recoding is not reliant on contractors or installers and Eskom warns that anyone posing as an Eskom employee claiming to require access to a property should be turned away and reported to the South African Police Service.

Once the meter is recoded customers will be able to use their preferred vending channel, including online platforms.

Eskom's Portia Papu reports that the first phase of the project, which was designed to clear all the initial teething problems, was completed in August and September, with Riverside, in Gauteng, selected as the pilot site.

The second ramp-up phase is currently under way and more than 670 000 meters have been reset across suburbs in all nine provinces.

Papu says customers will be alerted two weeks before the rollout commences in their area through messages in local media outlets and other communication channels.

Municipalities are responsible for the recoding of some 4.5-million meters falling within their distribution areas and the South African Local Government Association has set up a dashboard, at http://www.salga.org.za/event/sts/Home.html, to monitor recoding progress.

Eskom interim CEO Calib Cassim has described unlocking grid connection capacity, using curtailment, as an urgent priority while Eskom and other stakeholders assess funding options to expand the transmission network.

Speaking at a climate conference in Johannesburg, Cassim reported that discussions were under way on how to ensure that more renewable-energy independent power producers (IPPs) were connected to the grid ahead of the large-scale grid-related investment that was being planned.

"While we are still going to take a number of years to expand the grid, we need to connect these megawatts.

"There may be a portion of the year when those renewables IPPs will be curtailed.

"Let's manage that cost - it's a relatively small number - and not wait for a perfect solution," he said at the event, which was jointly hosted by Standard Bank and SOAS University of London.

A recent assessment by Eskom and two European transmission system operators - 50Hertz of Germany and Elia of Belgium - showed that the capacity of the existing Western Cape grid to host variable renewable generators could be doubled under a scenario where no more than 10% curtailment was implemented.

Curtailment involves the active reduction of output from wind and solar plants in response to system security needs or temporary transmission capacity constraints and is widely used by system operators to facilitate the introduction of renewable generators in a context of grid constraints.

The analysis indicated that 4 GW of additional renewables capacity could be connected to the Western Cape grid "almost immediately" and that more than 90% of the electricity that these plants would produce could be safely integrated into the grid.

Curtailment of up to 10% also offered more economic value than new investments, primarily where wind technology is the source of the variable renewable electricity. It also showed that solar typically paired better with batteries than curtailment, because, unlike wind, all solar plants would generally be producing at the same time.

Both Eskom and the IPP Office have confirmed previously that they were assessing a new approach to curtailment to allow for additional generation capacity to be built at points on the grid that had previously been shown as fully committed.

Had such rules been in place ahead of the sixth bidding round of South Africa's public renewables procurement programme, it would have been possible to contract for 3 200 MW of new wind projects in the Western, Eastern and Northern Cape. In the event, no wind projects advanced to preferred-bidder status, owing to claims by Eskom that the grid capacity on which the projects were premised had been absorbed.

It is understood that the curtailment framework could be released ahead of the next public procurement round, which was initially scheduled to proceed in September.

The framework could be unveiled once the updated Generation Connection Capacity Assessment is released; a document which is reportedly undergoing internal Eskom governance processes.

Meanwhile, Cassim also said that Eskom, which is currently being restructured into transmission, distribution, and generation entities, should be "open minded" about future funding options for the grid itself, which could include private sector participation. It is estimated that some R230-billion of investment will be needed by 2032 to add 14 000 km of transmission lines, as well as associated transformation capacity.

However, he stressed that there was also an urgent need for investment in distribution infrastructure and for a national conversation on the future structure of the sector, which is highly fragmented with many of the country's more than 250 municipalities holding distribution licences.

"There are a number of smaller distributors and municipalities that are not investing and if you want to deal with the security or supply and access, we can't ignore that element of the value chain," he concluded.

African National Congress President Cyril Ramaphosa claims that South Africa "has turned a definite corner as far as loadshedding is concerned", adding that the levels and frequency of loadshedding are expected to improve during the fourth quarter.

In closing remarks following the party's National Executive Committee meeting, Ramaphosa attributed this claim to the "return of Kusile units, embedded generation by private households and businesses, and demand management".

Earlier Eskom announced that Kusile Unit 1 had resumed production using a temporary flue a few days short of a year of having been rendered inoperable by the collapse of its flue duct on October 23, 2022, because of an uncontrolled build-up of slurry.

The failure also made two other units inoperable as the Unit 1 flue collapse damaged the unit two and three flues, which share a common chimney with the Unit 1 flue.

Eskom said Unit 1, which has a nameplate capacity of 800 MW but is contracted to supply 720 MW into the grid, had been returned a month-and-a half-ahead of the original schedule.

The utility did not say how much electricity from Unit 1 was currently entering the loadshedding-prone system, but indicated that Kusile Unit 3, which resumed production on September 30, was producing 800 MW consistently and supplying 720 MW into the grid.

The 80 MW difference arises as the station uses electricity, known as parasitic load, to run various systems that do not contribute to electricity yield.

"This signifies that Eskom is on the right path to reducing and ultimately ending loadshedding," Eskom said in a statement.

Kusile Unit 2 is officially scheduled to resume production on November 30 and Eskom did not provide any immediate indication as to whether it was able to beat that deadline.

Before the units could resume production, Eskom sought and received a postponement, until March 31, 2025, to Kusile's compliance with minimum emission standards in relation to its sulphur dioxide emissions, as the temporary flues bypass the flue gas desulphurisation plant.

Currently four Kusile units are on load, including Unit 4, which was unaffected by the flue collapse as its flue duct is in a separate chimney.

Kusile Unit 5, which was damaged by a fire ahead of commissioning, was being prepared for synchronisation to the grid towards the end of December.