A State Energy Monopoly Utility Blocks Progress to Renewables in South Africa

The South African electricity supply industry remains dominated by the state-owned and vertically integrated utility, Eskom. Coal is the major driver of the energy sector in the country. Although coal is the utility’s primary energy source in South Africa, the use of renewable sources for electricity generation has increased in the last few years. As per the government’s Integrated Resource Plan 2019 (IRP 2019), almost 60% of SA electricity will still be generated from coal by 2030.

Eskom – South Africa’s public power utility – continues to generate bulk electricity supply while new Independent Power Producers (IPPs) slowly develop their respective market shares. Eskom generates approximately 96% of South Africa’s electricity requirements which equals more than half of the electricity generated on the African continent. The new energy generation companies are facilitated by the IRP which maps out the country’s projected energy requirements and sources to meet the demand. Eskom-owned, Koeberg Nuclear Plant is the sole nuclear power plant in the country and was designed to close its doors in 2024. However, due to its best performance, Koeberg’s operating life has been extended by another 20 years.

Although the government welcomes the entrance of new participants in the energy sector, the country still experiences power shortages which affect the nation and neighbouring countries to which it sells electricity. Load shedding hit the country for the first time in late 2007. Since 2007, the cost of power has risen dramatically as Eskom has struggled to remain profitable and grow its investments in new power capacity, most particularly the Medupi and Kusile coal power plants. With an increase in the price of electricity over 15 years from 2004 to 2019, it has far surpassed consumer price inflation of 136% over the same period.

Activity Rating: ** Standing Still

Coal has been entrenched in both the energy and economic system for such a long time that a shift will also require fundamental changes at a governance level with an understanding that not all available mineral resources should be exploited. While a future energy mix that focuses on a range of renewable energy and a transition from fossil fuel will provide widespread, long-term social and environmental benefits, critical barriers such as existing energy subsidies and taxes and a shift in investment models must be addressed.

South Africa is lagging behind due to a monopolistic energy production structure which is unusual by international standards and often comes with operational inefficiencies, bloated costs, and poor governance. More work still need to be done in the energy sector.

Take Action

Alert Message:

Send a message to the Department of Energy Administrative Secretary calling for the strengthening of partnerships with independent power producers and discontinuing of monopolistic structure.

Since burning coal and converting it to liquid fuels contribute to climate change, its use as an energy source must decline. The targets for utility-scale renewable energy to speed up the movement away from fossil fuels should be made much more ambitious, with clear annual measurable targets. This should be coupled with a framework to guide public-private partnerships and local content. A continuous load shedding and an increase in the price of electricity are not sustainable for our country.

While Eskom’s power generation is still crucial to the medium-term national supply, it is essential that the utility does not continue to monopolize the energy sector. Increasing partnerships with independent power producers, supported by local content manufacture, should be pursued as soon as possible.

Contact Information

Administrative Secretary Ms. Buang Mokate

Email: Buang.Mokate@dmr.gov.za

Tel: + 27 12 444 3353

Department of Energy

Private Bag x 59, Arcadia, 0007

Learn more

For a more comprehensive view of ‘IRP 2019’, see http://www.energy.gov.za/IRP/irp-2019.html

An overview of the ‘Report of Electricity Market Reform in Southern Africa’, http://promethium.co.za/wp-content/uploads/2016/03/2016-03-21-Report-Electricity-Market-Reform-in-SADC-final.pdf

This post was submitted by Climate Scorecard South Africa Country Manager Tabana Mailula