The national election outcome in South Africa may accelerate the shift to private generation

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Mismanagement, poor planning, and corruption have seen the country’s fourteen coal-fired power stations which generate over 80% of the country’s electricity, fall into a state of disrepair and are unable to meet the energy demands of the country. At the same time, procurement of new-generation capacity has been slow from other technologies. Against this background, the government-controlled energy sector finds itself in deep crisis. Households and businesses face daily blackouts of up to 10 hours.

With no confidence in the government to fix the problem, the country has seen a massive uptick in solar PV hybrid with battery and/or generator by the private sector at the point of use. In their recent South Africa Power Transition Outlook report, Bloomberg NEF expects over 3.5 gigawatts of residential and commercial solar to be added annually over three years or until the electricity supply crisis ends.

While the government has introduced reforms like increasing the capacity threshold from 1MW to 100MW for private sector generation projects and recently passed South Africa’s Electricity Regulation Amendment Bill, paving the way for a more decentralised energy sector, a national election in May this year may reverse these reforms.

Power is quite literally politics in South Africa and with a national election taking place on the 29 May, there is much posturing by competing political parties, some of whom have already formed coalitions and devised energy policy to fix the crisis. Their manifestoes reveal two diverging themes namely a decentral, privatised energy sector versus a centrally controlled, nationalised sector, controlled by government. The outcome may see the current reforms reversed if the incumbent ruling party, the African National Congress (ANC), loses their absolute majority to a coalition government that pursues a nationalistic agenda.

While around 115 political parties are expected to contest the election, the country’s political landscape is dominated by three main parties, the ANC, Democratic Alliance (DA) and Economic Freedom Fighters (EFF).

Hartmut Winkler, Professor of Physics at the University of Johannesburg says that many parties favour unbundling the monopoly enjoyed by the national electricity utility, Eskom, and devolving the electricity sector into smaller entities.

“DA and other parties that present themselves as “pro-business”, such as Action South Africa and Build One South Africa, believe that large-scale privatisation of electricity will automatically lead to the end of power cuts. Their argument amounts to an ideological view that free market systems are more effective than state monopolies,” says Winkler.

On the other hand, he adds that the EFF is a firm advocate of nationalisation and wants to terminate existing contracts with private power producers. “They propose repairing coal-fired power plants and keeping them going for longer. But fixing some plants might be prohibitively expensive,” says Winkler.

The ANC election manifesto highlights industrial growth and job opportunities linked to renewable power, such as developing a green hydrogen sector. At the same time, they want the energy transition to be just and equitable with new generation gas, nuclear and hydropower projects playing a role. While their manifesto is clear, their reputation for implementation is wanting. The recently released Draft 2023 Integrated Resource Plan (IRP), which sets out the country’s energy masterplan leading up to 2030 and 2050, has drawn many criticisms for its gross inaccuracies and poor quality.

Busisiwe Mavuso, CEO of Business Leadership South Africa, says that every government should adopt evidence-based policies and no good case has been built for the assumptions in the IRP 2023. “There are so many difficulties in generating enough new power to stabilise supply that the country cannot afford to be held back by the core document that is meant to shape the future of our energy supply being so different to the reality of what is happening in the energy market and so out of touch with reality,” adds Mavuso.

A recent twist in the country’s political party mix is the bounce back of former president, Jacob Zuma, who is mounting a political fight against his former ANC comrades, through the newly established uMkhonto weSizwe Party (MK). During his presidency, Zuma was largely responsible for the halting of the country’s successful Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) in favour of a 9600 MW nuclear deal with Russia. The deal would have bankrupted the country and was eventually stopped by the courts. The damage however was done, and the country has chased its tail for new generation capacity ever since.

The MK party manifesto on electricity is vague. They want to extend the electrical grid to all corners of South Africa, ensuring enough capacity to power the country’s industrial future, from raw material processing to manufacturing. They also want to ‘continue to use and explore affordable and sustainable forms of electricity, prioritizing the benefit of South Africans.’

The 2024 elections are set to be heavily contested, with several public surveys predicting the ANC’s share of the vote, which has shown consistent decline in both previous national and municipal elections, could drop below 50%. This will usher in a national coalition government for the first time.

Many coalition governments at the municipal level are dysfunctional and basic service delivery in these municipalities has deteriorated.

There is one theme most parties agree on, that is that small-scale rooftop solar PV must be further promoted by the government through incentives like direct cash subsidies, waiver of import duties on solar PV equipment, tax incentives and the opportunity to sell excess power back to the grid operator.

“If a coalition government takes power after the elections, the route out of the electricity crisis could remain contested. This will hamper speedy progress on larger new builds. However, the intensified rollout of commercial, industrial, and domestic and solar PV installations enjoys support across the board. This is perhaps where progress will be fastest,” Hartmut Winkler concludes.

Author: Bryan Groenendaal

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