The future of electricity generation in South Africa is changing, according to Chris Yelland, independent energy analyst, and managing director at EE Business Intelligence.
“What we have now is largely a monopoly, but the future is going to be a diversified generation sector comprising [of] Eskom generators, public private partnerships, municipal generators, independent power producers and thousands of what we call embedded generators (EG),” said Yelland.
EG refers to a system where customers generate energy for their own use, as well as to feed into the electricity grid, on their own premise, he added.
“Coal is the largest energy fuel source in South Africa with over 85% of the generated electricity in the country coming from coal. While coal has successfully helped generate electricity, it has also placed South Africa among the top 10 greenhouse gas emitters in the world,” according to Olusola Akinbami, Samuel Oke and Michael Bodunrin of the Alexandria Engineering Journal.
South Africa’s domestic electricity generation capacity currently stands at 58 095 Megawatt (MW), according to Gavin Noeth, a senior consultant at CMS. CMS is a “future facing” law firm that combines market understanding and global overviews to forecast future events, according to their website.
“The renewable [energy sources] have made an impact, about six to seven gigawatt, roughly, on the grid now,” Noeth told MatieMedia.
The way forward
The average annual electricity demand is forecasted to grow a maximum of 2% by 2030. However, by 2030, it is expected that 10 500 MW of coal-generated energy will be decommissioned — this will follow the 5 400 MW that is set to be decommissioned in 2022.
This is according to Eskom’s Integrated Resource Plan (IRP) of 2019.
Although renewable energy methods are lower in cost than other sources of energy, wind and solar energy needs to be used in conjunction with other technologies in order to deliver power on demand in South Africa, according to Yelland.
“When it comes to what we build next, to replace old coal-fired plants that are going to be decommissioned, it makes no sense to build new coal, nor does it make economic sense to build new nuclear because the blend of wind and solar [photovoltaic (PV)] and flexible generation is now the least cost option going forward,” said Yelland.
Solar panels at the eco village of the Rogge Cloof guest farm in Sutherland, South Africa. PHOTO: Inge du Plessis
The impact on municipal finance
Renewable energy systems are generally seen as more affordable and environmentally friendly but could impact municipal income, according to Nikkie Korsten, PhD Researcher at Stellenbosch Centre for Renewable and Sustainable Energy Studies.
“There is a small number of customers within a municipality […] that can afford and will invest in renewable systems. That small number of people are also the people that [the municipality] gets the most revenue from,” Korsten said.
EG systems is a renewable energy method that has been adopted by the majority of municipalities in the Western Cape and a method that can contribute to the energy resilience of a province, said Helen Davies, chief director of Green Economy at the department of economic development and tourism of the Western Cape Government, in email correspondence with MatieMedia.
A notice sign on the outside of a house that uses an alternative source of energy like a solar photovoltaic (Solar PV) system. Stuart Grobbelaar, spokesperson of Stellenbosch Municipality, told MatieMedia in September that about 100 households and businesses in Stellenbosch are currently using embedded generators (EG) systems. PHOTO: Inge du Plessis
“Every household who has an electricity meter installed and is connected to the municipal electricity grid, is a cost to the municipality, also when no electricity has been consumed yet. That cost will not change when customers install renewable energy systems,” according to Korsten.
The group of households that are high electricity users and often consume at higher prices, is also the group of customers that are converting to renewable energy, she added.
“You’re then left with a consumer base that is less able to absorb the costs or the revenue that the municipality now needs to make up. The municipality still has the cost of the electricity grid and still has to keep [the grid] going and keep tariffs affordable for everybody,” Korsten added.
According to Davies, EG systems can have “a minor impact on municipal revenues but this is mitigated by proper tariff structuring for EG consumers”.
Renewable energy, as a whole, does not directly result in a loss of income to municipal income, according to Davies. “There are some elements that may have an impact but there are ways that these impacts can be mitigated.”
A tariff structure, which includes a fixed tariff for all electricity users regardless of the amount of electricity they consume, is a type of financial intervention plan for municipalities that allows them to break even and maintain the electricity grid, according to Korsten.
“For people who have EG systems installed, this tariff system is not financially beneficial and reduces the pay back time of the system significantly. This can lead to PV owners getting upset with the municipality and not registering their EG systems,” said Korsten.
Municipalities have different tariff structures but in Stellenbosch, specifically, solar rooftop PV owners are transferred to a special renewable energy tariff system that has an even higher fixed tariff rate, said Korsten.
The ‘beauty’ of the electricity grid
“As wholesale and retail electricity tariffs rise, we can expect more electricity users to
look for alternatives like rooftop [PV] systems (residential) or utility scale PV generation (mines and other big industrial users) and migrate away from the electricity grid,” the IRP stated.
Moving away from the grid is, however, not the ideal solution to South Africa’s energy problems, according to Yelland.
“Many people think that the energy that comes from renewable energy is equal to fossil fuel energy but the two have different qualities,” said Korsten. She explained that household peak demand of electricity occurs in the morning and at night, but solar energy is mainly produced during the day when electricity demand is lower and thus energy from fossil fuels make up for what renewable energy cannot do.
Nikkie Korsten, PhD Researcher at Stellenbosch Centre for Renewable and Sustainable Energy Studies, explains that renewable energy and energy from fossil fuels have different qualities. Although renewable energy is more affordable and environmentally friendly, it does not have the same energy generation capacity as coal, according to her.
“The beauty of [an electricity] grid is it enables the sharing of resources. So, when one area of South Africa needs electricity, it can be transported there and vice versa,” Yelland explained. “When one customer is using peak demand, another customer may not be using that much and, if you can share this resource, you don’t have to build as much because the peaks of each customer are not occurring at the same time.”