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South Africa’s energy future is not only dependent on how well the renewables, coal or nuclear lobbies argue their case but how we build flexibility in world’s most inflexible energy system – By Saliem Fakir is the head of WWF South Africas Living Planet Unit
South Africans are now familiar with the troubling state of affairs at Eskom and the precarious financial situation of one of the largest electricity utilities in the world. Once regarded as one of the best managed utilities on the planet, its lofty status has been eroded by State Capture and its dependence on unsustainable bailouts poses a real threat to the South African economy.
You’ve probably also heard about the troubling coal supply situation of Eskom linked to non-delivery of certain mines that has recently come to light with accompanying rumours of possible load shedding. We do not know all the details for these coal shortages because public knowledge of what goes on at Eskom is rather opaque.
On the renewables front the longstanding issue of signing on new Independent Power Producers (IPPs) has been lingering for almost two years. The IPP process went through go, stop, and then go motions following a court case lodged by the National Union of Metalworkers of South Africa (Numsa) arguing that renewables were benefiting a few and undermining jobs in the coal sector. Although off-taker agreements have been signed, it is still not clear when these projects will proceed.
These developments have collectively reduced the country’s energy debate to having to live in a constant framing of binary logic: it is always about coal versus renewable. We believe that in the broader context of uncertain future demand and rapidly evolving technologies this is a false dichotomy and it increasingly serves as a distraction from the real issue at hand.
The focus should rather be on whether the current energy system has the right configuration for taking us into the future. The future model of how energy will be supplied is undergoing a seismic shift that will most likely render Eskom’s current vertically integrated model of centrally planned, owned and energy supply at best costly and at worst obsolete.
The conversation must shift on issues of flexibility and adaptation of a system and not just an agency, nor sources of energy.
The current system is based on an old utility model of energy services which is not fit for purpose to an energy future that is being shaped by new technologies and novel models of energy service delivery. Eskom is out of sync with global trends.
In this respect the findings of the recently released World Economic Forum (WEF) report, Fostering Effective Energy Transition, sheds a harsh light on the underpinnings of South Africa’s lack of system adaptation and preparedness to adapt to global shifts in energy service models.
The WEF has put forth a Global Energy Transition Index that assesses energy systems of 114 countries. The index is aimed to help investors identify energy system risks in their decision-making by studying two factors: the performance of existing energy systems and its transition readiness.
The performance of existing energy systems is based on three imperatives – economic growth and development, environmental sustainability and energy access and security (further subdivided into 17 indicators).
The transition readiness or preparedness of countries’ systems to undertake energy transition is based on six enabling dimensions (subdivided into 23 indicators): regulation and political commitment, institutions and governance, credit and investment, infrastructure and innovative business environment, human capital and consumer participation and energy system structure.
In its ability to undertake low-carbon energy transition South Africa is ranked 113 out of 114 countries. Here it is in the company of Mozambique, Venezuela, Kyrgyzstan and Zimbabwe. South Africa ranks a distant 112 when it comes to its current system performance and 102 when it comes to its transition readiness.
While the poor environmental sustainability (ranked 110) of its existing energy system is the biggest drag on its current system performance, the country’s transition readiness suffers on account of it having the worst energy system structure in the world (ranked 114). Its energy system is an anachronism primarily due to a high share of electricity from coal generation (ranked 113) and least flexibility in its electricity system (ranked 114).
It is instructive to study South Africa’s Energy Transition Index ranking in comparison to other emerging economies. Saudi Arabia, the next least prepared G20 country for energy transition, is ranked 30, way ahead of us.
All BRICS countries, other than South Africa, in at least one of the nine sub-indexes, rank among the best 10 performers. In fact, South Africa is the only BRICS country to be ranked among the bottom five performers in two sub-indexes – environmental sustainability and energy system structure. Of these, we fall below on the energy system structure.
When it comes to energy system structure, neither the overall top five ranked countries (Sweden, Norway, Switzerland, Finland and Denmark) nor any BRICS countries were able to make it to the top 50.
This implies that although the magnitude may differ, South Africa is not alone when it comes to facing the challenge of modifying its energy system. The worrying part is that South Africa comes across as the least prepared to address the challenge. This is also partly due to the fact that South Africa is an energy-exporting country whereas energy-importing countries come across as having higher transition readiness.
The Energy Transition Index argues that given the high level of uncertainty involved in the energy sector, countries must build in flexibility within their electricity systems. Here, on a score of 0-100, South Africa scores a miserable 0.5 – making it the least flexible electricity system. This indicator suggests that the task at hand for South Africa is considerable.
At a very basic level an efficient energy system should enable a country to effectively deal with the energy trilemma of providing energy in a manner that ensures energy security, energy equity and environmental sustainability (World Energy Council, 2018). Viewed in this way, South Africa ranks 82 out of 125 countries evaluated by the World Energy Council (WEC).
The WEC has further placed South Africa as one of the four countries on its negative watch list – i.e. it is one of the “countries that are likely to experience significant [negative] changes … in their trilemma index performance in the near future”. Clearly, small investments in renewable energy by means of IPPs alone are not going to cut the chase.
South Africa’s energy future is not only dependent on how well the renewables, coal or nuclear lobbies argue their case but how we build flexibility in the world’s most inflexible energy system.
One of the key recommendations in the International Renewable Energy Agency’s latest report is that if we are serious about achieving energy transition, we not only need to have enabling policies but also address factors beyond the energy sector (influencing behaviour, ensuring livelihoods) by integrating diverse policy instruments that bring energy flexibility closer to development objectives.
It strikes us that this conversation is far more important and pressing as we need to focus on how we ensure a systemic change and the creation of enabling conditions to support a energy transition in South Africa. All the more reason why we need to engage with the future rather than just spending our energies in contesting the present. DM
Saliem Fakir is the head of WWF South Africas Living Planet Unit. Prabhat Upadhyaya is affiliated with WWF-South Africa and completed his PhD – comparing climate policy processes in South Africa, India and Brazil – in 2017 from Linköping University, Sweden. Louise Scholtz (BA LLB, MBA and MPhil in Sustainable Development), is Programme Manager: Urban Futures, Policy and Futures Unit, WWF-SA.