Electricity nerds such as myself are bracing themselves for a breathless few months, with significant developments on the horizon.
Much of the focus will be on the updated Integrated Resource Plan (IRP), which has finally been released for public comment. This is a critical document and it is only right that stakeholders put as much energy as they can muster into responding to it. A sound IRP is critical not only to attracting investment in the power sector, but also for laying the basis for investment in all other sectors, from mines to data centres. Incorrect decisions could result in far higher future tariffs than necessary.
South Africans of all persuasions should not only be supporting, but also demanding, the adoption of a least-cost IRP, with as few policy adjustments as possible. This is because the steep fall in solar photovoltaic and onshore wind costs over the past five years has placed South Africa in the enviable position of being able to meet all its policy objectives – energy, economic, employment and environmental – without having to make a detour off the least-cost highway. The trade-off between cheap and clean, and between cheap and job-rich, no longer pertains to countries such as South Africa, which have formidable solar and wind resources.
However, the IRP is not the only game in town, with major developments under way in parallel at South Africa’s beleaguered electricity utility, Eskom.
Following years of strategy drift, which has seen Eskom lagging global industry trends, the utility is, at last, working on an overhauled business model. This reform process is central to Eskom’s so-called ‘Strategy 2035’ review, which is being undertaken at the behest of Public Enterprises Minister Pravin Gordhan.
Gordhan has made public his concerns about the current model and whether it remains fit for purpose. Happily, Eskom’s new leadership concurs, with a senior Eskom manager telling stakeholders last week that the review is premised on the understanding that the “current model is unsustainable” and that Eskom should “evolve to embrace the future”.
A dedicated team, comprising functional and subject experts, has been established to oversee the review and the utility has partnered with external strategic experts to finalise the strategy and, thereafter, focus on implementation. Few details have been disclosed as to the possible new architecture. However, the review is assessing the appropriateness of the current vertically integrated design, which embraces the full electricity value chain of generation, transmission, system operation and distribution.
However, that’s not all! Eskom also needs to unveil its short-term corporate strategy by the end of September and deliver its next tariff application to the National Energy Regulator of South Africa during the course of the month. As always, that will be the trigger for nationwide public hearings.
Without question, it’s going to be a very high energy period indeed for the electricity sector!