Navigating South Africa's Energy Future: Challenges and Opportu

Global Courant
Picture: Energy Council of South Africa

Industry expert James Mackay, CEO of the Energy Council of South Africa, has conveyed both optimism and concern in his recent remarks. Speaking at the Solutions From the Edge conference, hosted by International Housing Solutions and Nedbank Corporate and Investment Banking in Johannesburg on September 14, Mackay discussed the state of South Africa’s energy landscape.

Mackay’s address began with a glimmer of hope, suggesting that there’s a chance for South Africa to bid farewell to the recurrent problem of load shedding by the end of 2024. However, this optimism was soon tempered by a stark warning that the nation is falling short of its decarbonization goals, posing significant challenges for its export-oriented industries and global trade relations.

“We are falling behind on our emissions reduction targets. We need to recognize this, and we need to ask: how will this hurt us – specifically when we think about our export-facing industries and global trade positions? What does it mean if we’re not going to be able to decarbonize as quickly as what we’ve committed to?” Mackay emphasized.

Despite the potential end in sight for load shedding, Mackay indicated that South Africans should brace for ongoing structural Stage 4 to 6 load shedding until the close of this year. He noted that there has been an improvement of two to three stages compared to March and April, attributing this to increased planned maintenance and essential technical interventions.

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Mackay argued that 2023 could be a pivotal year in South Africa’s energy crisis, praising President Cyril Ramaphosa’s Energy Action Plan launched in 2022 as a solid technical blueprint. However, he also acknowledged that the country’s biggest challenge might lie in political will, particularly with contested elections approaching. He emphasized the need for clear policy choices and commitments to drive the transition to cleaner energy sources.

Key factors were highlighted by Mackay to navigate South Africa toward resolving its energy crisis:

Mackay stressed the importance of maintaining and reforming Eskom, advocating for unbundling to establish a national transmission company and an independent market operator, a move embedded in the Electricity Regulation Act Amendment Bill currently with Parliament.

Mackay underscored the need to build upon the progress made in sector reform, spurred by load shedding. He emphasized the importance of not letting private sector investment in renewables stall.

While acknowledging South Africa’s ambitious technical plans, Mackay emphasized the need for improved implementation through collaboration and partnerships.

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Mackay also noted the challenges posed by the aftermath of State capture, the impact of COVID-19, and a decrease in state capacity, both within state entities and governmental departments. He underscored the urgency of the energy transition due to global climate change policies, such as carbon border adjustment policies in countries like the US and UK, posing economic risks to South Africa.

Regarding the energy transition, Mackay argued that it’s primarily driven by cost-efficiency rather than just a response to climate change. He highlighted that solar and wind energy, with their free feedstock, offer cost advantages due to increased efficiency. Still, he cautioned that fossil fuels would remain a part of the energy mix and would require innovative solutions for emissions reduction.

Mackay’s vision for South Africa’s energy future included a significant shift toward large-scale wind and solar energy to replace aging and emissions-intensive coal-fired power generation. He estimated the need for approximately 56 GW of wind and solar capacity, along with 8 GW of battery storage and 5 GW of gas-to-power to ensure a stable energy system. This would enable the decommissioning of about a third of the country’s coal-fired generation.

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While Mackay expressed some optimism about the growing pipeline of energy projects and investment, he also acknowledged that South Africa needs to accelerate its efforts to meet decarbonization targets. He attributed this challenge, in part, to a loss of skills and capacity within the government, particularly at the middle supervisory and delivery levels.