South Africa – truly on the horns of a trilemma

January 12th, 2015, Published in Articles: Energize

 

South Africa’s energy system is a textbook illustration of the challenges outlined in the World Energy Council’s (WEC’s) energy trilemma model, says Brian Statham, Chairman of South Africa’s WEC member committee. Finding a balance between energy equity, energy security and environmental sustainability is at the heart of the policy debate in both government and business today.

Brian Statham

Brian Statham

Despite its lack of oil and natural gas resources, South Africa – categorised along with Brazil, Russia, India and China as one of the emerging economies in the BRICS grouping – is one of the wealthiest economies in sub-Saharan Africa.

In terms of GDP it is Africa’s largest economy. It nevertheless faces a tough time in meeting its energy needs, partly because it lacks its own resources – except for carbon-intensive coal – but partly also because of its rapid rate of social and economic development over the past two decades. Indeed, energy availability is currently a significant constraint on growth and therefore looms large on the policy agenda, with efforts under way to boost supplies of natural gas, nuclear electricity, hydroelectricity and wind and solar power.

A report published in December 2014 by the International Monetary Fund concluded that: “South Africa has made substantial progress in its first 20 years of democracy, achieving much improved living standards for its citizens. But growth has slowed in recent years, specifically relative to other emerging markets. Although weak trading partners’ growth contributed to the slowdown, increasingly binding structural constraints, such as protracted strikes and electricity constraints, have been important factors.”

Energy equity

Looking first at the energy equity aspect of the trilemma, even in one of the most developed countries on the African continent, some 20% of the population still lacks direct access to commercial forms of energy. Without energy there can be no prospect of modern healthcare, sanitation, education or economic activity. So these citizens are excluded from social and economic development. The prospect of connecting these people to the mainstream energy grid in the near future is low because of the disperse nature of the communities and the long distances involved.

Off-grid solutions need to be developed on a scale that makes economic sense and of a standard acceptable to the people they will serve. Currently there is a strong perception – rightly or wrongly – that off-grid solutions are of a much lower standard than on-grid supply and they are therefore rejected by many communities. For the 80% of the population that does have access to commercial energy, a significant proportion are finding energy costs increasingly difficult to accommodate within household and small business budgets. To support the development of new capacity, electricity prices are rising faster than inflation. Many of the lowest-paid workers have to travel long distances to get to and from work and the cost of liquid fuels makes this commute a significant part of their personal budgets.

Energy security

Looking next at energy security, the second trilemma dimension, electricity supply is severely constrained with scheduled load shedding needed to maintain the integrity of the national supply network. This constraint is having a major impact on the performance of businesses – both large and small – and consequently has a knock-on effect on the nation’s economic performance. New generating capacity is being built but it will be some years before reserve margins will be adequate. Moreover, it is not only electricity supply that is of concern. The liquid fuels industry is also under severe pressure.

There has not been any investment in new refining or import facilities for decades and there is uncertainty over whether it will be government or the private sector that will make the necessary investments to support cleaner liquid fuel standards. About 10% of the diesel supply is being allocated for electricity generation. This increases the risk of diesel shortages, with knock-on effects on transport, mining, agriculture and industry. There is much talk of introducing natural gas into the energy mix to increase diversity and help with energy security – with the Department of Energy working to formulate a gas utilisation master plan.

But South Africa does not have any significant indigenous natural gas reserves and consequently has never developed an extensive natural gas supply network. Currently natural gas is imported from Mozambique and supplied mainly into the Gauteng region. Moreover, if additional volumes of natural gas are to be imported from the newly identified fields in northern Mozambique, or as LNG, there will need to be considerable further development of physical gas infrastructure and supporting legislation and regulation.

South Africa is thought to have large amounts of shale gas but the controversy over the desirability of fracking as a means of extraction has led to delays in the formulation of national policy and the granting of exploration licences. If shale gas is found to be a viable primary energy resource, it will be subject to the same challenges as other gases in respect of the need to develop gas networks and supporting infrastructure before it can get to market. The above developments in new capacity for both the electricity and liquid fuels sectors will needed to be funded. Regardless of whether the funding comes through the fiscus or from institutional or private investors, the impact will be increased energy prices which will negatively impact the energy equity dimension.

Sustainability

South Africa is also struggling with the third trilemma dimension of environmental sustainability. Electricity supply is around 85% based on fossil fuel-fired generation plant, mostly coal with a very small proportion of diesel. The cost of retrofitting flue gas desulphurisation and carbon-capture technologies to fossil-fired generation facilities will be significant, assuming viable technologies become available, adding further strain to the energy equity dimension. South Africa has run a very successful independent power producer programme based on renewables – primarily wind and solar – with its Renewable Energy Independent Power Producer Programme (REIPPP). However this represents less than 10% of the capacity needed to meet electricity demand.

The government has also declared its intention to construct more nuclear power plants. Currently, South Africa generates 5% of its electricity using nuclear power from the Koeberg facility near Cape Town. The government has said that, in line with its Integrated Resource Plan 2010–30, it plans to add 9,6 GW of nuclear electricity generation capacity. Intergovernmental agreements have been signed with potential vendors, including France, Russia and China. However, the policy remains very controversial from economic and safety points of view.

Environmental sustainability is not simply a matter of carbon management. Water resources are stretched to meet the needs of the growing population and the energy-water-food nexus debate is a matter of concern to the nation’s policymakers. Also, those citizens who do not have access to commercial energy are forced to forage for biomass to meet their basic energy needs. This leads to the destruction of forests and grasslands, with the consequent risk of soil erosion and the destruction of arable land. If you really want to understand the difficulty of balancing the WEC’s Energy Trilemma, imagine yourself in the role of a South African policymaker. There is much to be done on all three dimensions – and the counter-acting forces between dimensions are very powerful.

Contact Brian Statham, WEC, Tel 082 652-7580, statham@mweb.co.za

 

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