Energy Musings - June 17, 2024
Two weeks in South Africa observing the efforts of people to sustain the wildlife and land offered us an opportunity to talk about energy. South Africa has a crisis that highlights energy problems.
Energy Thoughts From South Africa
We are just back from two weeks in South Africa tracking wild animals. (You probably didn’t realize we were gone.) While in South Africa we talked with ordinary people, many of them engaged in environmental and wildlife sustainability activities, about the country’s energy market. They are concerned with emissions but also worry about energy costs and reliability.
South Africa has been experiencing an energy crisis – demand is growing and aging generating plants are failing while renewable energy is insufficient in picking up the shortfall. The people we talked with had interesting views and experiences with the energy crisis.
According to Wikipedia, South Africa’s energy crisis began in late 2007 and has continued. The crisis involves load-shedding, meaning people are forced off the electricity grid for some time each day. Load-shedding forces people to adjust their lives to fit the availability of electricity.
South Africa has a state-owned electricity company that controls all aspects of power – generation, transmission, and distribution. Amazingly, Eskom, the state-owned electricity company, has seen its generating capacity shrink over the past 30 years. In 1994, Eskom possessed 37 gigawatts (GW) of generating capacity. Today it has 28 GW despite adding two new power plants in 2017 and 2019 – Kusile (4.8 GW) and Medupi (4.6 GW). The capacity decline reflects the retirement of older plants and performance issues due to sabotage, corruption, and poor management.
Early last year, South Africa’s president, Cyril Ramaphosa, acknowledged in his State of the Nation Address the problems behind the nation’s energy crisis and the challenge for the future.
“We cannot undo the mistakes that were made in the past, the capacity that was not built, the damage that was done to our power plants due to a lack of maintenance, or the effects of state capture on our institutions. What we can do is to fix the problem today, to keep the lights on tomorrow and for generations to come.”
To offset Eskom’s declining capacity alternative power providers have stepped up. These include independent electricity providers, residential and local solar systems, and generation plants built to power industrial and mining facilities. The result is that the total electricity generation capacity in South Africa has grown to 42 GW despite Eskom’s share falling. The government plans to continue to divide Eskom into three separate business units while fostering renewable energy growth by independent producers.
Today, 85% of the nation’s power is coal-fired. South Africa was endowed with thick coal seams near the surface making it easy to mine and ensuring it is cheap. Coal mining creates jobs, which is important for an economy with substantial un- and underemployment.
According to the government’s plan, renewable energy generation will increase from its 9.3% share of total power generation in 2023 to 17.0% by 2032. The flip side is that thermal energy output should decline from 200.1 terawatt-hours (TWh) in 2023 to 188.0 TWh in 2032, a 6% reduction. While a positive development, it is less than many environmentalists desire. With high electricity prices, the plan is not popular with the people either. Between 2006 and 2021, electricity costs rose from 17 to 115 cents per kilowatt-hour, nearly a sevenfold increase over the 15 years.
However, the government’s plan fails to address the nation’s current 4-6 GW power shortage. The electricity system also faces the prospect of its lone nuclear plant being shut down this year. In 2019, Eskom started working on a 20-year operating license extension which would delay the plant’s closure to 2044. The plant’s 1.8 GW capacity is not an insignificant amount of electricity.
At the same time Eskom began seeking the license extension, it announced a plan to grow the nation’s nuclear power supply. It started by training workers in the science and engineering of nuclear power plants. However, the effort seems to be going nowhere.
A significant problem for South Africa is overcoming the cultural issues that have impacted Eskom’s performance. This has been a long-term issue and has become a major problem recently. It worsened in the mid-1990s when the African National Congress (ANC) led by Nelson Mandela assumed the leadership of South Africa. Throughout its history, Eskom was pressured to accept rate increases below the inflation rate as the government wanted to foster faster economic growth and low energy prices were key.
Cheap power promoted the development of energy-intensive industries like aluminum, which requires extremely high-temperature furnaces to create the product. Alumina was hauled from Australia to South Africa, where it was converted into aluminum. This enabled South Africa to become the leading aluminum supplier to the region.
The ANC pushed Eskom to electrify townships across the country. The company promised to connect 1.75 million people by 2000, a target achieved a year earlier. This was a costly venture and created a financial burden as many people were unemployed and unable to pay their bills building the company’s debt. This began the debt spiral that has pushed Eskom into effective bankruptcy and has necessitated the government to assume half its R423 ($23) billion debt in a restructuring undertaking. This is a sad situation for a company that earned a profit of R23 ($1.3) billion in 1994 but posted an R20 ($1.1) billion loss in 2022.
We were shocked to learn of sabotage events done to force Eskom to call repair companies at extremely high costs, or to cut output to create local opposition to the company and the government. We also read about the poisoning of coffee in the executive offices of Eskom that nearly claimed the life of its CEO. This is pretty drastic stuff to disrupt the electricity industry.
Several people we talked with noted that Eskom had stockpiled coal for three months before the national election on May 29th. We learned that April marked the first month since January 2022 that the nation did not suffer from load-shedding. We believe it also happened in May. This was designed to reduce the anger toward the ANC because of load-shedding. However, three days after the May vote load-shedding resumed. The politicization of Eskom has been a hallmark of ANC’s control.
Game reserve workers told us of their families elsewhere in South Africa who live without electricity for 6-8 hours a day. This forces them to adjust their lives. The issue arose while trying to understand Tswalu Game Reserve’s electricity situation. The game reserve is located on the southernmost edge of the Kalahari Desert, a large semi-arid sandy savanna in Southern Africa. It is the largest game reserve in South Africa and was created to restore the land to its original state. It was created by combining 43 ecologically degraded cattle and sheep farms purchased by British entrepreneur Stephen Bolar. When he suddenly died in 1998, his will required that Nicky Oppenheimer be offered first refusal on the land. Oppenheimer, South Africa’s second wealthiest individual, purchased Tswalu and controlled it through a foundation.
Tswalu consists of 450 square miles of land with over 1,000 miles of road. It has three camps that can host a maximum of 48 guests. Three hundred employees operate the reserve, camps, and infrastructure. Tswalu has 16 megawatts (MW) of solar power and 10 MW of battery backup. However, as our guide told us, this mix doesn’t work well during winter. June is an early winter month. While we were there, the electricity went out one evening. It was restored but we heard a generator running. We were told management is studying the electricity issue.
When we discussed solar power with our guide, he viewed it favorably but acknowledged blackout episodes. He said he would gladly pay 20% more to ensure reliability. He was interested in our view of solar (we have a system on our summer home in Rhode Island). We showed him our cell phone app that allows us to track our solar output and see each solar panel’s performance. He wished he had a similar app to monitor his home’s solar power.
We also learned that Tswalu has one electric vehicle for game drives. While our guide said it was fun to drive, it is unreliable because of battery life and the long distances of game drives. Thus, the vehicle is barely used. All Tswalu vehicles are diesel-powered, which isn’t changing anytime soon.
We were struck by the similarity of views and concerns about electricity in South Africa with those expressed in the U.S.