DARYL SWANEPOEL: Crisis in Europe highlights critical importance of self-sufficient, secure and stable energy production

The true value of a stable and secure energy sector has again been brought to the fore as Russia’s invasion of Ukraine triggered energy security concerns across Europe, with nations moving to reduce their reliance on Russian oil and gas in their networks.

While the strategy is likely to speed up Europe’s efforts to become less dependent on Russia for its energy needs in the longer-term, SA too must undergo a large-scale energy transition to overcome our electricity shortage and load-shedding after years of neglect and corruption.

Though Europe is not on the brink of collapse because of its decision to reduce its dependence on Russian gas, its leaders are under no illusion that a world without power is potentially suicidal and are pushing policymakers to develop and introduce plans to mitigate against the harmful effects of a war-induced energy crunch.

Disappointingly, SA’s response to its own energy crisis has been more lethargic, apathetic and confusing. The country has long been suffering the consequences of underinvestment in infrastructure and power station maintenance, compounded by corruption and maladministration atstate-owned utility Eskom. The electricity system has weakened to the point that debilitating load-shedding has become the default in managing grid stability when demand exceeds supply.

Rotational power cuts carry an enormous cost to the economy. According to the Council for Scientific and Industrial Research , load-shedding is estimated to have cost the economy between R60bn and R120bn in 2019, and subsequent CSIR data shows that 2020 and 2021 were even worse in terms of power cuts.

Moreover, with the war in Europe intensifying, things are expected to get more dire for Eskom as the shock waves emanating from the conflict see global oil prices shooting through the roof. This, in turn, is driving up fuel prices to unprecedented highs and for SA’s power utility this means one thing — its open cycle gas turbine generators, dependent on diesel, have become an increasingly expensive fallback. Eskom has warned about the difficulties of absorbing costs related to higher diesel prices.

Unstable electricity supply, combined with a 175% increase in power prices over the last decade, has proved to be a binding constraint on the country’s economic growth and has left SA’s investment proposition in tatters. Government acknowledges that power constraints must be addressed, with several policy interventions and new energy generation projects set to come online over the next few years to close a capacity shortfall that is estimated to be between 4,000MW and 6,000MW. 

While stakeholders agree that there are no simple solutions to the energy crisis, there is a need for creative, short-term measures to help better manage and stabilise the situation, while advancing SA’s low-carbon, clean energy transition. Stabilising electricity supply will help improve business confidence, enhance sentiment towards SA and make it more attractive to domestic and foreign investors.

As part of a broader economic research project, the Inclusive Society Institute has consulted energy experts to gather insight into what the country should do to place it on a path of higher and more sustainable economic growth. Those participating in the roundtable discussion acknowledged that certain reforms are currently under way to transform the sector, including lifting the threshold for electricity generation projects for which a licence is not required to 100MW, and bolstering energy supply with the ongoing massive procurement of utility-scale power. While these reforms will take time to bear fruit, there are some “quick wins” that could have immediate positive effects and provide the economy with breathing space to catalyse some of the more complex opportunities that are presenting themselves.

One of these arguably “easy and fast” solutions is to import energy sector qualification programmes as an alternative to importing skills. Developing a curriculum and learning material is complicated, arduous and time-consuming — the luxury of which we do not enjoy. Importing qualifications or learning programmes will reduce the lag between skills planning and implementation of projects.

Scaling back from grand plans to smaller, focused projects will also increase chances of success. Using pilot projects to test the feasibility of different technologies will create an enabling environment to fast-track development and help build local supply chains that can be used in the procurement process.

As the world transitions to a low-carbon economy SA must stand ready to seize the climate opportunities before us, such as the $8.5bn concessional finance offer linked to last year’s COP26 event in Glasgow. Climate change is often discussed as a major risk, but for first-movers that are willing to innovate it may hold a key to unlocking substantial economic development.

It is said that necessity is the mother of invention. The necessity presented by our ongoing electricity shortage may be the impetus that is needed for a solution to SA’s energy problems.

• Swanepoel is CEO of the Inclusive Society Institute.