JAKKIE CILLIERS: How to power South Africa’s future

What does South Africa’s long-term development look like? The Institute for Security Studies (ISS) used the International Futures forecasting platform, developed by the Pardee Institute at the University of Denver to assess a business-as-usual and a high-growth scenario.

A business-as-usual forecast estimates growth will average about 2.4% a year over the next two decades. At that rate, the nation will recover to its peak 2013 level of GDP per capita only in 2036, reflecting 23 years of stagnation and regression.

Our analysis then examined the potential impact across demographic, economic and infrastructure-related outcomes, manufacturing and free trade, offering insights into policy actions that could enhance South Africa’s development in each.

South Africa’s coal reserves have made it a net energy exporter, with about a quarter of total production being exported. At the same time, we import large amounts of refined fossil fuels, such as petrol and diesel. That situation will change soon, and by 2028 South Africa will become a net energy importer when the costs of energy imports overtake the value of coal exports.

There is broad agreement on the need to move away from coal. But South Africa also needs to ensure that it is energy secure — that domestic production is able to meet expected domestic demand. Energy demand is set to increase substantially. In a high-growth scenario, it would rise 40% in the next two decades.

Recent versions of the Integrated Resource Plan (IRP) set out to secure electricity supply through a balanced approach. The IRP 2023 identifies two timelines: to 2030, the focus is on addressing generation capacity constraints and system needs; from 2031 to 2050, the plan aims to achieve a resilient national electricity sector.

South Africa is the largest emitter of carbon in Africa and the 14th largest globally. But since Eskom plans to decommission many of its coal plants, there is an opportunity for emission cuts. The strong reliance on coal also makes it vulnerable to measures such as the EU’s Carbon Border Adjustment Mechanism, which will tax goods entering the EU using (cheap) fossil fuels that may compete with its more expensive but less carbon-intensive domestic production.

By 2030, only the Majuba, Kusile and Medupi coal-fired plants would still be operational, and Majuba is scheduled to be decommissioned in 2046. This means that by mid-century about two-thirds of South Africa’s energy production will have to come from renewables, gas, oil, hydro and nuclear.

We started our forecasting by modelling the effect of these reductions on coal’s contribution to energy production. Coal will remain important, but after the closure of these plants the vast majority of South Africa’s energy production will inevitably have to come from renewables, gas, oil, hydro and nuclear.

To fill this demand-production gap, we increased renewable, nuclear and gas production to the level that would provide energy security (matching production with demand) and reduced the country’s energy exports to ensure that the lower domestic coal demand does not simply translate into exports. In this scenario, energy production from coal declines to only 21% in 2043.

A study by Rystad Energy indicates that South Africa could produce 20% of its energy from renewables by 2030, which is enormous. We were at 1% in 2021. With this rapid increase, the renewables proportion could reach 56% within two decades. We then increased nuclear generation to 14.5GW, meaning that energy from nuclear will contribute 4.4% of South Africa’s much larger total energy production in two decades. These increases are ambitious but still leave a demand gap of 19%, which we closed by increasing gas. In 2021, natural gas made up 3% of the total primary energy supply in South Africa and we import all our natural gas requirements via Sasol’s 865km pipeline from the Temane and Pande gas fields in Mozambique.

Future sources of gas are uncertain. South Africa has auctioned exploration blocks for shale gas, with a focus on the Orange Basin and the Karoo region, but legal challenges and environmental concerns have constrained exploration.

We made no change to the forecasts of energy from hydro or oil.

The scenario provides long-term energy security, and production keeps pace with the rapid growth that would occur in an aggressive growth scenario that we think could take South Africa to GDP growth rates of about 6% a year by the mid 2030’s and an average growth rate of 4.8% instead of 2.4% over the next two decades. .

The impact of increased renewables, nuclear and gas means that by 2043, South Africa will rank as the 19th-largest carbon emitter globally, down from its position as the 14th largest, while its economy will be 60% bigger.

While the path to a sustainable energy future is challenging, the nation’s ability to balance growth, energy security and climate commitments will determine whether South Africa can power its economy without compromising the planet’s health.

Cilliers is head of the African Futures & Innovation programme at the ISS