Red tape thwarts South Africa’s green energy potential

Power experts say adding renewables would be one of the quickest and cheapest ways to end outages and reverse years of economic decline.
Image: Krisztian Bocsi/Bloomberg

World-leading renewables companies are lining up to invest in South Africa’s energy sector and help remedy a chronic generation shortfall that pushed the continent’s most advanced economy into recession even before the Covid-19 pandemic struck.

But their investment proposals are on hold as red tape and political considerations delay procurement, undermining a government pledge to prioritise wind and solar generation.

Indebted state utility Eskom’s coal-fired stations, which produce more than 80% of South Africa’s electricity, have long struggled to meet demand, culminating in rolling blackouts that last year hobbled industries central to the economy.

Power experts say adding renewables would be one of the quickest and cheapest ways to end outages and reverse years of economic decline.

Based on the government’s plan to add 2.6 gigawatts (GW) of as yet unprocured wind and solar capacity in 2022, the next auction could attract more than $2 billion in investment, a Reuters analysis of industry estimates found.

Billions more could flow if procurements happen regularly, contributing to much-needed economic development when the new coronavirus has exacerbated budget constraints.

“South Africa has a brilliant solar resource, and there is a lot of international and local interest,” said Wido Schnabel of Canadian Solar, which hopes to supply new projects. “Why are we still waiting?”

When it launched its first renewables auction in 2011, South Africa was at the vanguard of clean energy converts, Anton Eberhard, a University of Cape Town professor, said.

Six years after the last procurement round, “South Africa is falling behind,” said Eberhard, who has advised President Cyril Ramaphosa on reforming Eskom.

“There is no question. Engie would bid for both solar and wind,” said Mohamed Hoosen, chief Africa power and gas officer for the French power company.

Italy’s Enel Green Power will also consider bidding if tender and market conditions are as favourable as in the past, a spokesman said.

Tender delays

In an energy plan in October, the government aimed to increase installed wind and solar capacity roughly sixfold to more than 26 GW by 2030.

More than seven months on, none of the new capacity has gone out to tender.

Energy Minister Gwede Mantashe said in February he was seeking the agreement of energy regulator Nersa for procurements.

But in March, Nersa said it needed around six months for its electricity subcommittee to make a submission and to consult the public before it could make a decision.

Even 2,000 megawatts (MW) of “emergency procurement” identified as a priority and given a green light by Nersa last month has yet to happen.

The energy ministry told Reuters the law was clear on how procurements should take place and it was following established procedure.

A spokeswoman declined comment when asked whether red tape was holding up procurement, while a Nersa spokesman said its rules were designed to ensure installations were safe.

Mining companies, as major energy users and a plank of South Africa’s economy, have been lobbying the government via an industry association to ease regulations so they can build their own large solar plants.

These could greatly ease the strain by ensuring power for their own operations, as well as generating surplus supplies for the grid, while appeasing shareholders concerned about the miners’ carbon footprint.

But companies, including Sibanye-Stillwater and Gold Fields, say regulations and uncertainty over costs are delaying their plans.

Although the energy ministry tweaked the rules for small generators in March, it maintained strict licensing requirements for plants over 1 MW. Sibanye wants to add up to 150 MW of solar capacity, while Gold Fields is aiming for 40 MW.

The energy ministry told Reuters the rules “effectively enable companies to generate their own power”.

A spokesman for industry group the Minerals Council said the March amendment “was not intended to deal with self-generation on the scale that mines are seeking”.

Killing coal

Not all the obstacles are bureaucratic. Analysts blame the governing African National Congress’ (ANC) close ties with organised labour for its reluctance to unleash renewables.

Unions – heavily represented at Eskom and in the coal mines that fuel its power plants – have resisted renewables because they fear they could cost coal miners their jobs. With unemployment at 30% even before COVID-19, the ANC is alive to those concerns.

“The renewable energy sector is allowed space as well to grow. But it’s allowed space to grow without killing coal,” Sello Helepi, a senior advisor to the energy minister, told Reuters.

Helepi noted there had been few renewables projects in Mpumalanga province, the country’s coal-mining heartland and an ANC stronghold.

“Let’s say hypothetically we switch off coal-fired power stations, what are we saying to the people of Mpumalanga?” he asked.

An ANC spokesman did not answer phone calls seeking comment.

Proponents of renewables say additional clean energy capacity would not threaten coal jobs directly and that the government’s reticence could stifle employment in a new sector.

Max Bögl, a German construction firm that manufactures wind towers, told Reuters it was interested in establishing production in South Africa that could create around 400 direct jobs.

But it awaits the government’s next move, said Bruno Geadas, a company official who visited South Africa several times last year to evaluate investment prospects.

“We are waiting for another level of commitment,” he said.

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What we have here is incompetence and the lack of will to change things. The secret is, Mr.Minister, to surround yourself with competent go getters that don’t take no for and answer. Movers and shakers. Doesn’t matter what color they are. But what the hell, nothing is going to happen. As usual.

It’s not “RED TAPE.” It’s failure of the government linked to bureaucratic ineptitude personified. On the job trainee’s is another phrase that’s analogous. It’s all brought to you by the guys you KEEP voting for. Enjoy

Agree its not RED TAPE.

However the Ministar has a couple of agendas in the background.
I think he is still busy doing Zuma’s dirty work.
If the Nuclear procurement does not go through, the Russians will be visiting ZUMA. Putin has reminded South Africa about the 1 Trillion Rand Nuclear Deal.
The stakes are tooo high (people have already got their monies) to let this deal fall apart.

Therefore get creative. Roof top solar sub 1 MW – no regulation.

Around 300 MW installed.

The big projects of which plenty could be in Mpumalanga would be a boon and create more jobs than coal whilst reducing electricity costs. Will it happen? At a very very slow pace.

The ANC protecting unsustainable jobs at unreliable and dilapidated power stations and non-viable coal mines is an example of communism in its purest form. The USSR mined coal at an enormous loss to keep the workers employed. The entire national budget disappeared into loss-making enterprises that were nothing else than subsidized labour camps. This bankrupted the USSR and led to the fall of the Berlin Wall.

Our SOEs are repeating the same failed experiment. The ANC, frantically trying to win favour with the unions, is selling the family silver to pay bribes. The looting factions have a stranglehold on the ANC. There is no way out of this situation. The more they try to protect jobs, the more jobs they lose. The more they try to revive SOEs, the faster they kill the economy. For every unionized job they are protecting, they are keeping 100 people unemployed.

By prolonging the SOE death-spiral, the ANC is transferring the death-spiral to the entire economy. Lockdown is the final financial shock that will push the economy over the edge. Our economy has started going over a series of waterfalls from which there is no turning around. Beyond this series of waterfalls lies the sea. The sea of worthless paper currency. Hyperinflation is always and everywhere a political decision. This decision is made when the rulers protect jobs at SOEs, jobs that do not contribute to a growing economy. This vote-buying exercise is the first waterfall. A banking crisis is the last waterfall before we enter the sea of “liquidity”.

Exactly right. This is all about pressure from unions to preserve the status quo. Not to mention those who benefit from tenders to supply coal to Eskom.

Well said and worse. It is to keep their (ANC) hugely overpaid chums in work and scoring tenders to supply rubbish coal and stones to Eskom. It isn’t even to keep workers employed; to is to make themselves rich.

I suspect the same with renewables. ANC factions are busy jockeying for position to become “BEE partners” and score big loot for doing nothing.

All the trade unions are concerned about is their dues and their workers.
But there are fewer than 3 million unionised workers in SA – less than 5% of the total population. So for this tiny percentage, all South Africans must suffer – when we could all have ample electricity at a lower price than at present. The greedy unions need their backsides kicked. And as for the Commie mindset of people like Pravin Gordhan and Mantashe, it’s well past time that S.Africans realised that this dogma has been historically proven disastrous in practice. Why do we even HAVE a Communist Party – especially one actually calling the shots??? Free renewables!

Is this not a case of the monkey with the hand in the coconut not letting go to grab the even bigger and juicier coconut under the next tree?

Release the fear of job loss from coal power generation and embrace the potential for job creation as wind and solar farms pop up through-out the nation.

Instead of being Timbuctoo away from where the people live (as are the current coal-fired stations), these projects can grow up amongst the community. Jobs right where they are needed.

The first to take on these energies will be where there is the highest demand- and the greatest shortfall in current Eskom output. ie the suburbs and commercial/ industrial urban areas.

I always prefer using personal examples. So…

I have some townhouses in Midrand. They are wonderfully located in complexes with 100 + units and abundant East facing roof spaces.

If our corporate body looked at this roof space potential for energy generation we would find it suits generating a lot more energy than residents use.

We could farm this energy. Use some for local needs and feed the surpluses onto the grid.

Instead of energy costing us more and more, we could utilise this system to generate a profit.

With a business plan in hand, banks should be able to provide finance to unit owners at very low-interest rates to put the system in place and get it up and running. We could outsource the technicalities to these attested manufacturers and local service providers.

Payback within 5 years or less- charging out to residents at a reduced rate and scoring back from the main grid. From then on owners benefit added to their rental emoluments from a diversified income source to the corporate body. Perhaps even butter it up for owners with a portion of the loan available for improvements/ maintenance of their properties.

A win for residents, a win for the suburb, a win for the region, a win for the province, a win for the nation, a win for the banks, a win for the environment. A win for jobs.

Religious beliefs in punted technology can be detrimental to you and society.

Get some balance, example see the documentary, Planet of the Humans (2019)

Sure. But industry like the mines are stumped by the inept government and fossils that run it. The former mines minister was much better than Mantashe

Seems to me that with the current opportunity so great, those who can afford to install PV power should say to hell with bureaucracy and go right ahead. Just like we did with not paying etolls.

It’s a no-brainer to switch to renewables in this country, wherever possible. But seeing as our government has no brains, they’re doing everything they can to avoid this obvious solution.

End of comments.

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