The integrated Resource Plan (IRP) 2030, the government’s electricity blueprint up to 2030, is likely to cost the country R100billion more, Peter Attard Montalto, the head of Capital Markets Research said, as reports emerged that initially the wrong version of the plan was gazetted last Friday.
The government unveiled the IRP 2030, saying it was an electricity infrastructure development plan based on the least-cost electricity supply-demand balance, taking into account the security of supply and the environment.
In the plan, coal and nuclear remain the cornerstone of the energy mix despite the decommissioning of old power plants and the preference for renewables and gas.
Mineral resources and energy minister Gwede Mantashe said the IRP aimed to develop adequate generation capacity under the current low-growth economic environment and when the economy improved to 4percent annual growth.
“Generation capacity must accordingly be paced to restore the necessary reserve margin and to be ahead of the economic growth curve at least possible cost,” he said.
But Montalto was not convinced.
“It is not the least cost. The IRP lays out the least cost version and shows how the chosen policy costs the economy some R100bn more through higher tariffs than the least cost version. The IRP artificially pulls away from least cost through the imposition of annual limits on renewables as such. While the increase in renewables is welcome it is still not as much as it could have been,” Montalto noted.
Montalto charged that the plan said nothing on who should undertake the new renewable energy.
He also said that the plan’s lack of detail on the accelerated decommissioning of coal meant that a green transition fund cannot not work. Funding from international financial institutions cannot be procured until the government does come forward with such a plan in the coming years.
“The IRP is going to be seen as a tick for the market, but remains problematic and will have to be updated in a few years as demand growth turns out to be lower and coal and nuclear are unworkable and a faster move to a just energy transition is required,” pointed out Montalto.
“As such the energy system will remain very much in flux, and the IRP won’t be able to be fully considered until we see the Eskom white paper next week, and indeed the debt solution in the medium term budget policy statement.” Mantashe indicated the integrated plan up to 2030 comprised of 1500 megawatts (MW) of generation from coal, 2500 MW from hydropower, 6000 MW from photovoltaic, 14400 MW from wind, 2088 MW from storage and 3000 MW from gas.
NJ Ayuk, the chairperson at the African Energy Chamber, said the approval of the revised IRP2019 was a breakthrough for South Africa, which had huge energy investment potential.
“Government roadmaps and policies are critical in giving investors clarity on where the investment opportunities lie. South Africa is sending a message that its institutions are aligned towards clear goals and objectives and are ready to work hand in hand with the private sector to achieve a common development vision,” added Ayuk. -BusinessReport