South Africa's power supply crisis

 

Leveraging our power market analysis, we assess the measures being taken to manage the country's future electricity supply.

Years of under investment in new generation capacity and insufficient maintenance has left South Africa in the midst of a power crisis, with incumbent producer Eskom unable to guarantee security of supply. 

The company has been forced to implement three stages of load shedding during the first half of 2015, reducing supply by up to 4GW.  And, with seasonal electricity demand increases expected over the next few months, load shedding requirements are likely to become even more pressing.

South Africa reserves margin

The resumption of a rigorous maintenance programme is crucial if Eskom is to increase fleet availability to its target level of 80%, yet taking power plants offline will risk further short-term pain for the South African economy.

Instead, the delivery of new generation to the grid will be key to ensuring security of supply in the long-term and the government has programmes in place to encourage Independent Power Producers (IPPs) to invest in new coal and renewable capacity.

The South African market lends itself well to the large-scale deployment of renewable power supply and the Department of Energy is aiming for 42% of capacity installed between 2011 and 2030 to be renewable.

A third IPP programme to tender for gas-fired power stations is also expected to be announced shortly, likely utilising imported liquefied natural gas (LNG).

If successful, we believe  the IPP programmes will diversify South Africa's power supply mix away from coal and significantly increase competition. However, the government must first ensure investment conditions are optimised by providing clarity around long-term energy policies and setting tariffs that allow power producers both to cover costs and make an attractive return.

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