South Africa: Changing The Energy Mix For A Low Carbon Future

British Embassy Pretoria

December 2013

Summary

South Africa‘s coal dominated energy mix is changing. Renewable energy is entering the market and a long-promised roadmap for nuclear power is expected soon. Modest natural gas expansion and Carbon Capture and Storage are also being considered. A look at what is driving energy diversification and how it will impact on South Africa’s climate change commitments. UK support and commercial opportunities.

Detail

South Africa is the fifth most energy intensive economy in the world, with over 90% of electricity production from cheap local coal. It is developing two further large coal power stations to help address the lack of power supply which has left South Africa on the threshold of mass rolling blackouts, last seen in 2008. Their construction has been beset by delays, cost overruns and concerns about environmental mismanagement. A third coal power station is being considered.

But, the focus is shifting to renewables, nuclear and gas, as coal prices increase and carbon reduction targets come to the fore. South Africa’s Integrated Resource Plan (IRP), which outlines plans for coal, nuclear and renewable energy development up to 2030, is under review. This process will conclude in March 2014. The IRP proposals (currently under public consultation) include extending the life of existing coal power stations, more gas and solar, less wind and slightly less nuclear than originally planned. The lack of skills, capacity, finance, plus water scarcity further complicate decisions on South Africa’s energy future. However, there are significant opportunities for UK companies, particularly in renewables and oil/gas.

 

Renewable Energy

The first renewable projects will start contributing to the grid this year and should provide 10% of South Africa’s capacity by 2020. A number of UK companies have been successful in bidding for projects to date, especially those that have partnered with established entities in South Africa. Further wind and solar projects could be approved over the next few months.  

Nuclear

Despite the high price-tag (estimates of £66-80 billion to build), there is significant pressure to add up to six new reactors to the sole, ageing, nuclear power plant. President Zuma has personally taken on responsibility for nuclear energy coordination. A tender announcement is expected by the end of this year. We will be in a good position to capitalise on business opportunities in consultancy, financial, and legal services and possibly also the supply chain.

 

Carbon Capture and Storage

 

Government interest in Carbon Capture and Storage (CCS) compensates in part for the likely continued use of fossil fuels and will help to reduce the overall emissions trajectory. DECC is currently funding a World Bank CCS project for a test injection site.

 

Gas and oil

 

Gas could be a “game changer” for South Africa. With major exploration activity taking place off the east and west coasts, likely imports from Mozambique and Angola, and plans to issue shale gas exploration licenses in early 2014, there are real opportunities here for British business. The FCO are currently running a Prosperity Fund project to establish the sector’s potential. With little oil locally, South Africa has a large synfuels industry, producing 30% of transport fuel, and is also the second largest crude oil refiner in Africa with plans to expand this still further. For both oil and gas, UKTI is focusing on supply chain opportunities as well as addressing major skills gaps through UK training.

 

Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.

Countries: South Africa
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