Critical moment as South Africa faces another load-shedding crisis

South Africa’s energy transition is entering a critical phase, and another energy crisis looms if the country doesn’t add enough renewable energy capacity quickly.

Standard Bank and Cresco’s latest Energy Market Projections report states that insufficient renewable capacity will be problematic when Eskom begins decommissioning its coal plants.

Despite the rapid uptick in renewable capacity in recent years, the report suggests that, come 2030, the picture will be different and more challenging.

“A combination of old coal plants shutting down, steadily rising demand, and delayed gas projects could push shortfalls up to 4GW at any time,” Cresco said.

“Even with renewables averaging 24% of generation, balancing the grid will become much harder.”

Cresco predicts that 4GW of Eskom’s coal-powered generation will become unavailable by 2030, due to unplanned breakdowns or planned decommissioning.

This will decrease coal’s contribution to South Africa’s energy mix to 60%, down from 80% as of 2024.

At the same time, renewable energy capacity is expected to rise by 23GW, bringing its share to 28% by 2030, up from 11% in 2024.

By 2030, Cresco expects demand to outstrip supply significantly during the morning and evening peak periods. “Deficit management will need to continue, at least during those hours,” it said.

Given that the deficit could be as much as 4GW in any given hour, energy demand management would take the form of a demand response programme, load curtailment, and load-shedding.

However, Cresco also said excess energy will be produced during daylight hours, primarily from solar generation.

Therefore, long-duration energy storage systems could be critical to meeting demand during peak periods in the evening and morning.

By 2040, South Africa’s energy mix will lean heavily towards renewable energy. However, Cresco says significant challenges will remain.

“In 2040, just five of Eskom’s coal-fired power stations are expected to remain in operation,” it said. Two of those five coal power stations will also be going through the decommissioning process.

“By that point, coal will represent only 25% of total energy annual generation, but that still leaves a significant reduction in fossil fuel reliance to achieve carbon neutrality by 2050,” Cresco stated.

While gas-fired generation is expected to reach 10GW by 2040, peak-hour generation will likely still be inefficient in meeting the 2040 demand.

“But it will, ironically, be sufficient to meet 2024 demand, indicating how far behind we are in today’s terms,” Cresco added.

“There’s a hope that larger-scale battery energy storage systems (BESS) will be able to be implemented at this stage, where bulk nickel or iron ore could lower the price of storage.”

No room for error

Based on its predictions, Cresco said there will be no room for error in the Renewable Energy Independent Power Producer Procurement Programme’s (REIPPPP) Bid Window 7.

Nor is there any room for error regarding gas-fuelled generation capacity additions or delays in private sector procurement.

“Even with solar PV and wind projected to account for the majority of generation by 2040, there will still be a need to ‘top-up’ with gas-fuelled, nuclear, or other generation,” it said.

It said there is a looming risk of another energy crisis, which may materialise as soon as coal decommissioning is resumed.

“New capacity additions and renewable energy implementation need to increase at a dramatic rate,” it said.

“The Just Energy Transition Partnership is a noble and essential effort, but total generation still needs to meet demand annually and also hourly.”

Cresco noted that large power users in South Africa who procure energy sources privately could be forced to increase their generation capacity to meet their needs entirely.

Moreover, it believes these users may be called on to supplement the national energy supply in unforeseen circumstances.

It noted that unforeseen circumstances could include a decreased energy availability factor at Eskom, and renewable energy supply chain or REIPPPP integration challenges.

Cresco explained that, while there is awareness that rooftop solar lowers demand for Eskom, particularly during daylight hours, it also presents potential challenges.

“It has also added pressure on the system operator in terms of grid balancing,” it said.

“If the embedded market were to grow or if selling excess energy back into the grid became a reality, it could play a significant role in meeting national demand.”