Updates to the Integrated Resource Plan 2010-2030

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Introduction

The National Development Plan 2030 (NDP), a policy document of the South African government drafted in August 2012 by the National Planning Commission, a special ministerial body first constituted in 2009 by former President Jacob Zuma, identifies the need for local investment in a strong network of economic infrastructure designed to support the country’s medium and long-term economic and social objectives.

The NDP envisages that, by 2030, South Africa will have an energy sector that provides reliable and efficient energy services at competitive rates, is socially equitable through expanded access to energy at affordable tariffs and is environmentally sustainable through reduced pollution.

The South African Governmental Department of Energy (DOE), in response to the sectoral needs identified in the NDP, developed and promulgated the Integrated Resource Plan 2010-2030 (IRP 2010) in March 2011. The IRP 2010 was defined as a “Living Plan” which is expected to be continuously revised and updated as necessitated by changing circumstances.

The aim of the IRP 2010 is to provide an indication of the country’s current and forecast electricity demand and the strategy and budget necessary to meet these demands. Dentons’ Africa Chief Executive Officer, Noor Kapdi, in line with his duties as a member of the advisory council to the former Minister of Energy, formed part of the Advisory Commission formulated to refine and advise on both the IRP 2010 and the Energy Resource Plan.

In line with section 4(1) of the Electricity Regulation Act 4 of 2006 the Minister of Energy, Honourable Jeff Radebe, utilised the promulgated IRP 2010 to issue determinations for new capacity. It was found that various key input assumptions made in the IRP 2010 have since changed and that these changes necessitated an update.

The DOE started with the IRP 2010 review and update process in 2015. This process identified four milestones:

  • the development of the input assumptions;
  • the modelling of a reference case or base case and scenario cases including analysis of results;
  • the production of balanced scenarios; and
  • policy adjustment in view of government priorities, policies and commitments.

On 27 August 2018 the DOE released the updated Draft Integrated Resource Plan (Draft IRP 2018) for commentary. The aim of the Draft IRP 2018 is to address the point of departure between the assumptions made in the IRP 2010 and the legislative mandate for electricity supply-demand optimisation based on a least-cost path. The following are notable changes:

  • electricity consumption continues to decline on an annual basis. Current usage is comparable to those of the year 2007. For the financial year ending March 2018 the actual total electricity consumed is some 30% less than the figure projected in the IRP 2010;
  • Eskom’s existing generation plant performance is not at expected levels. Eskom’s own reports show that plant availability is below the IRP 2010 assumptions of 80% and above;
  • to date, an additional 18,000MW of new generation capacity in the form of coal, pumped storage and renewable energy has been committed to, with most of the capacity already connected to the grid and the rest to be realised by 2022;
  • reduced cost of new generation technologies;
  • actualisation of the least-cost option;
  • reduced carbon emission obligations on South Africa; and
  • the phased decommissioning of Eskom’s power generation facilities as they reach the end of their life spans over the next 32 years.

Taking the new key assumptions and milestones into account, the Draft IRP 2018 details a number of policy adjustments. These include the retention of annual build limits for the period up to 2030; the inclusion of 1,000MW of coal-to-power in 2023-2024, based on two already procured and announced projects (these being Khanyisa and Thabametsi, both to be built by the private sector as part of the government’s independent power producers’ programme); the inclusion of 2,500MW of hydropower in 2030 to facilitate the Grand Inga Hydropower Project Treaty which South Africa has entered into with the Democratic Republic of Congo; and 8,100MW from gas.

Interestingly, there is limited mention of nuclear-powered energy due to the costs associated with nuclear power and the government’s commitment to the least-cost approach. In addition, the Draft IRP 2018 states, in line with existing policy, that nuclear power will be procured solely by Eskom and not via an IPP.

The envisaged energy mix by 2030 will consist of 34,000MW of coal (46%); 1,860MW of nuclear (2.5%); 4,696MW of hydro (6%); 2,912MW of pumped storage (4%); 7,958MW of solar PV (10%); 11,442MW of wind (15%); 11,930MW of gas (16%) and 600MW of concentrated solar power (1%).

The Draft IRP 2018 is open for public comment until 26 October 2018 and it is likely that revisions will be made following public consultation. We are of the view that these revisions are unlikely to alter the basic energy and technology allocations set out in the Draft IRP 2018.


Dentons would like to thank Noor Kapdi as well as Ayesha Shaw at Dentons in Cape Town for this month’s newsletter.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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