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1. Procurement of 2500 MW of new nuclear power in South Africa deferred again.
On 16 August 2024, Energy and Electricity Minister Kgosientsho Ramokgopa announced the withdrawal of the Section 34 ministerial determination of his predecessor, Mineral Resources and Energy Minister Gwede Mantashe, for the procurement of 2500 MW of new nuclear power in South Africa. This followed legal challenges by the Democratic Alliance, Earthlife Africa and the South African Faith Communities’ Environmental Institute (SAFCEI). Minister Ramokgopa indicated that the legal challenge by the DA was of an administrative and procedural nature that could have been dealt with. However, he said the arguments presented by Earthlife Africa and SAFCEI, with which he agreed, were more substantial, and necessitated the withdrawal of the Ministerial Determination. Earthlife Africa and SAFCEI argued that the energy regulator, NERSA, failed to conduct a proper public consultation process after Minister Mantashe informed NERSA that the suspensive conditions in respect of its concurrence with the Ministerial Determination had been met. In addition, they argued that it was not rational to concur with the ministerial determination without the finalisation of an updated IRP considering the technical advancements, need, costs, pace and scale of new nuclear power in South Africa for the years after 2030. A new determination will thus require finalisation of an updated IRP for electricity to replace the outdated IRP 2019, and a further public and stakeholder consultation process. While the minister reaffirmed government’s commitment to nuclear power as an option in South Africa’s energy mix, he indicated that he is “equally committed to ensuring that the process is completely underpinned by the principle of openness, and transparency”. So, for the time being, it is now “back to the drawing board” for new nuclear power in South Africa.
2. Electricity Regulation Amendment Act signed into law.
On 26 August 2024, South Africa’s President Cyril Ramaphosa assented to signing the Electricity Regulation Amendment Act (ERA Act) into law. The Act sets out far-reaching reforms in South Africa’s electricity sector to provide an independent transmission system operator (TSO), an independent market operator (IMO), an open electricity market allowing competitive, wholesale and retail buying and selling of electricity, and a market code that provides the necessary rules for market participants. This is expected to facilitate greater competition, reduced electrical energy prices, and increased investment in the sector. The Act distinguishes between tariffs that must be set or approved by the regulator, NERSA (such as network charges) and those which are subject to a direct supply agreement or arise as an outcome of a competitive market. The Act provides that the system operator may not discriminate between different generators or customers in relation to dispatching or balancing the system, except for objectively justifiable and identifiable reasons approved by the regulator. Access to the transmission and distribution power system must be objective, transparent and non-discriminatory. Going forward, the Act is expected to lead to long-term energy security, a more competitive energy system, more rapid uptake of renewable energy sources, and ultimately lower electrical energy prices. But, like the Climate Change Act, it is possible that the ERA Act and/or some of its clauses, may only come into operation on a date still to be proclaimed, as the Presidency tries to resolve certain issues arising. This may include the possibility of a Constitutional Court challenge by the South African Local Government Association (SALGA) and certain municipalities in respect of some definitions in the ERA Act perceived as infringing on their constitutionally protected rights to electricity reticulation in SA.
3. South Africa’s draft gas master plan will require a major overhaul before finalisation.
At a media briefing on 12 August 2024, Energy and Electricity Minister Kgosientsho Ramokgopa announced that changes in the operating environment and the assumptions upon which the draft gas masterplan, GMP2024, was based, as well as defects identified in the draft GMP2024 itself, indicated that the plan requires significant rework and remodelling. After more than a decade of delays, the draft GMP2024 was released for public comment by Mineral Resources and Energy Minister Gwede Mantashe in late April 2024. The public and other stakeholders were invited to submit their comments and inputs on the draft by 15 June 2024. There have been concerns expressed that the draft failed to adequately address the so-called “gas cliff” facing industrial gas users from June 2026, in Mphumalanga, Gauteng and KwaZulu-Natal provinces. This failure may force industrial gas users to switch to alternative fuels including imported LNG that are more expensive and environmentally harmful, leading to increased prices for consumers and a rise in carbon emissions. Without a secure and affordable supply of gas, the viability of these industries could be threatened, leading to job losses, with significant economic and social repercussions. Major changes in the assumptions upon which the draft GMP2024 was based include the exit of TotalEnergies, Qatar Petroleum and CNR International from development of the 11B/12B (Brulpadda and Luiperd) gas fields off the southern Cape Coast, and delays to the return-to-service of the shuttered PetroSA gas-to-liquids plant in Mossel Bay. A further complicating factor may be uncertainty in respect of which government department is responsible for GMP2024 itself, as well as for the supply, distribution and end-use of gas for industry and power generation in South Africa, following the split of the Department of Mineral Resources and Energy (DMRE) into a new Department Mineral and Petroleum Resources (DMPR) and Department of Energy and Electricity (DoEE). Minister Ramokgopa gave the assurance, however, that government is engaging with industry players, and that the matters are being attended to with urgency.
4. Solar PV in Bid Window 7 of the Renewable Energy IPP Procurement Programme massively oversubscribed.
Following closure of the Bid Window 7 (BW7) auction of the Renewable Energy IPP Procurement (REIPPP) programme on 15 August 2024, the IPP Office of the South African government announced that the bids received totalled 10 218 MW, made up of 8526 MW of solar PV and 1692 MW of onshore wind capacity. BW7 was launched with the goal of procuring 5000 MW of renewable energy, split between 3200 MW of onshore wind and 1800 MW of solar PV. BW7 has faced challenges resulting from grid access issues, particularly for wind power where grid capacity constraints have previously hampered project allocations. Grid access has not been helped by the failure of Eskom and the energy regulator, NERSA, to finalise a curtailment framework which would have unlocked a further 3500 MW of grid access for wind projects in the Western and Eastern Cape provinces. Differing from previous bid windows, the South African government has reduced the sovereign debt guarantees from 100% to 80% for power purchase agreements of BW7, reflecting a shift in risk management that may influence the financial viability of projects. Economic development factors will play a smaller role in bid evaluations, with price being the predominant factor (90% weight) compared to economic development (10%). BW7 emphasises local equity ownership, requiring at least 49% local ownership in project bids. The IPP Office is also said to be planning BW8, which will similarly aim to procure another 5000 MW of renewable energy. Minister of Energy and Electricity Kgosientsho Ramokgopa has indicated that this may be further increased to what he refers to an a “mega-bid window”.
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