South Africa: Weaning Itself Off Coal

Published on 03.17.2017

10 min read

Middle School

History, geography and geopolitics

Following a few years of sluggish growth, in August 2016, South Africa pulled ahead of Nigeria, which has a population three times as large, to again become the largest economy in Africa, according to the International Monetary Fund (IMF). The country has a solid list of achievements: its demographic growth is now under control, its school attendance rate is the highest in Sub‑Saharan Africa, it attracts the most foreign investment on the continent and, according to statistics, 85% of its population has access to ¹.

South Africa has a huge energy appetite. It accounts for nearly 30% of the continent’s total energy consumption but only 4.6% (55.4 million people) of its population². It has the biggest vehicle fleet on the continent: 180 vehicles per 1,000 inhabitants – North Africa only recently passed the 100 mark – compared to an average of 44 for the continent as a whole³. In addition, final oil product consumption rose by 20% from 2004 to 2014.

85%: 
The percentage of South Africa’s population that has access to electricity, although supply is frequently disrupted.

An Aging Grid and the Dominance of Coal

South Africa has two weaknesses, however:

Due to a lack of adequate investment, the country’s electrical grid is in bad shape (one third of stations are routinely idled), and networks continuously operate near full capacity. In the face of rapidly growing demand, the state power utility Eskom must frequently resort to load shedding. Not only does this pose problems to the population, especially in the poorest areas, it seriously hampers industrial activity, costing the economy one percentage point of annual growth, according to the government’s own estimates.
Like China and India, South Africa’s dominant source of energy is , which provides 92% of its electricity. South Africa is the world’s seventh-largest coal producer and possesses 95% of Africa’s total coal reserves. It even exports one quarter of its supply, mainly to India. The mining industry is inefficient, however, plagued by repeated strikes and declining competitiveness. In order to increase electricity output, in 2008 Eskom began construction on two gigantic coal-fired power plants, Medupi and Kusile, each with an of 4,800 megawatts. But at the end of 2016, the plants were still unfinished and facing significant cost overruns.

A Bumpy Ride for Diversification

Diversifying its energy supply is a challenge for South Africa. The country produces practically no oil or gas. During the apartheid era, after the international community imposed an oil embargo, the country produced from coal using the . Natural gas, meanwhile, is imported from neighboring Mozambique.

The situation could change if the existence of reserves – considered vast by some U.S. studies – is confirmed and the country decides to develop them⁴. In March 2016, the government announced that exploration would begin in a few months. Several international companies expressed interest in applying for a license. However, estimates of shale gas resources remain uncertain, and the economic cost of extraction has yet to be determined. As is happening elsewhere, a debate is raging over the danger posed by , particularly on the water resources in the semi-arid Karoo region.

South Africa still depends heavily on coal, which accounts for 90% of its total electricity generating capacity.

Renewables and Nuclear Energy

South Africa began investing in only recently. From practically zero in 2013, installed wind power capacity rose to more than 1,000 megawatts by the end of 2015. Photovoltaic (PV) solar power has experienced similar growth, with capacity rising from 40 megawatts at end-2012 to 1,120 megawatts at end-2015. By comparison, France’s PV capacity was 6,200 megawatts at the same date.

In the hydropower sector, South Africa is involved in the Grand Inga project in the Democratic Republic of the Congo. The Inga site comprises several dams which, if expanded, would have a substantial capacity of 40,000 megawatts. The electricity produced by the dam could be exported to numerous African countries in the north and the south. To ensure the project’s financial viability, in 2013 South Africa promised to buy half of the electricity (2,500 megawatts) produced by the future Inga III dam.

South Africa is also eyeing as a way of diversifying its energy supply. It already operates the continent’s only nuclear power station in Koeberg, located a short distance from Cape Town. Its two reactors, built in the 1980s by Framatome (now Areva), provide 5% of the country’s electricity. The government has announced a nuclear procurement plan that would bring six to eight new reactors on stream by 2025 and supply nearly 10,000 megawatts of additional power. Several countries are competing for the project, including Russia, China and France.