The Wetility CFO says, on the back of the Russia-Ukraine conflict, renewable energy is crucial for the economy.
South Africa has struggled with power generation for years as its state power utility, Eskom, continues to face financial issues. And while most South Africans have grown used to loadshedding, fears have escalated as the impact of the Russia-Ukraine conflict may lead to no power at all due to oil and gas prices increasing.
Wetility CFO Dawid Swart says, in the short term, the conflict and the follow-on impact it will have on the global economy could have a material influence on the local electricity supply in South Africa. “The conflict has led to an increase in oil and gas prices, and has the potential to cause indirect supply chain and logistics challenges as well.”
He explains that Eskom often uses diesel to supplement energy supply, and the increase in prices or supply chain delays is concerning because it can lead to a decrease in Eskom’s electricity production capacity.
“The more serious problem at hand is that Africa is currently facing an energy crisis,” he adds. According to the International Energy Agency (IEA), an estimated 44 percent of the total population (1.35 billion people) do not have access to any electricity. And, despite living in one of the most developed countries in Southern Africa, approximately 5.5 million South Africans do not have access to electricity.
“The current fossil fuel-based energy supply in South Africa has failed to be reliable or inclusive,” Dawid says. “This is mainly due to poorly maintained infrastructure, coal supply shortages and limited energy distribution infrastructure.”
In addition to this, Eskom is responsible for being the biggest greenhouse gas emitter in Africa, according to the Global Carbon Atlas.
Because of this, Dawid explains that a move to renewable energy in South Africa “is not just necessary, but inevitable, and over the next decade the energy supply ecosystem needs to change profoundly”.
During the COP26 climate summit, the U S, Germany and France pledged $8.5 billion (about R123.6 billion) over the next five years to assist South Africa in transitioning to green energy. However, Eskom has recently estimated that it will take approximately 15 years and $35 billion (about R508.6 billion) to make a successful transition to renewable power.
“It is imperative that households, businesses, and independent energy firms step up in order to support this transformation as South Africa moves to establish a stable and sustainable energy supply,” Dawid urges.
Go green for the economy
The frequent and long-lasting power outages across South Africa have put a strain on businesses with increased running costs, reduced productivity and declining profitability. “South Africa’s economy is under immense pressure with high debt levels, low GDP growth predictions and record unemployment numbers, and the reliability of stable and affordable energy is one of the main contributors,” says Dawid.
The macro-economic impacts have been significant, with power interruptions impacting GDP by up to five percent across sub-Saharan Africa. According to the CSIR, the total economic impact of loadshedding in South Africa over the past 10 years could be as high as R338 billion.
Dawid explains that Eskom supplies more than 90 percent of South Africa’s electricity and is struggling with a large debt burden, ailing infrastructure, and the ability to meet an increasing energy demand. The CSIR expects that loadshedding will continue for another two to three years, unless Eskom and the government starts making decisions and taking actions to address the problem.
“Until steps are taken to restructure and strengthen our electricity system, the economy will continue to experience slow growth and weak investor confidence,” he adds.
Go solar for South Africa
Dawid says that solar energy solutions make perfect sense in Southern Africa because there is a high irradiation rate, population density is low and the costs of solar energy production are decreasing.
“Most areas of South Africa are averaging 2,500 hours of sunshine a year, and experience high solar irradiation levels of up to 6.5 kWh per square meter per day,” he adds.
The US National Renewable Energy Laboratory (NREL) reports that the cost of photovoltaic (PV) system components has dropped by as much as 80 percent over the past decade, while at the same time, the technology has become more efficient.
“A rooftop PV system is relatively quick to instal, clean and pays for itself in the long term, but until fairly recently the upfront costs have priced this option out of reach for most South Africans,” Dawid explains. “However, we are now starting to reach a point where ordinary South Africans can afford to start their solar journey, with lower-cost components and new lease-to-own systems, putting rooftop solar PV systems within reach of millions more people.”