INTRODUCTION
Eskom has recently released their latest supply and demand data on the Eskom Data portal. Similarly, SARS recently provided its latest monthly update on national trade, which gives insight into the market size for various products. A brief interrogation of that data gives some interesting insights into loadshedding and load curtailment trends, the rate of renewable energy adoption, as well as hinting at some potential implications for large-scale energy users.
LOAD SHEDDING & CURTAILMENT TRENDS
As would be expected, the severity of loadshedding (including load curtailment) in Q1 2023 dwarfs that experienced in previous quarters and continues a trend of quarter-on-quarter increases that now stretches back to Q1 2022. In total, South Africa experienced a shortage in energy supply of 5 751GWh in Q1 2023, which was more than the combined load shedding in the first three quarters of 2022. As a proportion of energy demand over the period, load shedding equated to 10.2% of the 55 983GWh of energy that Eskom did supply in Q1.
Looking at load shedding in terms of stages rather than GWh, Q1 2023 averaged at stage 2.6, up from 1.8 in Q4 2022 and 0.2 in Q1 2022.
In terms of load curtailment, the effects have been significant. At times stage 4 load curtailment, requiring a 20% reduction in power usage, has been instated for up to 24 hours at a time, with knock-on impacts on production.
“Gross 6E production declined by 9% in the nine-month period due to the timing of processing maintenance and the increased frequency and severity of load curtailment.” Impala Platinum, 31 March 2023
“Ongoing electricity outages could dent Amplats refined production by up to 5% in 2023” Anglo American Platinum, 21 Feb 2023
“Power cuts could knock 15% off production” Sibanye-Stillwater, 28 Feb 2023
THE RATE OF RENEWABLE ENERGY ADOPTION
Forward-looking measures looking at development activity have recently suggested that up to 66GW of renewable energy projects are currently in development in South Africa, of which 18GW are at an advanced stage (see extract from Eskom: 2023 South African Renewable Energy Grid Survey below). Even allowing for the lower capacity factors associated with renewable energy resources, this is an extraordinary number when considering that the current installed capacity of the entire Eskom generation fleet, including thermal power, is 54GW.
SOLAR PV
The latest SARS data for imported renewable energy materials directionally supports this trend, albeit at more measured levels. In the solar PV sector, Q1 2023 saw a significant increase in the import of PV panels and components, amounting to approximately 748MW in capacity (covering utility scale, C&I, and residential applications).
WIND
Conversely, given the dependence of the wind industry on government procurement programs, the importation of wind turbines has stayed flat since Q3 2021. With BW7 planned as well as the development of wind projects for private offtake, this will no doubt pick up, but this is yet to be evident in the data.
THE (INEVITABLE) EMERGENCE OF THE DUCK CURVE
With increasing renewable energy penetration (particularly PV), South Africa’s residual energy demand profile (the demand profile netted-off for renewable generation) is increasingly aligned to other countries with high PV penetration – the so-called Duck Curve. Even without accounting for behind-the-meter installations, Eskom’s supply and demand data already highlights increasingly pronounced morning and evening peaks with knock-on effects on power management and over time, no doubt, on energy pricing and time-of-use bands.
IMPLICATIONS FOR LARGE-SCALE ENERGY USERS
- Load curtailment planning continues to be highly relevant: Even if load curtailment has not reached the extreme levels predicted by some over this winter, the situation remains precarious and the long-term trend worrying. Bearing in mind the slow rate at which new generation is added to the grid as well as the challenges in addressing performance issues at existing plants, a load curtailment plan that includes curtailment scenarios out to 3-5 years is required.
- Changes in energy pricing and time-of-use structures: The evolving residual demand profile will at some point result in changes in energy pricing and time-of-use (TOU) structures. As the demand profile shifts, the relative cost of peak and off-peak power will also change. Large-scale users, particularly those with TOU tariff structures, should plan for these modifications and factor them into investment decisions on renewable projects.
- The importance of wind generation: Wind generation will become increasingly critical for both the system operator and the C&I market. Wind power complements solar PV, reducing the residual demand during evening peaks. The combined contribution of wind and solar can better match the typical demand profile.
- The role of battery storage technologies: Behind-the-meter battery storage can offer benefits such as energy arbitrage, curtailment mitigation, peak demand shaving, and increased penetration of renewable energy. While the business case for storage systems currently relies on energy arbitrage, declining system costs and evolving TOU pricing will improve economics as well as helping to future-proof other renewable investments.
FINAL THOUGHTS
With load curtailment worsening and an explosion of project development, most of which has yet to translate into MW on the grid, the risk is of the market overheating with a corresponding market correction to follow. At Energy Group, we have cumulatively over 80 years of experience in project development and investment, including expertise across multiple power markets internationally. If a discussion is of interest to talk through perspectives on how to navigate the space, please get in touch.
