Long-term energy planning is critical for modern economies. Just as building new generation capacity can represent significant investments, so the timing and mix of the capacity are crucial, and carry important implications for tariff paths and economic growth.
In light of the importance of such planning decisions, Genesis was commissioned by a leading civil society organisation to review and comment on the South African government’s long-term energy planning documents, drafts of which were published in late 2016.
Both the Integrated Energy Plan (IEP) and the Integrated Resources Plan (IRP) address key issue related to long-term energy security. The IEP is the Department of Energy’s plan for the energy sector, and forecasts energy supply and demand on an annual basis through to 2050. It also outlines the infrastructure investments that will be required during this period in the electricity and liquid-fuels segments. The IRP is similar, but focuses exclusively on electricity generation.
In reviewing both of these documents, the project team drew on its extensive understanding of the energy sector and its expertise in assessing policy.
The team’s review of the IRP entailed a detailed technical assessment of the various inputs into the modelling of the electricity generation mix. Its analysis included a comparison and critique of technology cost assumptions; an assessment of the impact of these cost assumptions on the long-term electricity price path; a critique of other modelling assumptions, including demand forecasts and the discount rate; and an assessment of whether the IRP’s base case represented the optimal generation mix.
In our parallel review of the IEP, we sought to provide both a technical and a contextual assessment of the plan. We not only assessed the usefulness and accuracy of the IEP’s scenario modelling, but also interrogated the purpose and objective of energy planning.
Technologies to be used to generate electricity as South Africa retires its coal fleet were among key issues to emerge from the debate. Front and centre in this debate have been the interchangeability of nuclear and renewable technologies in the energy mix.
The debate has been stoked by the success of the independent renewable power-producers programme and by the government’s ambitions for its nuclear build programme. A decision on new nuclear capacity has been stayed, for now, following the Western Cape High Court’s decision in Earthlife Africa v Minister of Energy.
Subsequent to this project work, Genesis has written and presented two papers on the topic of long-term energy planning. The first was presented at the 3rd Annual Competition and Regulation Economics Conference, held in Dar es Salaam, Tanzania, in July 2017. More recently, we spoke on the importance and implications of long-term energy planning at the African Forum for Utility Regulators in Kigali, Rwanda, during November 2017. We continue to work on this important issue and its related topics.