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Integrated Resource Plan in South Africa will prompt energy sector reform

  • Market Insight 18 December 2019 18 December 2019
  • Africa

  • Infrastructure

In October South African announced its long-awaited, revised Integrated Resource Plan (IRP), which provides a vision for the country's energy sector and electricity needs.

Integrated Resource Plan in South Africa will prompt energy sector reform

While the plan is designed with the next ten years in mind, it is over the next twelve months that the first real signs of reform will start to emerge, and independent power producers (IPPs) will make their first moves in the market.

In the plan, South Africa is targeting an increase in capacity of 30GW – with 25GW of this additional capacity coming from renewable energy sources, particularly wind power. The overall aim is to reduce the country's reliance on coal as an energy source, as the fossil fuel accounts for over 80% of South Africa's power generation currently.

Crucially, the IRP enforces annual build limits on projects associated with the various energy sources in an attempt to create balanced development across the industry and ensure no single stakeholder is left behind.  These limits, whilst approved, have not been finalised as yet because they are dependent on the approval of a 'just transition plan' to ensure the negative social impact of decommissioning coal-fired power stations is minimised.

The IRP also recommends a power purchase programme to mitigate the slowdown in Eskom's performance and prevent power shortages, and it will likely be in 2020 that we see IPPs start to enter into these agreements with the South African Government.

Ultimately, this plan isn't designed to launch with a fanfare and then gather dust over the next decade. Rather it is a 'living' document that will be amended continually to reflect the changing status of the market. If the energy landscape changes dramatically in 2020, expect moves to change the plan along with it, as part of this new era of what is hoped will be a more responsive energy policy in the country. 

Read the rest of our projects & construction predictions here.


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