1. Separation of DMRE into DMPR and DEE, and appointment of ministers
President Cyril Ramaphosa announced his new cabinet on Sunday 30 June 2024, including the separation of the Department of Mineral Resources & Energy (DMRE) into a Department of Mineral & Petroleum Resources (DMPR), and a separate Department of Energy & Electricity (DEE). As the new DMPR minister, the responsibilities of ANC chairman and former DMRE Minister Gwede Mantashe have been substantially reduced, while the responsibilities of former Minister of Electricity Sputla Ramokgopa have significantly expanded as DEE minister. Some have suggested that this has been a demotion for Mantashe due to his dismal performance in Minerals & Energy, whilst Ramokgopa is being promoted with an increased portfolio in Energy & Electricity as a result of his achievements in ending load shedding. Whilst the boundaries of the roles and responsibilities of the DMPR and DEE are not yet clear, and will be further detailed in a proclamation in the Government Gazette in due course, it appears that Ramokgopa will take over responsibility for the Integrated Resource Plan (IRP) for electricity, the Integrated Energy Plan (IEP), and the Electricity Regulation Amendment (ERA) bill still to be signed into law.
2. TotalEnergies may exit gas projects off the southern coast of South Africa
After investing some US $400-million in exploration for oil and gas off the southern coast of South Africa, and significant gas condensate finds at the Luiperd and Brulpadda (blocks 11B/12B) gas fields, speculation is mounting that TotalEnergies may withdraw from the project after failing to secure committed offtake agreements with South Africa. There are also suggestions that technical difficulties in developing and operating these gas fields in deep water with strong ocean currents are adding significant risks to economic viability, and that TotalEnergy is now focusing on easier and more promising opportunities in the Orange River basin off the south-west coast of Namibia. It is unclear at this stage if reports of a possible exit by TotalEnergies from the 11B/12B gas condensate finds are simply part of a hardball negotiation strategy with South Africa, or not. An exit by TotalEnergies would probably spell the end of plans to resuscitate the PetroSA gas-to-liquids plant in Mossel Bay, and stymie a change from expensive diesel to natural gas at Eskom’s nearby Gourikwa open-cycle gas turbine (OCGT) power plant.
3. NERSA approves municipal electricity price increases for 1 July 2024
After a series of intensive meetings on 24, 25, 26 and 27 June 2024, the regulator, NERSA, approved the 2024/25 electricity price increases and tariffs of virtually all 178 licensed municipal electricity distributors for implementation on 1 July 2024. Although the full-time NERSA board member responsible for electricity regulation, Mr Nhlanhla Gumede, voted against approval of virtually all the applications on the grounds that they did not meet the legal and regulatory requirements on various grounds, the other three board members at the meeting voted in favour of the applications and steamrollered them through, stating that the applications were in accordance with all legal requirements. However, the very next day, in an urgent application brought Afriforum, the Pretoria High Court declared that about 100 of the electricity distributors had not submitted the required cost-of-supply studies, and were therefor non-compliant with NERSA’s own requirements and an earlier court order in 2022. NERSA promptly indicated its intention to appeal the judgement of 28 June 2024, and so, for the time being at least, the 2024/25 municipal electricity price increases by NERSA stand approved for implementation.
4. Outrage grows at City Power’s R230 fixed charge for prepaid electricity customers
A storm of protest is brewing after City Power put up the prices in its Residential Prepaid High electricity tariff, which is applicable to the significant majority of its poor and indigent customers with prepayment meters. While the variable energy components of the inclined block tariff were increased by 12.27%, an additional R230 fixed charge per month was added over and above the prices per kWh consumed. Thus, even if no electricity is used in a month, the customer has to pay the R230 fixed charge. This results in cost increases of 61% to 33% from 1 July 2024 for low consumption (generally the poor and indigent) City Power prepaid electricity customers with electricity usage in the range from 200 to 400 kWh per month respectively, with costs that are 49% to 76% higher than similar Eskom direct prepaid electricity customers in Soweto. Civil society organisations such as OUTA point out that in situations of extreme poverty and unemployment, such prepaid electricity prices and price increases, with significant disparities between those of City Power and Eskom, and between low consumption and higher consumption indigent and poor customers, all within the Johannesburg metropolitan area, are considered to be dangerous, and may increase the risk of social unrest.
5. Eskom celebrates 100 days with no loadshedding
On 5 July 2024 Eskom celebrated the achievement of 100 consecutive days without load shedding, as well as a significant reduction in diesel-burn at its open-cycle gas turbines. Eskom data shows a significant and sustained increase in Eskom’s energy availability factor, a reduction in unplanned breakdowns, and a corresponding increase in planned maintenance outages in the 2024 calendar year, compared to the previous year. While Eskom can be justifiably pleased with its own operational performance this year, there are also a number of other factors that are contributing to the significant reduction in load shedding. These include a flat economy and a significantly declining demand for Eskom generated electricity, as customers move to alternative energy sources, including renewable energy and storage, gas for cooking and heating, and solar hot water geysers. Eskom electricity price increases significantly above the inflation rate for a decade are driving a reduction in the energy intensity of the economy, as energy intensive industries become less competitive, and the country moves to lighter manufacturing and services. The rising Eskom electricity prices also contributes to increased efforts at energy efficiency and demand management, and make the business case for alternative energy sources ever more compelling. Significant increases in the wheeling and trading of new renewable energy from IPPs is also having a positive impact.
6. 10% import duty applied to solar PV modules offset by 10% rebate scheme
The renewable energy industry in South Africa has reacted with some surprise to the imposition in early July 2024 of a 10% import duty on solar PV modules by the South African Department of Trade, Industry and Competition (DTIC). The import duty is no doubt intended to provide some protection to the two local assemblers of solar PV modules, ArtSolar and Seraphim, who were not able to compete on price with imported Chinese solar PV modules. However, a corresponding 10% rebate scheme, effective simultaneously, effectively negates the impact of the 10% import duty, at least for the time being. The local assemblers of solar PV modules only meet a fraction of the demand in South Africa, and virtually all the materials used in the locally assembly process are imported from China anyway. While some consider that a 10% import duty on solar PV modules would be be an important part of localisation and job creation around the green economy for a just energy transition, others argue that this is case of misguided industrial policy. When the rebate scheme is dropped, the 10% import duty is not expected to make the locally assembled solar PV modules competitive in local and export markets. In this case, it is argued, the 10% import duty would only serve to increase the price of solar PV installations in South Africa, and raise taxes for the fiscus, without creating new markets or new jobs for locally assembled PV modules.
