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Wind turbine Station - IRP 2019: What does it mean for developers

IRP 2019: What does it mean for developers

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The new Integrated Resource Plan sets out a roadmap for SA’s energy supply. What does that plan look like, and what opportunities does it offer residential estate developers?

 

You may have noticed the lights going out at home and at work recently. Load shedding is now such a regular event – and such a noose around South Africa’s economic neck – that the government has taken steps to map out new electricity generation capacity, and to change the national energy mix until 2030.

At the end of October 2019, government published the Integrated Resource Plan (IRP), which aims to provide a medium-term solution to the power crisis. While these plans are meant to be updated every two years, the last new IRP was promulgated in 2011 – so this new edition has been a long time coming.

A lot has changed since 2010. Currently, under the old IRP, South Africa gets about 95% of its energy from coal-fired power stations. Under the new IRP, that energy mix will change to 59% coal; 18% wind; 8% hydro; 6% solar; 5% nuclear; and 2% gas and battery.

Aerial view from an airplane of a solar plant in the northern cape of south africa near the town of Upington - IRP 2019: What does it mean for developers
Aerial view from an airplane of a solar plant in the northern cape of south africa near the town of Upington

Once you’ve shaken the Chernobyl miniseries visual out of your head (at the IRP launch, Energy Minister Gwede Mantashe described nuclear energy as ‘the most reliable and cost-effective’ option), you’ll see that the new mix includes significantly more in the way of renewable energy.

Added to this, the new IRP allows energy users to generate their own power – and it does this by removing certain regulatory requirements for projects between 1MW and 10MW. What’s more, Mantashe confirmed that the government would immediately start buying power from private suppliers.

If you’re a savvy estate developer, you’d have seen the opportunity presented in that previous paragraph. The new IRP is actively encouraging South Africans to generate their own electricity, through (as the IRP’s accompanying report puts it) ‘the enactment of policies and regulations that eliminate red tape without compromising security of supply’.

Residential estates that generate their own power – either through photovoltaic (PV) solar panels stuck on residents’ skygazing rooftops, solar thermal, wind or even small-scale hydro if you have a suitable stream – could, in theory, serve as a microgrid. That microgrid could, now, produce excess power that could be sold to the local municipality as a revenue source.

Solar panels or Solar cells on rooftop or terrace of building in Cape Town - IRP 2019: What does it mean for developers
Solar panels or Solar cells on rooftop or terrace of building in Cape Town

Property developers already know the cost-saving potential of ‘building green’; now, with money to be made from it, there could be an even greater push towards sustainable building and independent power solutions.

Either way, the energy demands of the residential market are changing. The government report included an honest admission that the growth in demand for electricity which it had previously anticipated didn’t materialise. This, it noted, was the result of factors like ‘lower economic growth; improved energy efficiency by large consumers to cushion against rising tariffs; fuel switching to liquefied petroleum gas (LPG) for cooking and heating; fuel switching for hot water heating by households; and the closing down or relocation to other countries of some of the energy-intensive industry’.

In other words, South Africa’s energy demand exceeds its supply, but not as much as the government thought it would. Now, to secure the country’s energy future, that gap between supply and demand will be filled by renewable and alternative energy sources – and by enterprising developers who can find a way to reduce their own power use while producing enough of their own power to sell back to the government.

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