From a high level the energy transition pathway for South Africa is clear.
The country needs to shift from a highly centralised, top-down market structure to a more decentralised and bidirectional model, involving many more participants.
The failing vertically integrated monopoly should be unbundled to create an independent grid company and system operator that facilitates generator competition and the emergence of stable distribution entities that can, eventually, offer customers value- and price-based choice.
The aged fleet of polluting and climate-changing coal-fired power stations should be progressively replaced by a combination of wind, solar and flexible generators that, even after the inclusion of grid- stabilising ancillary services, represent the lowest-cost, least-regret and cleanest supply option for a country whose future export competitiveness will increasingly hinge on its ability to decarbonise.
Scratch below the surface of that portrait of the future and a more complex picture emerges – one that comprises very many legislative, regulatory and organisational brush strokes.
The changes at Eskom alone are difficult to fully grasp, even if the next step is clear: the creation of a fully independent and licensed National Transmission Company of South Africa (NTCSA), responsible for not only maintaining and growing the transmission network assets, but also for system and market operation.
While the other market reforms should follow from the creation of the NTCSA, it is not a given, especially absent supportive legislation and regulation. The current frameworks continue to lag developments in the market, which is already displaying many of the characteristics of the future system, but without the guardrails required to ensure technical and financial sustainability.
Scratch even further to the distribution level and even more and finer brush strokes are revealed – brush strokes that must be applied by hundreds of painters across various distribution entities; some orgnaised but vulnerable, others in the deadly grip of utility death spirals.
Ensuring distributor resilience in a context of ongoing disruption is definitely possible, but still highly complex.
These entities are having to cope with managing regular load- shedding, which has the potential to damage their physical assets if not well implemented, alongside major systemic changes in front of and behind meters. These include new generation technologies, the emergence of prosumers and increasing demands on distributors to not only build and maintain physical assets and ensure frequency control, but increasingly to introduce energy trading, arbitrage and aggregation services.
What’s more, change is expected to be a permanent feature of the future electricity supply industry, as can be seen from a market such as Australia, where nearly 200 rule changes have been made since the initial reforms of the late 1990s, purely to keep pace with market developments.
It’s going to take painstaking attention to detail to ensure that the distribution sector is revived and made resilient to the changes already under way, as well as those that will arise in future. If lawmakers and the regulator fail to intervene constructively and speedily, some distributors may not survive this transition.