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Challenges for South African power sector

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World Coal,

South Africa’s power market faces significant challenges in the short-to-medium term, according to a recent report from BMI Research, including inefficient existing capacity, lack of investment, delays to project commissioning and the precarious financial situation of its state-owned utility, Eskom. As a result, BMI Research has revised down its forecast for economic growth as rolling blackouts undo the positive impact that lower oil prices will have.

“South Africa’s power sector is in turmoil as its supply shortages and rolling blackouts continue to plague to company,” BMI Research said. “This is negatively affecting economic growth as industrial customers are encouraged to reduce their energy usage […] South Africa has suffered ongoing ‘power emergencies’ since the beginning of 2014 and warnings of load shedding have been mooted frequently.”

Coal accounts for over 90% of South Africa’s generating capacity and will continue to play a significant role to 2024, generating 263.12 TWh by that date.

BMI Research also views the partial privatisation of Eskom as likely to continue, despite strong opposition from trade unions, as one of the few remaining options available to the government to recapitalise the troubled country.

In addition to coal, renewables capacity is expected to grow strongly with the sector attracting significant foreign investor interest on the back of its solid regulatory framework. The country is also considering adding almost 10 GW of nuclear capacity to its energy mix by 2030 – although cost may be prohibitive given the industry’s financial weakness.

Written by . Source: BMI Research

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