South African is close to a tipping point in terms of its capacity to manage energy risks, the fifth and latest edition of the South African National Energy Association (SANEA) ‘Energy Risk Report’ warns.

Presenting the report at SANEA’s 2022 conference in Johannesburg, general-secretary Wendy Poulton said that, although some progress had been made over the past year to reduce policy uncertainty, it was both insufficient and too slow.

Progress was also being undermined by a lack of integrated planning and implementation, a skills dearth, a lack of maintenance and the quality of infrastructure.

The energy experts canvassed for the report cautioned that the need for integrated policy planning and skills development had become particularly urgent if South Africa was to ensure that there was sufficient capacity to manage the energy risks. 

“This is evidenced through increasing energy costs, a lack of energy security and loadshedding in the case of electricity,” Poulton said.

“This is compelling customers to source and supply their own energy needs, oftentimes at a lower cost, and take control of their business risk.

“This negatively impacts the business models and financial viability of State-owned enterprises and municipalities – causing the proverbial utility death spiral where costs increase to cover fixed costs, driving customers away and reducing revenue.”

Poulton said this “constellation of disruption” could increase the already considerable pressure on government to bail-out energy participants, increasing fiscal pressures while decreasing affordability.

“The situation can be turned around if there is agile and integrated policy, all players integrate their effort and a laser focus on implementation.”

Greater integration was required to take advantage of some of the opportunities being presented by the energy transition, including creation of a green-hydrogen sector.

“Currently, the sheer scale of the infrastructure that will be required is not considered in an integrated manner and therefore not adequately resourced,” she warned.