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The updated Draft Integrated Resource Plan – a return to rational energy planning

31 August 2018
– 8 Minute Read


The updated Draft Integrated Resource Plan (draft IRP 2018) was released by the South African Department of Energy (DoE) for commentary on 27 August 2018.

The key changes from the promulgated 2010 Integrated Resource Plan (IRP 2010) can be summed up in three short statements:

  • nuclear is out;
  • renewables (in the form of solar PV and wind power) maintain a strong, but subordinate, showing; and
  • gas is now King.

Our view on the draft IRP 2018

While short on detail in some respects, the draft IRP 2018 nevertheless reflects clear, balanced reasoning on the future energy requirements of South Africa and how these requirements may best be met.

The primary factors that have influenced the views of the DoE are:

  • the decline in demand for electricity in recent years, together with an assumption that this is a trend that will continue. (This is a consequence of high electricity prices, a structural change in the nature of the energy requirements of the South African economy, and the availability of alternative sources of power other than from Eskom.);
  • achieving the least-cost option;
  • the carbon emission reduction obligations of South Africa; and
  • the phased decommissioning of Eskom’s power generation facilities as they reach the end of their life spans over the next 32 years.

The draft IRP 2018 is open for public comment until 26 October 2018 and it is likely that revisions will be made following public consultation. Unless the fundamentals of the DoE’s strategic vision change significantly (and that strategic vision currently looks sound), these revisions are unlikely to alter the basic energy and technology allocations set out in the draft IRP 2018.

Click here for a table showing the proposed allocation of new generation facilities to 2030.

The public consultation process is likely to see the following representations being made:

  • the annual allocation for renewables, which in the draft IRP 2018 are only proposed to commence again in 2025, should be brought forward;
  • there should be no annual build limits on renewables or, alternatively, that the annual build limits should be increased to promote competitive pricing;
  • there should be more aggressive decommissioning of old coal-fired power plants; and
  • the allocation to coal should be reduced –the  probable form of this proposal will be that the last units of Eskom’s new coal-fired power station, Kusile, should not be built.

Parties with entrenched interests in the coal sector are likely to motivate for a more gradual decommissioning of coal-fired power plants and will also strongly resist any proposal that the last phases of Kusile not be built out.

Nevertheless, the basic theme of the draft IRP 2018 will, in our view, remain the introduction of a significant amount of new gas powered energy into the grid from 2026 to 2030 – up to  8100 MW in fact.

Analysis of proposed allocation


Short shrift is made of nuclear powered energy, which makes a very limited appearance toward the end of the 2050 period of the draft IRP 2018.

The reasons for this are not spelled out in any detail, but references to updates of the cost estimates for nuclear power, together with an emphasis on achieving the least-cost option, after taking into account policy considerations, make it clear that nuclear is considered by the DoE to be too expensive for now.

In addition, the draft IRP 2018 states, in line with existing policy, that nuclear power will be procured only by Eskom and not through an IPP.


The 8100 MW allocated to gas makes it the poster child of the DoE up to 2030. A number of speculative conclusions can be drawn about gas from the
draft IRP 2018:

  • The spread of allocation to gas powered energy over the period from 2026 to 2030 suggests that the DoE envisages procuring between two to four new gas-powered projects to come on-line during that period.
  • The draft IRP 2018 does not comment on which gas technology will be selected for these projects. However, given the time and effort spent by the DoE’s IPP office on LNG to Power in the first half of this decade, concluding with the 2016 Preliminary Information Memorandum (PIM), it seems an obvious conclusion that the LNG to Power Programme will be revived, and will run hard toward coming on-line in 2026.
  • The date on which the draft IRP 2018 sees gas powered generation coming on-line is instructive:
    • given the periods which are required to complete procurement of an LNG to Power facility, followed by financial close and construction, it seems a reasonable conclusion that this is a programme which the DoE is likely to kick off shortly after the promulgation of the final draft IRP 2018;
    • some weight is lent to this conclusion by the first allocation of new renewable projects being pushed out to 2025 – with the experience of four rounds of the REIPP Programme behind them, the DoE can defer the next round of renewable projects for a few years, giving it the time and capacity to concentrate on a Gas to Power Programme.
  • The date of 2026 is also potentially significant for the type of regasification:
    • while it suggests the DoE intends to initiate the programme sooner rather than later, if one assumes an 18 month procurement period, that will nevertheless leave sufficient time to complete an LNG to Power project with land-based regasification, as opposed to FSRU regasification;
    • an FSRU for regasification appeared to be the preference of the DoE in 2016, but with the more generous time period which the draft IRP 2018 proposes to bring gas power on-line, as well as the additional benefits to the South African economy of land based regasification, it looks quite possible, even probable, that the DoE’s preference will now change to land based regasification.
  • The draft IRP 2018 refers, in several places, to the concern that the DoE has about the impact that market-related gas prices may have for gas-powered IPP projects and the least-cost option which the DoE wants to achieve. This is a clear signal to potential IPPs that mitigation of the impact of market-related gas prices is important and is likely to be a significant factor in the selection of the preferred bidder under any Gas to Power Programme.


Renewable energy remains very much in favour with the DoE, but not for immediate implementation.

Renewable energy in the form of solar PV and wind power will (subject to the impact of technology developments) continue to provide an ever-increasing component of the energy mix up to 2050. But the next renewable projects, it is proposed, will only come into commercial operation by 2025. So the commencement of the procurement of Round 5 of the REIPPP Programme (Bid Window 5) is likely to be delayed to 2020 or 2021.

Some of the DoE’s reasons for this delay could be the following:

  • a policy commitment to concentrate, for the next few years, on a Gas to Power Programme;
  • giving the renewables market the time to establish local manufacturing of renewable power components, such as solar panels; and
  • providing time to assess the impact of renewable energy on the stability of the grid as well as the impact of any developments in energy technology over the next few years.

Whatever the reasons the DoE has for this delay, the projections made in the draft IRP 2018 of South Africa’s energy requirements up to 2030, together with the scheduled decommissioning of existing Eskom plants and new coal-fired plants projected to come on line in the next 10 years, show that there is no need, in the next seven years, to procure any new renewable energy.

A criticism that is likely to be made by the renewables sector, in the public consultation process, is that the price assumptions in the draft IRP 2018 for renewables are too conservative and if more up-to-date prices are used, the least-cost option would favour bringing more renewables on-line sooner. These comments have already been heard from the renewables sector and it remains to be seen whether they will be successful in shifting the DoE’s position on this point.

The draft IRP 2018 confirms that the Ministerial Determinations issued for renewables to date will be reviewed in line with the changes proposed by the draft IRP 2018.

Hydro power

Hydro power has been included in the proposed energy mix, in the form of
2 500 MW allocated to the hydro power project at Inga Falls in the Democratic Republic of the Congo (DRC). Its allocation to the year 2030 is indicative of two things:

  • the South African Government’s commitment to its treaty obligations to the DRC; and
  • recognition that, due to the complexity and trans-national nature of the project, it will take time before Inga is able to deliver power into the South African grid.

The importance of a successful Inga Falls project to regional development is noted in the draft IRP 2018.

Contact Us

We will be participating in the public consultation process as legal specialists in project finance and infrastructure, and also on behalf of clients.

We will also be hosting a series of high-level engagements for our clients with key industry players to discuss the proposals in the draft IRP 2018.

If you require any clarification on the draft IRP 2018, please contact your usual Bowmans’ partner or send an email to us at [email protected].