Let ’s prick this gas balloon before it gets any bigger

The idea that gas-fired power plants are a solution to our electricity challenges could become a policy fad in South Africa unless its shortcomings are highlighted. It wouldn’t be a bad idea if it was realistic. As a principle, no energy source should be left out in our efforts to build a resilient energy system.

But whatever we include in the energy mix should, as a minimum, be scientifically and commercially viable. Electricity minister Kgosientsho Ramokgopa is advocating for gas as a coal replacement. Last year, he visited a gas-to-power plant under construction and claimed that such projects “will help diversify the country ’s energy mix, reducing reliance on coal and promoting cleaner energy sources”.

He also praised a co-operative agreement between Sasol and Eskom aimed at exploring and researching liquefied natural gas (LNG) requirements for South Africa. The two companies want to explore options to source gas within South Africa, Sadc and other parts of the continent, in addition to evaluating long-term LNG contracting from other sources.

In remarks that undermined what might otherwise have been a good initiative, the two companies said in a statement: “This will support the gas requirements for Eskom’s planned coal power station repowering and conversion to gas in the long term.”

As a minister responsible for electricity, Ramokgopa should endorse all types of energy sources, not one at the expense of the other. He should avoid endorsing gas at the expense of coal. Any talk of “repowering ” and “converting ” of coal-fired power plants to gas would be misguided in the context of rising energy demand. Energy source substitution must not be a policy in a country with a fragile energy generating capacity and one that desperately needs more energy generation capacity to grow a stagnant economy.

A zero-sum policy on energy generation is bound to fail and inflict pain. Energy policy must be about adding more capacity and using all available sources, including coal. Only a country with excess capacity has a luxury to cut back. According to the Global Energy Monitor, global coal energy generation capacity currently in construction (at 250GW) exceeds that for gas and oil (just over 200GW). In Asia, coal is the driving force of economic growth, taking 44% of operational energy capacity, while oil and gas combined stands at 12%. And among energy projects under construction in Asia alone, coal’s share is 24% while gas and oil are 7% combined.

The development of gas capacity is fraught with difficulties. There are four related factors why gas is not a viable alternative for South Africa. The first is lack of gas endowment. Without it, any talk of repurposing coal-fired power stations to gas is illogical. However, it’s good to prospect for gas and formulate a new policy based on the findings. Even with a positive finding, a new policy should still be based on scientific and commercial feasibility.

The second is that premature policy announcements could have the unintended effect of undermining the good work that is being done to maintain Eskom’s coal fleet and keep the lights on. It could further undermine the integrated resource plan’s promise to create additional coal generation capacity of 1,500MW using new clean-coal technologies.

We learnt from Komati power station’s decommissioning how policy wishes divorced from reality can cause disaster. Now stripped and idling, the 1,000MW coal-fired power plant stands as a monument to failure of the energy transition.

The third factor is geopolitics. There are fewer countries producing gas in huge quantities, thus making importers vulnerable to geopolitical disruptions. European economies too dependent on Russian gas suffered massively after Moscow invaded Ukraine. The US (25.5%) and Russia (14.4%) had the largest share of gas in 2023, according to the 2024 Energy Institute’s “Statistical Review of Energy”. The third largest producer is Iran (6.2%), followed by China (5.8%), Canada (4.7%) and Qatar (4.5%).

Relying on gas imports would introduce new risks to South Africa’s energy security; domestically produced coal poses no such risks. It should be remembered that the reasons for the establishment of Sasol in 1950 was that the then government wanted to shield South Africa from geopolitical risks associated with fuel imports.

Producing diesel and petrol from local coal reduced imports — and geopolitical risks. This logic is even more powerful in relation to electricity today and in the future. Closely linked to the geopolitical dangers is the fourth factor: dollarisation of electricity. We are better with a unit of electricity quoted in local currency. We know the daily stress of having to deal with the volatility of diesel and petrol prices due to market and exchange rate fluctuations. Importing huge quantities of gas in dollars for energy generation could subject electricity prices to the kind of volatility associated with petrol, diesel and paraffin.

Adding to these costs is expensive infrastructure. A roll out of gas-to-electricity infrastructure is costly. As the Reuters energy expert Gavin Maguire recently pointed out in reference to Asia, gas uptake in that region is constrained by expensive distribution and storage networks.

They are more expensive than coal systems due to the need to keep gas under pressure in specially built tanks and pipelines. South African policymakers, troubled by fiscal constraints, should take note.

Bayoglu is MD of Menar, a mining investment company with interests in the coal and ferromanganese sectors

This opinion piece was published in the Sunday Times: https://www.timeslive.co.za/sunday-times/business/opinion/2025-03-16-lets-prick-the-gas-balloon-before-it-gets-any-bigger/