Integrated Resource Planning and Independent Power Producer Investment in South Africa's Evolving Electricity Market

Abstract

This research examined the relevance of integrated resource plans (IRP) in South Africa's electricity market, particularly its role in attracting investment from Independent Power Producers (IPPs) after the removal of the 100 MW licensing exemption threshold announced on 17 January 2023. The White Paper on Energy Policy,1998 mandated IRP-based decisions for large investments, with new generation capacity licenses granted only if compliant with the IRP. Similarly, procurement by the IPP Office relied on IRP-derived technology and capacity needs. However, recent developments challenge the IRP's role. Technological advancements, electricity crises, grid limitations, and legislative changes are transforming the South African electricity market. Notably, the removal of the 100 MW licensing threshold through the Licensing Exemption & Registration Notice, 2023 weakens the link between IRPs and investment decisions. This research investigated stakeholder perspectives on the continued relevance of IRP in this evolving landscape, where IPP investment may no longer dependent on IRP-backed procurement with government guarantees. The goal was to determine whether the role of an IRP may require adaptation or replacement, and whether successful IPP investment in the new market structure can be facilitated in the absence of a guaranteed off-taker and government guarantees. A qualitative research approach was adopted using interviews for primary data collection and document analysis for secondary data collection. Interviews targeted stakeholders involved in or impacted by IRP and generation investment (government, regulators, utilities, etc.) – 14 respondents. Document analysis focused on public records and data related to IPP projects exceeding 100 MW, with public pronouncements, and completed registration with the National Energy Regulator of South Africa (NERSA). The study suggests that while the IRP program has merits, it needs modifications. It also highlights those factors often assumed to be crucial in influencing IPP investment decisions (like iii guaranteed off-takers and avoiding social obligations) may not be as decisive in the evolving South African market than conventionally understood in the broader literature.