Up to R149 Billion a Year: What an LNG Price Shock Could Do to Electricity Costs
South Africa's gas-to-power plan rides on shaky assumptions about global LNG availability and pricing. As the nation faces a deepening energy crisis, experts warn that failing to address these stark realities could have profound implications for households and businesses alike.
South Africa's plan for gas-to-power assumes it can obtain liquefied natural gas (LNG) at a fixed world price, regardless of demand. However, global LNG prices often spike during peak demand in Asia and Europe, which coincides with South Africa's highest electricity needs. The Integrated Resource Plan 2025 (IRP 2025) commits 6,000 MW of gas-fired capacity to bridge a 9.5 GW coal plant shortfall.
This fleet requires around 3.4 million tonnes of LNG annually. Yet, no LNG projects have committed to South Africa's demand, leaving the country as a residual buyer in the global market. South Africa has discussed an LNG import terminal for decades but has yet to secure an anchor offtake, which is essential for bankability. The country's reliance on neighboring Mozambique, Qatar, and the American Gulf Coast for LNG does not inherently lower the price it pays.
Suppliers determine a price of indifference where selling to South Africa is no worse than selling elsewhere. As a newcomer buyer with no track record and non-standard demands, South Africa would likely pay a premium. The analysis suggests South Africa should not expect better terms than established Asian buyers. The paper examines the planning framework and identifies a compound vulnerability: high fuel costs combined with a weak currency can significantly increase electricity tariffs, adding 0.7 to 1.6 percentage points to headline inflation.
Written by urgent.news from IOL's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
