The shape of the Electric Vehicle revolution in SA and the possible impact thereof on the Eskom grid

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Views expressed in this report do not necessarily represent the views of the Inclusive Society Institute or its Board or Council members.

June 2023

Author: Ilze-Marie le Roux

Editor: Daryl Swanepoel

Content

Chapter 1: Introduction

Chapter 2: Literature Review

Introduction

Electricity Usage

Global EV Market vs South African Market

Government Support

SA’s Barriers to EV Uptake

Climate Mitigation

Foregoing the Valuable Fuel Levy

SA’s Automotive Sector

Conclusion

Chapter 3: Methodology

Introduction

Source of Data

Analysis

Limitations

Similar Forecasts

Calculations and Results

Eskom’s Conundrum

Conclusion

Chapter 4: Conclusion

References

List of tables

Table 1: Charging Times of Different EVs

Table 2: Region/Country EV target

Table 3: Manufacturer EV target

Table 4: EV Prices in South Africa

Table 5: Eskom data

List of figures

Figure 1: Global sales and sales market share of electric cars, 2010-2021

Figure 2: EV Sales: SA vs China vs World

Figure 3: EV Sales: SA vs Chile

Figure 4: Sales of Battery Electric Vehicles

Figure 8: Technology Cost Trends for Lithium-ion batteries

Figure 9: Change in average price of new US electric vehicles and lithium-ion batteries since 2012

Figure 10: Effect of EV Charging on the National Grid in a 24-hour period

Figure 11: Effect of all EV Charging during afternoon peak hour on the National Grid in a 24-hour period

Figure 12: Effect of all EV Charging during off-peak hours on the National Grid in a 24-hour period

Chapter 1: Introduction

Since the arrival of the first combustion engine in South Africa in 1897, it has dictated the development of the country’s landscape: city planning, infrastructure locations and employment creation. Today, nearly 13 million vehicles are registered to operate on South Africa’s roads (Natis, 2022). This roughly equates to one vehicle for every five citizens.

Moreover, the local automotive industry provides direct employment to 110 000 workers and supports an estimated 1,5 million indirect jobs, while contributing 6,4% to the country’s GDP (Del, 2019). Industry exports, mainly to Europe, totaled R175 billion in 2020.

Now, the latest vehicle revolution is taking shape: electric vehicles (AIEC, 2021). There has been a global trend for greener sources, which has led to the rapid expansion in global usage of electric vehicles. The global electric passenger car stock boomed between 2015 and 2021 (IEA, 2021).

In a move that could further bump electric vehicle (EV) sales, the European Union has tabled a proposal to ban the sale of new combustion engines by 2035 (Abnett, 2022). This holds significance for South Africa, as the European bloc receives most of the country’s vehicle exports. The National Association of Automobile Manufacturers of South Africa (Naamsa) has already expressed their concerns that other countries, like Egypt and Morocco, are gearing up to grab the country’s export market while government is dragging their feet in developing supportive EV policies (Barron, 2022).

Worldwide governments are incentivizing consumers to purchase electric vehicles as they sprint to adhere to climate commitments. This, undoubtedly, will drive further expansion of the market in future, with some expecting that electric vehicles will account for 70% of all vehicle sales by 2040.

South Africa lags far behind the global market trend. The slow growth has been attributed to, among others, high import duties – and therefore prices – lack of trust in electricity supply and inadequate infrastructure (GC, 2022). However, the market is set for an upswing. More and more vehicle manufacturers are announcing an end to combustion engine vehicles in their ranges, which will eventually leave consumers with little choice but to acquire an electric vehicle.

Given the prominence of vehicles and the accompanying sector for South Africa, it is imperative for authorities, industry bodies and policymakers to ensure the country is fully prepared for the impending change. This includes ensuring sufficient electricity generation to support an electric vehicle market in South Africa.

Chapter 2: Literature Review

Introduction

Countries worldwide are racing to combat climate change or at least slow down its effects. Strategies to limit carbon emissions are being implemented to limit the temperature increase to below two degrees Celsius, with 1,5 degrees Celsius as the ideal target (UN, 2015).

Road transport contributes around 23% of all carbon emissions. An uptick in electric mobility, which includes electric vehicles, is therefore among the strategies being implemented. According to the International Energy Agency’s report, released in 2015, at least 20% of global road transportation must be electrically driven by 2030 to reach the world’s climate targets. This translates to 35% of all new vehicle sales in 2030 to be EV (UN, 2015).

In 2020, a report by Climate Action Tracker, however, projects that to reach the 1,5 degrees target, fully electric vehicles will need to account for 75-95% of global annual passenger vehicle sales by 2030 and 100% by 2035 (CAT, 2020). Both reports set ambitious targets for the rapidly expanding EV market. Some experts have warned that EV adoption is currently not happening at a fast enough rate to meet these targets (Skibell, 2021; Econ, 2022). At the current adoption rate, the International Energy Agency (IEA) expects EV to represent only 30% of all new vehicles sold, which is well below the required target (IEA, 2022a).

Electricity Usage

Determining whether South Africa’s state-owned energy supplier, Eskom, is up to the task to support the impending market, we have to note the amount of charging EVs require. An electric source is needed to charge an EV battery. Standard home plugs are one option. This, however, provides Alternating Current (AC), while a battery requires Direct Current (DC) to charge (EVch, 2022). EVs are fitted with an internal switch that converts the current from AC to DC.

A charging station can also be installed where the converter is located inside the charger, so the current is switched to DC before it enters the EV. These are also known as ‘superchargers’, as it cuts down significantly on charging time.

There are currently three levels of chargers (EVch, 2022):

Level 1

The charger can be plugged into a standard domestic socket and supply up to 3,7 kW of AC power. Although simple to use, it’s the slowest method of charging an EV.

Level 2

A charger specially installed into an electric circuit by an electrician which can supply between an estimated 7 kW and 22 kW of AC power. This is the fastest source of at-home AC charging.

Level 3

These superchargers can supply as much as 150 kW of DC power. They are mainly installed at charging facilities at public spaces, like malls.

The time it takes to charge an EV from empty to full is dependent on the following aspects (Kia, 2022):

• Size of the battery: Charging takes longer for larger batteries

• Charging rate of the EV: There’s a cap on the amount of kW-rate an EV can accept.

• Charging Rate of Charger: The speed at which an EV can charge is also dependent on what type of charger is being used (Level 1, 2 or 3).

• Weather: Lower temperatures lead to longer charging times.

PodPoint, an EV charging service, has compiled the charging times of different EVs from an empty to a full battery using one of the three levels of chargers.

Charging Times of Different EVs

*Not available in SA **Charging is measured up to 80%, as the charging time slows after reaching this point to protect the battery. Source: PodPoint, 2022

Global EV Market vs South African Market

Since the launch of the first passenger electric vehicle in 2008, more than 10 million have since been sold (WRI, 2021). There has been an accelerated uptake of EVs from 2010, with a 43% growth in sales year-on-year between 2019 and 2020 alone (IEA, 2021). EVs now constitute 4,6% of all new global vehicle sales.

Global sales and sales market share of electric cars, 2010-2021

Source: IEA, 2022

The EV market’s exponential growth is expected to continue as countries attempt to reach their individual targets. Europe, China and the USA have among the most aggressive EV targets, as they already enjoy the largest market share (IEA, 2021).

Region/Country EV target

Sources: Abnett, 2022; GSEP, 2021; UK, 2022; Wayland, 2021a

In their attempt to align themselves with the abovementioned policy goals, vehicle manufacturers themselves have set some bold EV targets.

Manufacturer EV target

Sources: Wayland, 2021b; Fingas, 2021; Vol, 2021; BBC, 2021; Eisenstein, 2021

EV sales are expected to grow by between 24% and 29% over the next 10 years (Del, 2020; FBI, 2020). According to the 2020 Deloitte report, EV sales will reach 31,3 million by 2030 and constitute 32% of the total market share for new car sales.

The EV market in South Africa is lagging far behind global trends. In 2021, two hundred and seventy-one EVs were sold in the country, of which 220 were PEV and 51 were HEV (IEA, 2022b). This is compared to 6,6 million EVs sold worldwide in the same year, with 3,3 million being sold in China alone (the biggest EV market worldwide) (IEA, 2022b).

Source: IEA, 2022b

Data represents combined sales of PEV and HEV.

Even for a developing country and economy, South Africa is behind the EV curve. The developing Chile in South America has seen a steady increase in EV sales since 2013 (apart from a slowdown in 2020 due to the Covid-19 pandemic). In South Africa, EV sales went up by 697% between 2013 and 2021 (34 in 2013 to 217 in 2021). Compared to an 11 300% increase in Chile over the same period (5 in 2013 to 570 in 2021) (IEA, 2022b). Although sales in both countries pale in comparison to the markets in more developed countries, it is still indicative of the rapid rate at which EVs are expanding.

Source: IEA, 2022b

Data represents combined sales of PEV and HEV.

Government Support

The main reason for the rapid uptake in developed countries boils down to government support measures. Various governments have implemented one or a mix of interventions to boost support for EV growth as part of their strategies to meet their respective climate goals.

Examples of these measures include:

• Zero Emission Vehicle (ZEV) Mandates

Legislative requirements placed on vehicle manufacturers to reach a mandatory number of ZEV credits. These targets are met upon the delivery of a ZEV for sale. The number of ZEV credits varies between manufacturers based mainly on their respective total vehicles produced (ICC, 2019).

The State of California, in the USA, has successfully implemented ZEV mandates since 1990. Although the program has been adapted many times over the years, with additional changes earmarked for the future, it seems to have at the very least contributed to California’s uptick in EV sales. In 2011, EV sales constituted 0,15% of all vehicle sales across the USA, reaching 2,1% in 2018. Over the same period, EV sales grew from 0,6% to 7,9% of all vehicle sales in the state. EVs therefore represent a much larger share of vehicles sold in California compared to the rest of the country (ICC, 2019).

Sales of Battery Electric Vehicles

Source: ICC, 2019

Other US states have adopted similar programs, as well as China and Canada.

• Purchase Incentives

To promote the sale of EVs, some authorities have provided purchase incentives to EV customers, ranging from subsidies and tax savings to bureaucratic advantages.

In Norway, EVs are exempt of import duties and value added tax. This in turn makes EVs more affordable, with prices on par with their combustion engine counterparts (Volk, 2022a). Norway is a leading EV market, with nearly every second vehicle registered in 2019 being electric.

French authorities have placed a hefty surcharge on vehicles with the highest carbon dioxide emissions, with the aim to incentivize consumers to rather opt for an EV (Volk, 2022a). An ecobonus of up to €6 000 can also be claimed for purchasing an EV.

In Germany, EVs are exempt from vehicle tax for up to 10 years while in the Netherlands, EV owners don’t have to pay registration taxes on pure electric cars (Volk, 2022a). In the US, a Federal Tax credit of US$7 500 is granted upon the purchase of an EV.

Various studies have proven the direct positive result between fiscal incentives and the adoption of EVs (Alali et al, 2022). One European analysis states incentives may lead to a 5-7% relative sales share increase (Gnann et al, 2019). An American-focused study suggests an individual monetary incentive can lead to an average 2,6% increase in EV registrations per US$1 000 offered (Gopal, 2018). In 2020, governments spent US$14 billion on direct purchase incentives and tax deductions for electric cars – 25% more than the previous year (IEA, 2021).

• Other EV supportive initiatives

Some cities have created zero-emission zones (ZEZ) allowing only EV (given they do not produce tailpipe pollutant emissions) to drive in the area and/or granting access to other vehicles at a prescribed fee. London, Rotterdam, Shenzhen and Oslo are among the metros with ZEZ (ICC, 2021).

Other cities, like Dubai and London, opted for free parking spaces dedicated to EV drivers only (GoD, 2022).

To appease consumers with charging-related concerns, policy-focus has been placed on developing charging infrastructure, which in some cases may even be provided free of charge. The EU has proposed legislation which, if adopted, would obligate new buildings and those undergoing renovations, to either install charging stations or provide the required infrastructure in parking spaces (Virta, 2022).

Germany is on an ambitious drive to install one million charging stations across the country by 2030 (Volk, 2022b). Some countries have developed other measures, like charging station subsidies for companies and tax reductions on the electricity used to power commercial electric vehicle charging infrastructure (EVB, 2020).

In the leading EV regions, mainly China, EU and the USA, a mixture of these measures in some format has contributed to the advancing market share of electric cars.

SA’s Barriers to EV Uptake

There may be various reasons for the slow pace of EV adoption in South Africa. In March 2022, then Transport Minister Fikile Mbalula pointed out that range anxiety (the fear that an EV won’t have sufficient electricity to complete the trip), a constrained power grid and EV’s high prices are the main reasons for the low EV numbers (BT, 2022a).

Some of his assertions are corroborated by AutoTrader’s 2021 Electric Vehicle Buyers Survey report (AT, 2021). Respondents perceived the following to be the biggest drawbacks when owning an EV:

1. Lack of National Charging Infrastructure (59%)

2. Charging Time (57,8%)

3. Initial Cost of Purchase (54,6%)

4. Impact of Loadshedding (37,9%)

5. Inconvenient Charging Options (34%)

6. Range Anxiety (25,7%)

7. Battery Life Deterioration (21,3%)

8. Lack of Knowledge with Roadside Assistance Crews (9,6%)

A Gauteng-focused study found the high price of an EV and battery to be the biggest constraints to EV market expansion in South Africa (Moeletsi, 2021a). Majority of the respondents in this study were not too phased by the range limits (although the author points out that this may be due to most travelling less than 100 km per day) or by a perceived lack of charging facilities.

A study conducted in 2019 similarly found the high cost of an EV along with a concern about the inaccessibility of charging infrastructure among the top reasons why more electric cars aren’t being sold in South Africa (Manu, 2019). It further found a lack of public education on EVs as well as low levels of government support policies to also have had a significant role in the low uptake.

The three common reasons cited in the literature for the low number of EVs on South African roads are the following:

1. High Price tag of an EV relative to a combustion engine vehicle

2. Real or Perceived lack of charging infrastructure

3. Concerns about insufficient electricity supply

1. The High Price tag of an EV

New Electric vehicles in South Africa continue to be on the high end of the price scale.

EV Prices in South Africa

*Not available in SA **Does not include import duties or any other South African taxes Sources: Tesla, 2022; Mini, 2022; Cars, 2022; BMW, 2022; Jag, 2022

Taking into consideration that the monthly earnings of a South African employee working in the formal non-agricultural sector amounts to R23 502 per month, it’s clear that at these prices the cars remain out of reach for most (Stats, 2022). Even the few available on the secondhand market retail at a relatively high price. A secondhand 2021 Mini Cooper SE sells for R688 000 and a used 2022 BMW iX3 Sport sells for R1 359 000 (AT, 2022).

On average, the market price of an EV is more expensive than a comparable internal combustion engine vehicle (Moeletsi, 2021a). One report found a typical price differential between EVs and their respective ICE equivalent models to be 36% in high-income markets (Tips, 2022). The price difference is largely due to the high manufacturing cost of an EV battery pack. The technology costs for a lithium-ion battery (the battery technology used in most EVs), however, have declined significantly between 2015 and 2021 (IEA, 2022c).

Technology Cost Trends for Lithium-ion batteries

Source: IEA, 2022c

Despite this decline, a report by the World Economic Forum found EV prices did not decline at the same rate (WEF, 2022). According to their data, the average cost of an EV battery declined by 80% between 2012 and 2021. Meanwhile, the average market price of an EV increased by more than 80%. The reason cited for this is the fact that EV manufacturers are developing luxury models before expanding into cheaper versions intended for the mass market.

Change in average price of new US electric vehicles and lithium-ion batteries since 2012

Source: WEF, 2022

Global market forecasts before 2022 envisioned that the price of EVs would decline to such an extent that electric cars will be able to compete with the prices of their ICE counterparts in the near future (Del, 2020). While some expect the EV manufacturing costs to be cheaper than ICE vehicles before 2030, others found that EVs will only reach parity after 2030 (Partridge, 2021; Miller, 2020). In 2022, however, challenges linked to battery production may put a damper on these future EV predictions.

Most EVs use Lithium-ion batteries, with Lithium as the main mineral component. The price of Lithium has reached record levels over the past year, with a 330% increase in August 2022 year-on-year (TE, 2022). The spike is largely due to a higher EV demand, mainly from China (Kurmelovs, 2022). Other factors include supply chain constraints due to the Covid-19 pandemic. The IEA estimates that the demand for Lithium will increase 900% by 2030 and 4 000% by 2040, as the various countries try and reach their climate policy goals (Blackmon, 2022).

Locally, South Africa further pumps up the EV price by adding on a 25% Customs Excise Import duty as well as an Ad Valorem tax (calculated based on the EV price), which can range up to a maximum of 30% (GC, 2022). That’s compared to the 18% import duties paid on ICE vehicles coming into the country. A report commissioned by the Western Cape Government found the average Ad Valorem tax on the current EV products to work out at around 17%. Altogether, this then translates to an added average 42% in total taxes paid on an EV (GC, 2022).

In its draft Green Paper 2021 on the advancement of new energy vehicles in South Africa, the Department of Trade, Industry and Competition (dtic) has suggested reducing or scrapping the Ad Valorem tax on EV to stimulate demand for EVs in the country (dtic, 2021). The Department proposed a standard rate per kWh using US$137/kWh as one example. The document further suggests lower- or zero-rated import duties on some specified EV components. Should these measures be implemented, it will only be valid for a specified number of years. The Green Paper is yet to be finalized.

A study conducted by the Trade and Industrial Policy Strategies recommends a ‘temporary cash grant or innovative financial arrangement’ to stimulate demand. The data found R80 000 for PEVs and R20 000 for HEVs to be the most optimal amounts through which to reach this goal (Tips, 2022). The research further suggests complementary or extremely low interest loans to support EV uptake.

Another proposed support measure is to introduce policies to assist in the development of locally produced EVs destined for both the local and export markets. A form of localization allowance credits, for example, can be used to support local manufacturers, which in turn can drive down EV prices on the South African market. The South African government has little fiscal room, as finances are constrained. Careful consideration will have to be given to where the funds will come from to support such an EV strategy.

2. Real or Perceived lack of charging infrastructure

South African cities seem to be well serviced by charging infrastructure. According to the search tool, PlugShare, which assists users in locating public EV charging stations, there are currently 273 stations mapped across South Africa (PS, 2022). In its research, the IEA ranked the country as fourth globally when it comes to the ratio of public EV chargers to electric vehicles, at 6 EVs per public charging station (IEA, 2021).

Most of the charging stations are located in major cities, with strategically placed stations along the N1 and N3 highways to connect Johannesburg with Cape Town and Durban. Other charging stations are provided by shopping malls, specific car dealerships or local municipalities. Charging stations outside city boundaries, however, are limited and motorists will struggle to keep their vehicles charged through publicly available infrastructure.

The dtic’s draft Green Paper, recognizes a lack of charging infrastructure as a hurdle to the adoption of EVs in the country (dtic, 2021). It has called on the private sector to play a key role in such a development. If international trends are considered, which shows that the vast majority (80%) of EV owners charge their vehicles at home, then perhaps public charging spaces should not be the main focus of such an infrastructure rollout (Badik et al, 2017).

3. Concerns about insufficient electricity supply

South Africans cannot be blamed for doubting Eskom’s ability to constantly provide sufficient electricity to meet EV charging requirements. Mismanagement and corruption have led to bouts of rolling blackouts sometimes leaving consumers without power for hours on end. The state-owned utility has struggled for more than a decade to keep its ageing coal fleet from total collapse, while the new built projects are delayed due to corrupt activities and shoddy construction. Meanwhile, South Africa’s renowned renewable energy program was also delayed, adding further pressure to the already constrained power grid.

The Department of Mineral Resources and Energy (DMRE) released the latest Integrated Resources Plan in 2019 (DMRE, 2019). The document sets out the course for the country’s energy plans up until 2030, with cautionary scenarios provided for 2040 and 2050. According to these projections, Eskom should have installed a capacity of 44 GW in 2022 and projected capacity of 78 GW by 2030 and 120 GW by 2040. Although this may be South Africa’s best estimated roadmap, the document contains flaws and therefore these projections may vary from reality on the ground.

The Medupi power plant is one such example. It is the fourth-largest coal-fired plant in the world and has an installed capacity of 4,8 GW (Eskom, 2022). It was scheduled to be fully operational by 2019. Various delays as well as an explosion at Unit 4 has left the plant unable to provide the total amount of electricity as anticipated in the IRP 2019 (Labuschagne, 2022). To address the crisis at hand, more renewable energy is being procured from private entities than initially planned (Omarjee, 2022). It is therefore expected that South Africa’s energy landscape may look vastly different than what is forecast in the IRP 2019.

Climate Mitigation

The drive for an increased EV-use compared to ICE vehicles stems from countries racing to meet their respective climate commitments to slow climate change. While the carbon emissions during manufacturing were addressed earlier in this paper, another related problem is the source of energy used to charge an EV.

More than 90% of South Africa’s electricity is produced from coal (DoE, 2015). Should EV owners then largely rely on Eskom-supplied electricity to charge their vehicles, it would negate the reasons related to carbon emissions of owning an EV in the first place. A 2021 study found that charging from South Africa’s current electricity grid is more carbon intensive than driving a new ICE vehicle (Moeletsi et al, 2021b). Moeletsi et al further found that the carbon emissions mitigation impact of EV will increase from 2040 as the power grid becomes less reliant on fossil fuels and more decarbonized.

EVs are projected to reduce baseline emissions of cars by 19% in 2050. Using embedded energy from solar plants to charge an EV could be an alternative to Eskom’s coal power. Charging stations powered by solar is already in use, like the one provided by the City of Cape Town (BT, 2020). Car dealer, Audi, is also now selling a solar home charging kit, along with full installation, to its e-tron electric vehicles customers (Du Toit, 2022).

The installation of solar panels at home and small to medium businesses is also gaining in popularity as a way to mitigate against Eskom’s rolling power cuts. The regulations have been amended to ease this process further. Consumers now only require a license from the National Energy Regulator if they intend on generating more than 100 MW from their installed solar panels (Stoddard, 2022). This then also creates an alternative for home charging an EV, which, as opposed to using power from the grid, will assist in climate change mitigation.

Foregoing the Valuable Fuel Levy

South Africans pay both a general fuel levy (GFL) as well as a Road Accident Fund (RAF) levy per liter of fuel purchased. These serve as valuable income streams for the National Government. In December 2021, the GFL stood at R3,93 and the RAF levy at R2,18 per liter of petrol respectively (Stats, 2021).

The GFL generated R80 billion in revenue in 2019/2020, accounting for about 6% of total tax revenue. The RAF levy generated R41,2 billion over the same period. This represents 99,8% of their total income and 93% of these funds were used to pay claims submitted to the Road Accident Fund. Thus, a decline in ICE vehicle sales due to an increased uptake of EVs will lead to a decline in tax income and RAF revenues.

Other funding models will need to be developed to replenish the lost income. Some of the lost income may be offset by a balance of trade saving from reduced oil imports as the total ICE vehicles decline. A Green Cape report found that the introduction of one million EVs that drive 20 000km per year in South Africa, would collectively reduce oil importations by 58PJ/a (Petajoules per annum) (GC, 2022). This represents a potential R8,1 billion balance of trade saving for the economy. The savings from reduced oil imports is thus far less than the income generated by the fuel levy.

It’s not a uniquely South African problem. Other countries face similar losses through their various tax structures. As motorists in the UK shift towards EV purchases, the government will lose out on the fuel duty and vehicle excise duty, which in 2019/2020 amounted to £37 billion and is equivalent to 1,7% of the UK’s GDP (UK, 2021). In the US, $36 billion was collected in federal fuel taxation in 2018 (Morris, 2020). This income will continue to decline as the EV market expands at the cost of ICE vehicles in that country. In his article, Morris argues that a global shift in car taxation is inevitable as the landscape continues to change at a rapid pace. In 2021, the South Australian government adopted legislation to tax EV owners 2,5 Australian cents per kilometer travelled, from July 2027. The law was passed while the Liberal Party was in power. The Labour Party has since taken over and the new government is attempting to repeal the measure (Sky, 2022).

A report commissioned by the California legislature and released by the Institute of Transportation Studies at the University of California made a similar finding. It found a distance-based road user charge to be the most efficient way to recoup the funds lost on vehicle-related taxes that are not applicable to EV owners (Jenn, 2018). The South African government may consider a similar structure to supplement its income in the short to medium term as the country transitions and to ultimately replace the fuel levy in the long run.

SA’s Automotive Sector

South Africa’s vehicle and automotive component manufacturing is the largest manufacturing sector in the country (dtic, 2020). It accounted for 18,7% of manufacturing output in 2020. The sector contributes around 5% to the South African economy.

Of all the vehicles locally manufactured, just over 60% is destined for the export market, with the European Union receiving the largest shipment. The EU alone receives three out of every four vehicles exported from South Africa. Any changes to the automotive legislation or policy by EU authorities therefore has a significant impact on South African operations. This was already evident in 2020. Due to stricter emissions legislation in the EU at the start of 2020, South Africa recorded record exports of automotive components due to the spike in demand for catalytic converters. (Catalytic converters fit into the exhaust system of a vehicle to reduce emission of gaseous pollutants (Milton, 1998).)

Naamsa expects 40% of all European vehicle sales to be EVs by 2030 (BT, 2022b). If South Africa cannot meet their export vehicle requirements, the country could forego R201 billion in export earnings per year. Based on its draft Green Paper, government is aware of the implications of the changing automotive market, both locally and internationally.

The document underscores the importance of a ‘just transition’ from manufacturing ICE vehicles to EVs. Among the proposals are the following:

• Transition the current ICE vehicle manufacturing infrastructure to incorporate EV production.

• Support local EV adoption, perhaps providing incentives for a specified period, expanding charging infrastructure and scrapping or reducing Ad Valorem on imported EVs.

• Increase international EV investment in South Africa to fund a transition to EVs.

• Stimulate local EV manufacturing from the required raw materials to possible battery production through EV supportive policies.

• Ensure the required skills development is being undertaken to support the transition.

It is unclear what the status of the draft Green Paper is after it was released for public comment in 2021.

The automotive industry is busy shaping up for the incoming EV future. Toyota invested R2,6 billion to develop the Corolla Cross – South Africa’s first locally produced HEV (Malinga, 2021). The vehicle has been available since 2021. According to an industry body’s sales report, the Corolla Cross has been doing well among South Africans, even outselling the local favorites, Polo Vivo and VW Polo (TA, 2022).

The 2022 Green Cape report on EVs has found there is a lack of skills to drive EV development in South Africa (GC, 2022). It states the following insufficiencies relating to the EV value chain:

• Electrical engineering and mechatronics skills

• Regulatory compliance knowledge

• Advanced materials engineering

• Advanced ICT skills

• Research and development capabilities

• Robotics

• Vehicle maintenance and repair skills

A few training programs have been launched to add the required EV skills. The Porsche Aftersales Vocational Education Training Centre, Retail Motor Industry Organisation, Automotive Remanufacturers’ Association and the Vehicle Testing Association are among those who have launched EV training programs (Malinga, 2022). Audi became the first Original Equipment Manufacturer in South Africa to train first responders on how to handle EV incidents (Audi, 2022). Utilizing a R30 million pledge by the UK government, the South African government launched the Yakh’iFuture. The program is aimed at upskilling engineering students to assist in the transition to new electric vehicle manufacturing in the country (BT, 2022b).

Jobs at refineries and service stations will also be impacted by the shift to EVs (Tips, 2019). If service stations don’t pivot to support electric cars, thousands of jobs in the industry may be lost. These include petrol attendants, service kiosk workers and marketers. It again highlights the widespread impact that EVs will have throughout the value chain.

Conclusion

The changes brought about by EV expansion have many avenues. Manufacturing will have to adapt, future energy plans will be influenced by EV developments, the planning of cities and buildings will have to incorporate the technology at a rapid rate and eventually, EV charging may even influence how people structure their day. It is a technology tsunami that will wipe the automotive landscape as we know it, but with it comes a myriad of opportunities to boost jobs and the South African economy.

Understanding the rapid EV development, how it operates, and the extensive influence thereof is also important for creating the context for the situation in which Eskom finds itself. Policies, together with technology and skills development, will impact both the local and international demand for EVs, which in turn holds significance for the country’s energy supply and demand. As South Africa’s main supplier of electricity, this will invariably affect Eskom’s future operations.

Chapter 3: Methodology

Introduction

To establish whether South Africa’s current energy supplier will be able to generate sufficient electricity to support an EV market reliably, secondary quantitative data was used. The information was obtained from Eskom and includes both demand and supply scenarios for the three-year points: 2022, 2030 and 2040. Data on the EV’s future market penetration at three different levels (low, medium and high) was also supplied by Eskom (Eskom, 2019). The information was reworked by an electric vehicle and solar energy advisor to establish whether or not there will be enough electricity available to charge all the electric cars on South Africa’s roads in future.

Source of Data

The data was sourced from a 2019 Eskom presentation as well as the latest forecasts obtained from the utility in 2023 (the data provided is not publicly available yet) on the future of electric transportation in South Africa. The state-owned entity continues to generate the majority of the country’s electricity requirements. Eskom is therefore the best current source of information about future energy demand projections. It also has an in-house e-mobility research program and has been focusing on the development of the local EV market since the early 1990s. The electric vehicle and solar energy advisor used for this study was the Transport Energy Consultant at Eskom between 1992 and 2002, after which he continued exploring the e-mobility sector in South Africa through research and consulting work.

Analysis

The advisor provided data on the average amount of electricity required to sufficiently sustain an EV for one year of road travel. The data was then merged with Eskom’s projections on different EV market penetration levels at three-year points, to calculate the total energy demand stemming from EVs alone per year. These figures were then compared to Eskom’s future energy projections over the same period to establish whether sufficient supply will be available.

Limitations

Although Eskom may be best placed to provide details on South Africa’s energy needs and demands, there are limitations to their information. Seeing as the projections are for a long period into the future, slight changes in either the energy supply or demand side may have significant impacts on the results. These changes may include a different reality to the previous assumptions made by Eskom when calculating energy supply.

This flaw is evident in the country’s Integrated Resources Plan 2019, where the forecasted electricity supply by the state-owned entity is yet to be realized as projected. This is largely due to faulty power generators and a delay in its renewable energy program. The economic growth assumptions the forecast is based on also never realized due to the Covid-19 pandemic and other factors. It also doesn’t consider how many EV owners may end up charging their EV using private renewable energy sources, whether at home, office, or a shopping mall (for example).

The uptake of EVs may also evolve differently due to external factors. Some examples may include a rapidly increasing fuel price (as seen in 2022), which could prompt more motorists to buy EVs, expanding the market at a quicker rate than would have been otherwise anticipated. The implementation of government support policies to promote EV adoption could also spur market growth quicker than originally envisaged. On the opposite end, a continued economic slump may limit EV market growth. Despite these concerns, Eskom has been in existence for nearly 100 years. It is therefore the best possible source of information when it comes to South Africa’s electricity analysis.

Similar Forecasts

A study conducted by the American Government, examined similar forecasts to Eskom. Based on EV sales, future energy demand was modelled based on low, medium or high EV market penetration between 2020 and 2050 (USD, 2019). This was done to establish whether there will be sufficient electricity generation to support the increased demand brought by EV expansion. The document cites technological developments as one of the future uncertainties that could impact the end result of the study. Improved energy efficiency is one example. It further highlights the importance of off-peak charging as to not overpower the grid. The study therefore went further than Eskom’s data by providing different charging strategies.

Another study about the impact of various projected levels of EV market penetrations on the electrical grid was conducted by the European Commission (EC, 2018). It considered the uptick in electricity demand by EV charging and whether sufficient electricity is expected to be generated to support the market. Like the US study, it too went further, taking the impact of the anticipated increase in demand per various charging strategies into account. The study recognizes that EV won’t just change the overall electricity demand, it may also change the shape of the hourly load curve of the power system.

Calculations and Results

The data provided by Eskom and the energy analyst have been assembled and calculated in the following Excel spreadsheet:

Calculations

Energy Potential Hours =

Electricity (hrs/yr) x Projected Installed Capacity (GW)

Total Energy Demand Hours =

Electricity (hrs/yr) x Energy Demand (GW)

Electricity need (GWh) =

{[ average energy (kWh) required to travel 100km x average distance (km) travelled in one calendar year ] /100 } x (total registered EV/1000000)

Percentage of Potential available electricity =

Electricity need (GWh) / Energy Potential Hours

Percentage of Demand =

Electricity need (GWh) / Energy Demand Hours

Findings

• Scenario 1

A Low EV market penetration in 2022 sees an energy demand of 0,44GW per year. This is equivalent to 0,0001% of the total energy potential and 0,0001% of total energy demand in 2022.

The Projected Energy Demand for 2022 is 30GW, while the Projected Capacity is 44GW. Therefore, sufficient energy on average will be available to support the added EV demand in a low market penetration scenario.

• Scenario 2

A Medium EV market penetration in 2022 sees an energy demand of 1,324GW per year. This is equivalent to 0,0003% of the total energy potential and 0,0005% of total energy demand in 2022.

The Projected Energy Demand for 2022 is 30GW, while the Projected Capacity is 44GW. Therefore, sufficient energy on average will be available to support the added EV demand in a medium market penetration scenario.

• Scenario 3

A High EV market penetration in 2022 sees an energy demand of 4,9GW per year. This is equivalent to 0,3% of the total energy potential and 0,002% of total energy demand in 2022.

The Projected Energy Demand for 2022 is 30GW, while the Projected Capacity is 44GW. Therefore, sufficient energy on average will be available to support the added EV demand in a high market penetration scenario.

• Scenario 4

A Low EV market penetration in 2030 sees an energy demand of 325,94GW per year. This is equivalent to 0,048% of the total energy potential and 0,078% of total energy demand in 2030.

The Projected Energy Demand for 2030 is 48GW, while the Projected Capacity is 78GW. Therefore, sufficient energy on average will be available to support the added EV demand in a low market penetration scenario.

• Scenario 5

A Medium EV market penetration in 2030 sees an energy demand of 371,3GW per year. This is equivalent to 0,054% of the total energy potential and 0,088% of total energy demand in 2030.

The Projected Energy Demand for 2030 is 48GW, while the Projected Capacity is 78GW. Therefore, sufficient energy on average will be available to support the added EV demand in a medium market penetration scenario.

• Scenario 6

A High EV market penetration in 2030 sees an energy demand of 416,656GW per year. This is equivalent to 0,061% of the total energy potential and 0,099% of total energy demand in 2030.

The Projected Energy Demand for 2030 is 48GW while the Projected Capacity is 78GW. Therefore, sufficient energy on average will be available to support the added EV demand in a high market penetration scenario.

• Scenario 7

A Low EV market penetration in 2040 sees an energy demand of 668,904GW per year. This is equivalent to 0,064% of the total energy potential and 0,141% of total energy demand in 2040.

The Projected Energy Demand for 2040 is 54GW, while the Projected Capacity is 120GW. Therefore, sufficient energy on average will be available to support the added EV demand in a low market penetration scenario.

• Scenario 8

A Medium EV market penetration in 2040 sees an energy demand of 1971,624GW per year. This is equivalent to 0,188% of the total energy potential and 0,417% of total energy demand in 2040.

The Projected Energy Demand for 2040 is 54GW, while the Projected Capacity is 120GW. Therefore, sufficient energy on average will be available to support the added EV demand in a medium market penetration scenario.

• Scenario 9

A High EV market penetration in 2040 sees an energy demand of 3274,344GW per year. This is equivalent to 0,311% of the total energy potential and 0,692% of total energy demand in 2040.

The Projected Energy Demand for 2040 is 54GW, while the Projected Capacity is 120GW. Therefore, sufficient energy on average will be available to support the added EV demand in a high market penetration scenario.

Eskom’s Conundrum

The calculations are based on an increase in energy demand due to EV adoption spread evenly across the energy supply spectrum. Energy demand, however, is not a constant throughout a 24-hr period. Peak hours see a noticeable spike in demand. In its own research, Eskom raises its concerns about the impact of simultaneous EV charging during peak hours, as this may pose supply challenges. Concerns also exist about whether local infrastructure will be able to accommodate the influx of energy demand, especially during peak hours.

The following Eskom graphs represent the electricity demand (MW) spread across a 24-hour period as indicated by the blue area. It assumes 3,2% of all registered passenger vehicles are EV (at 2019 passenger car figures) and the added demand, stemming from charging at different times throughout the day, is then added in red. In the first instance, the demand from EV charging is represented as being spread evenly throughout the day.

Effect of EV Charging on the National Grid in a 24-hour period

Source: Eskom, 2019

This, however, does not represent a realistic scenario. The second graph takes a look at the demand spike when all EV owners charge their vehicles during peak hour. This is considered a dangerous scenario, as it could easily overpower the infrastructure and out-demand supply at that current point in time.

Effect of all EV Charging during afternoon peak hour on the National Grid in a 24-hour period

Source: Eskom, 2019

To avoid this, EV drivers will have to be incentivized to charge at non-peak hours. As seen in both the European and US studies, an optimized charging strategy will have to be implemented to avoid demand outstripping supply during peak hours. The last graph is an indication of how little impact there would be on the grid should EV owners only charge during off-peak hours.

Effect of all EV Charging during off-peak hours on the National Grid in a 24-hour period

Source: Eskom, 2019

Conclusion

In the scenarios explored, energy demand, including the added EV requirements, is spread evenly over the time period of a year. Based on the assumptions made by Eskom, the state-owned entity is expected to have sufficient energy-generating capacity to support a projected EV market over the next 20 years. There are, however, potential realistic factors that may derail Eskom’s support of South Africa’s EV market. The early establishment of an optimized charging strategy will be a key factor in avoiding a negative impact on the country’s electrical grid.

A special thank you to EV and renewable energy expert, Carel Snyman, for his invaluable input and assistance in compiling the methodology.

Chapter 4: Conclusion

The global EV market is gaining traction at an accelerated pace. Unfortunately, South Africa is lagging the required development in the EV space (apart from some limited pockets of progress). The country currently does not have the skills or policy to ensure we limit fiscal and job losses that will accompany the incoming transformation from ICE to EV. At least, if current projections materialize, the state utility, Eskom will be able to provide sufficient electricity to support the added demand stemming from the uptake of EV by local consumers. Without meaningful change to the grid, however, increasing EV in South Africa will do little to mitigate against climate change in the short to medium term.

The expansion of the Electric Vehicle market in South Africa will happen. It’s just unclear how long exactly it’s going to take to reach a significant level. What is certain is that the switch from ICE vehicles to EVs is happening at a much faster rate in developed countries, many of them being South Africa’s trading partners. This alone should incentivize government to actively drive EV expansion to avoid job, income and economic losses. It will further ensure the country can capitalize on EV opportunities, like battery development, while mitigating the possible damage brought about by the transition. Authorities will also have to work together with stakeholders in establishing a tax system that doesn’t kill EV adoption, while supporting the industry through a subsidy measure.

Eskom is also changing, and chances are that South Africa’s energy landscape will look vastly different in 20 years’ time to what may be envisioned today. It’s understood that part of this change will be the incorporation of more green energy sources. More people are further expected to be capable of generating some solar power at home in future, which could decrease pressure on Eskom while providing cleaner charging.

Electric Vehicles in South Africa is not a question of if, but when. It’s vital for the South African government, together with the private sector, to ensure every link in the EV chain is prepped for this tech take-over. It’s crucial for the country to stop limping behind the curve, to avoid financial and job losses but also to use this as an opportunity to tap into a market that holds countless benefits in economic potential.

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This report has been published by the Inclusive Society Institute

The Inclusive Society Institute (ISI) is an autonomous and independent institution that functions independently from any other entity. It is founded for the purpose of supporting and further deepening multi-party democracy. The ISI’s work is motivated by its desire to achieve non-racialism, non-sexism, social justice and cohesion, economic development and equality in South Africa, through a value system that embodies the social and national democratic principles associated with a developmental state. It recognises that a well-functioning democracy requires well-functioning political formations that are suitably equipped and capacitated. It further acknowledges that South Africa is inextricably linked to the ever transforming and interdependent global world, which necessitates international and multilateral cooperation. As such, the ISI also seeks to achieve its ideals at a global level through cooperation with like-minded parties and organs of civil society who share its basic values. In South Africa, ISI’s ideological positioning is aligned with that of the current ruling party and others in broader society with similar ideals.

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