Comments on the draft integrated resource plan (IRP2018)



The recently released IRP2018 draft, a discussion document and not cast in stone, differs significantly from both the 2010 and 2016 versions. Changes which steer the plan away from a diverse mix of technologies in the direction of a high dependence on renewable energy have evoked a large amount of comments, both pro and anti.

The IRP consists of two main parts pre 2030 and post 2030. The post 2030 section is characterised by a high degree of uncertainty and is indicative only. Click here to download the draft IRP2018.

The portion of the IRP covering the period up until 2030 is relevant as it is technology and quantity specific. The planned new build and totals by 2030 are shown in Table 1.

Major concerns

The primary concern is that increase in demand in the period up to 2030, and assumedly thereafter, is to be met by the wind/solar/gas (WSG) trilogy. South Africa has very little experience with either RE or gas and virtually none with the combination.  In spite of the forecasts and predictions contained in various studies, there are still a number of unknowns in the long term behaviour of variable resources, and the RE gas combination is regarded as a high risk option.

Table 1: Planned new build and totals by 2030.
Technology Coal CSP Hydro Wind Solar Gas Other
New build (MW) 1000 0 2500 8100 5670 8300 0
2030 totals 33 847 600 4696 11 442 7958 11 930 499

Wind remains a volatile resource, no matter what forecasts and predictions say. The UK recently had a spell of nine consecutive days with very low wind production and Germany has an annual period of at least a week with virtually no wind (or solar). Data from the CSIR study on wind and solar indicate that there are numerous periods when wind speed is low everywhere in the country. It is assumed that the large amount of gas generation, which has the ability to generate four to five times the energy of wind, is intended to cover these periods.

Variability of solar is not seen as a major problem but the volatility of the large wind component is. Although the capacity of gas exceeds that of wind it is forecasted to generate only 20% of the energy expected from wind. If this amount changes there could be serious cost implications.

Reliance on the WSG trilogy makes the programme dependant on the development of a gas industry in this country. Some commentators have expressed concern about the viability of such a gas program, and if the local gas supply industry does not develop, this component will not be realised, placing the whole program at risk. The usual answer is that gas can be imported, but this would mean the location of all gas turbines at the coast, which leads to network problems, and dependence on foreign gas supplies.

The gas price is also an issue and concern has been expressed about the influence of the gas price on the plan. The IRP states that changes in gas pricing could affect the issue so that the WSG trilogy is no longer the least cost solution. But by how much?

The CSIR study, on which this IRP seems to be based, seems to have assumed that wind turbines can be installed anywhere that technical requirements demand, and did not consider external factors. The main of which is the growing opposition to wind turbines from both conservation and civic organisations worldwide, the recent acceptance by the World Health Organisation (WHO) that noise from wind turbines can cause health problems, and recent studies which show that wind farms could affect the climate in the vicinity of the farm, and if enough large farms are installed, could have a global impact as well.

In addition there is the increasingly strict requirement for environmental and visual impact assessments for wind farms. There are already claims that the EIAs/VIAs for several local wind projects were not done correctly but rushed through to get projects approved, and legal challenges are in the offing. The industry itself, which seems to be mindlessly pursuing the development of larger and larger turbines, without paying attention to the impact, is responsible for this.

A rather strange feature is the small amount of CSP included in the programme, which highlights one of the weaknesses of the LCO approach, namely ignoring the impact of price reductions. CSP is regarded as an expensive technology, and previous bid windows have supported this view. However, recent reports indicate that CSP, with storage, is approaching the price of wind and solar without storage. The issue here is whether we rely on the statistical probability of wind being available outside of the solar hours to supply power in the evenings, or whether we rely on storage to do this.

A victim of this IRP is of course nuclear, and it is fairly clear that the decision to exclude nuclear is political one, is heavily influenced by lobbying from political groups, although cost is often quoted as the reason, there is no certainty on this issue and  figures quoted in the national press are widely inaccurate. It is a great pity that a large build program was originally planned and, it is unfortunate that the nuclear option became embroiled in political scandal.

Perhaps if there was less of an involvement in state capture the technology would have been given a fair chance. The DoE has however wisely refused to reject nuclear entirely, and the government regards it as a “glamour project” with the possibility to review the inclusion in post 2030 programs. Ten years can change the picture entirely, with new developments such as small modular reactors coming on to the market. NIASA has announced its intention to lobby for inclusion of nuclear in the plan.

Another major concern is the inclusion of the INGA 3 contribution. This is fraught with difficulties, the least of which is not the transmission line which would have to span thousands of kilometres over several countries. This is seen as a political commitment to the project in a politically unstable stable country which may never even materialise, leaving the network short of some 3600 MW of baseload power. (Which nuclear could provide with less risk.)

A final concern is the total absence of storage in the IRP. The argument offered here is that storage is not a generating technology. Although this may be true it ignores the impact that   storage can have on the configuration of the network, by doing away with the need for geographic diversity and the cost of implementing a network interconnecting variable generation sources. The IRP uses gas turbines to perform some of the functions that storage could perform. This approach also ignores developments, such as the hybrid battery/gas turbine system.

Costs

The input cost structure for RE has been adjusted to reflect Bid Window 4 prices for wind and solar, so the costs used are a mixture of estimated costs and bid prices. Of concern is the fact that bid window prices are being used for RE components while estimated or LCOE and other predicted costs are used for nuclear and other technologies. This gives a very skewed comparison.

Current RE prices are affected by a number of factors such as CPI indexed loans, low interest green loans, tax breaks, carbon credits and other factors which may not continue in the future, particularly if a large penetration of RE is reached. The calculated LCO is thus not representative. There is a risk that these preferential factors may not continue in the future and using current prices for long term predictions is fraught with danger.

This is illustrated if one compares the overnight capital costs as given in the draft. Costs to construct nuclear and wind of the same energy generating capacity come out at about the same, yet the costs per kWh differ substantially. Both are heavily capital intensive technologies. The current low price of PV particularly is suspected of being a dumped price, and concerns have emerged from within industry of quality deterioration with price.

Post 2030

Although the IRP indicates that the scenario of RE without annual build limits provides the least-cost path up to 2050, it acknowledges that there are technical and financial risks associated with this option, and this could be affected dramatically if assumptions on input variables change, and recommends  that the post 2030 path not be confirmed, but that detailed studies be undertaken to inform the future update of the IRP. These studies should, among others, include the following:

  • Detailed analysis of gas supply options (international and local) to better understand the technical and financial risks and required mitigations (if possible) for a RE and gas-dominated electricity generation mix post 2030.
  • Detailed analysis of the appropriate level of penetration of RE in the South African national grid to better understand the technical risks and mitigations steps needed to ensure that security of supply is maintained. This work is to include an in-depth analysis of technical risks, resulting from non-synchronous generation and distributed generation which could result in stability issues. Risks include :
    • Reduced inertia
    • Reduced synchronising torque
    • Reduced voltage support
    • Reduced contribution to short-circuit currents
  • Detailed analysis of other clean energy supply options (coal, hydro, nuclear and others), including their associated costs and economic benefits. The NDP update calls for cleaner coal technologies to be supported through research and development, and technology transfer agreements in ultra-supercritical coal power plants; fluidised-bed combustion; underground coal gasification; integrated gasification combined cycle plants; and carbon capture and storage, among others. The NDP update further acknowledges the role of nuclear in the energy mix and calls for a thorough investigation of the implications of nuclear energy, including its costs; financing options; institutional arrangements; safety; environmental costs and benefits; localisation and employment opportunities; and uranium-enrichment and fuel-fabrication possibilities.

So in spite of claims from certain sectors that coal and nuclear can be ignored in any detailed network analysis to simplify issues, this is far from being decided.

Least cost optimisation

Of concern here is the repeated reference in discussions to the term “least cost optimisation” (LCO) or least cost approach, as if this were some magical system which justifies the final decision taken. It is doubtful whether any of the people using this term have any idea what it is and what its limitations are, and very little information is available to the public as to how this system works. It should be remembered here that the output of any future looking scientific or other study is a forecast and not fact, and the LCO process is a forecast, not fact, and has the same credibility as any forecast.

LCO is mathematical modelling process based on linear programming and like any model relies on the quality, relevance and accuracy of input to operate. The output is not a guaranteed certainty but a forecast based on input data and assumptions. If any of these changes substantially, then the output can also change. LCO does not rely on a single system, as there are at least 14 commercial systems on the market and an estimated 70 to 80 smaller localised systems in use. One of the complaints against commercial LCO systems is that the developers refuse to reveal how their system works.

The LCO programme does not produce scenarios itself, but relies on input from other sources, and the scenarios are constructed by the organisation running the study. These scenarios must satisfy another requirement before use in the LCO process, and that is the ability to meet the projected demand, and this factor must be determined and confirmed.

The whole decision here hinges on the WSG trilogy. Constructing a scenario using firm generation such as gas, coal, nuclear, biomass and hydro with linear characteristics can be done with a great degree of certainty, as the process simply means adding in or removing a fixed capacity. Scenarios based on volatile sources such as wind and solar are not so certain, as reliance has to be placed on statistical data relating to projected performance, and possible combinations of these sources.

The DoE has used a model based on collector stations for wind and solar, located at selected points around the country. The input to these collector points is an aggregate of the output of solar and wind farms in the area, and must be based on information from studies done on these factors, in this case the CSIR study.

The CSIR study used to construct this wind/solar/gas trilogy, and other similar studies used to justify the use of this model, have not been subjected to public scrutiny, which is a requirement of the IRP process, and this represents a lack of transparency on the part of the DoE. Selected results have been shown in various presentations, but no details of the study have ever been released.

The CSIR study has its origins in a study carried out with assistance of a team from the Fraunhofer institute in Germany in 2015/2016, “Wind and Solar PV Resource Aggregation Study for South Africa”, with the aim of “Increasing the fact base and understanding of aggregated wind and solar PV power profiles for different spatial distributions of wind turbines in South Africa”.

As the title suggests, the study was focused mainly on aggregation of the wind resources, and is based on the outdated concept of  using geographic diversity to smooth out the variations in wind.  This concept is fast being made obsolete by developments and applications of storage technology, which within the timescale of the IRP will be used for variability smoothing on an area or site basis, as well as providing a measure of control, which geographic diversity does not offer.

In effect, the study validated a predicated outcome i.e. a wind and solar duology, and no attention was paid to the practical implications of amalgamating these resources and the impact on the grid. The study did not cover the occurrence of extreme events, such as consecutive days of low wind and solar. This study also did not consider inclusion of other sources such as storage in particular, attempting to prove that the problem of variability could be solved by amalgamating resources around the country.

It was then morphed into the much quoted CSIR study which included gas to cover the residual load component, instead of storage which could have performed the same function. This may have included extreme events but there is no indication that this was the case. The same rule applies here that the study produced a forecast not fact, and is heavily based on assumptions made, and no doubt on the interests of those who did the study.

In spite of claims that several LCO based studies have produced the same result it is suspected that all of these studies used the same data from the CSIR process and the same basic LCO process.

So the IRP, which is a forecast in itself, is based on a single study, which ignores the development of new technologies and solutions, and is also a forecast, using a single database produced by a team from outside the country. What would give the IRP more credibility would be a completely independent alternative study, if this is at all possible in today’s world.

Local industry and the effect on the SA economy

Is this focus on RE likely to stimulate an industry in South Africa?  This is unlikely in view of the fact that manufacturers in Europe and elsewhere are experiencing problems with decreasing local demand.  Major wind turbine manufacturers in Europe have closed down manufacturing facilities. The same applies to solar PV facilities in the Far East, where demand has been affected by a downturn in subsidies in the local market.

The gas turbine industry is also suffering, particularly in Europe, and is also seeing a fall-off in demand. So it is unlikely that any of these industries would establish a facility elsewhere, preferring to keep their domestic production going and export to wherever possible. It is very likely that for the next ten years we will continue to support foreign wind, solar and gas turbine manufacturers.

A further concern is the fact that the major lifetime costs of both wind and solar are the capital costs of imported equipment, largely paid for by means of foreign loans and foreign equity, in the guise of “investment”.

The question that needs to be answered is simple. What percentage of the tariff paid by Eskom to IPPs leaves the country to service foreign loans, foreign equity and other foreign costs, and what percentage stays within the South African economy? It would be enlightening if someone could provide this figure.

How much will this amount to when 50% of the electricity is generated by RE systems? The lifetime costs of including gas generation are also based on capital for imported gas generation, but will be heavily influenced by the costs of importing gas in the case of a local gas resource not developing. This also amounts to money leaving the country. Who exactly is the IRP enriching?

Benchmark

What base can we use to judge the IRP? One of the common avenues open to us is to compare this IRP with that of other developing nations, such as the BRICS community. The comparison reveals some striking differences as all have gone for a diverse mix of technologies including new coal and new nuclear.

In addition to renewable energy, China and India are building new coal and nuclear plants. Russia is building new nuclear and gas plants, and even Brazil, with a large RE penetration, is building new coal (with the aid of China) as well as investigating nuclear. It appears that these countries have used criteria other than least cost” in their planning and are hedging their plans for future generation capacity.

The DoE would be wise to follow the example of our BRICS partners, use the LCO process as a guide and not a prescription, and adopt a balanced, diverse mix of technologies in the plan. “Least cost” is not the only criterion; there are others which need to be considered to establish a secure, reliable and economically sound supply of electricity.

What may appear on analysis to be the least cost solution may turn out to be expensive in terms of security and reliability and overall cost to the country. Failure of any of the volatile components to deliver in the long term would be disastrous for the country.

Send your comments to energize@ee.co.za

 

 

 

 

 

 

 

 

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