IRP2018 calculations seem “mathematically flawed”



Overheated rhetoric and fuzzy science seem to have dictated parts of the new Integrated Resource Plan 2018 (IRP2018). Substantial public prejudice against nuclear would make it difficult, if not impossible, for nuclear to exist as an energy source if legacy issues trump logic. The nuclear industry is being paraded as a game of cloak-and-dagger and is said to be less economically competitive.

Knox Msebenzi

The IRP2018 makes provisions (although not committed) for some 25 GW, with the mix dominated by wind, gas/diesel, solar PV, hydro and coal. Using the same metrics, measures, generating capability and costs provided in the document, a wind-solar-gas combination is expected to cost in the region of R303-billion, with an average plant life expectancy of 20 years. Nuclear, on the other hand, could dispatch grid-ready power at some R308-billion with plant life expectancy of 60 years.

To match nuclear’s dispatchability with the wind-solar and gas combo for the same period of 60 years, the government will have to outlay R924-billion. It is evident that the assumptions made by the authors of the IRP2018 are mathematically flawed and simply point to deep biases.

Wind and solar technologies can and should play a role in the energy mix if deployed correctly, though the base load requirements must be anchored in reliable sources like nuclear. The IRP2018 looks at all aspects of supply and demand to find ways to produce cleaner energy but overlooks the eventual cost of electricity and a much greener source.

Right now there are many factors to take into account. For instance, Grand Inga has been delayed to 2025 if not later, and other fuels in the mix, like gas and diesel, are linked to global price fluctuations. There is absolutely no guarantee any other energy source can be as stable and reliable as nuclear.

The term “least-cost” appears on 15 pages within the draft IRP document. However, this term is not defined, so the methodology to achieve the least-cost plan cannot be evaluated. Least cost is based on cost-benefit analysis and by definition, it is clear that the methodology applied in the draft IRP2018 does not meet the criteria for least-cost planning. It appears that the developers of the least-cost utilised a “cheapest” plan rather than a least-nett-cost plan to the economy as is defined by the utilities industry.

NIASA calls for the government to issue a non-binding nuclear RFI in order to obtain accurate nuclear costing as well as financing options. This will also ensure costing of fully and partially indexed pricing for various energy sources is accounted for correctly. It has been shown that bid-window prices (as used in the IRP2018) utilise full indexing where normal LCOE calculations result in partially indexed pricing over time (fixed CAPEX indexed OPEX). The RFI is a transparent and a pragmatic approach and will level the playing field for all energy sources.

The assumptions and resulting sensitivities of the build path to 2030 (and to 2050 even more so) is extremely uncertain (and incomplete) as contained in the IRP2018. It is recommended that the least-cost path scenario be re-run with correct information. Current policy biases if not addressed will result in the use of fossil fuels and inefficient renewables instead of nuclear, which also comes at a cost of poor climate performance.

Intermittent solar and wind cannot provide the needed quantities of energy sustainably, economically and reliably. If energy transformation is the end game, the emphasis should be on converting some of the coal output to nuclear which can realistically be achieved within the next decade.

The energy sector vision is also based on supporting the National Development Plan (NDP) which aims to achieve 7% economic growth. It would therefore be rational to expect the final IRP to assume successful implementation of the NDP in its economic growth targets. In the same way it would be irrational to develop an IRP based on the NDP vision and assuming this will not be implemented or achieved, as seems to be the case with the lower growth trajectories assumed in the IRP2018.

Admittedly, fears about nuclear energy run deep in South Africa stemming from the opaque manner in which the previous administration sought to push nuclear without following due processes. Perceived malfeasance is so profoundly entrenched that it is almost accepted common knowledge that any nuclear deal with involve kickbacks.

This argument misses the point. Increasing accountable government spending can bolster economic growth by putting money into people’s pockets. At two unit for examples, the total employment estimate inclusive of localisation benefits would result in almost 23 000 formal sector jobs, with direct tax revenue in the region of R450-million per annum.

Already the decrease in government spending is harming the infrastructure sector: construction companies are shifting focus away from infrastructure and shed some 600 jobs with more retrenchments expected in coming months. Some have have entered business rescue.

In the long term, we argue that nuclear is the only developed energy source that is capable of delivering the enormous quantities of energy to industrialise South Africa and realise the goals of NDP as envisioned. There was a time South Africans read load shedding schedules like weather reports. That time in history cost the economy some R300-billion. Public prejudices and policy biases are at best counterproductive and at worst, dangerous and will in all likelihood put South Africa on a collision course with its own future.

Send your comments to energize@ee.co.za

 

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