South Africa’s future energy mix: what should we expect?



 

The South African National Energy Association (SANEA) held a one-day dialogue event at the Sandton Convention Centre recently to discuss the most suitable forms of electricity generation for South Africa in the light of the Department of Energy’s (DoE’s) recently released draft Integrated Resource Plan (IRP).

Five presentations were given followed by a discussion panel. The presenters, which included independent consultants, representatives from the Council for Scientific and Industrial Research (CSIR), the World Energy Council, Swiss RE, an insurance company, and a local banking group discussed the importance of proper energy planning – not just for the provision of electricity, but for energy sources in general – saying that the country’s integrated energy plan (IEP) should have both short-term and long- term targets, with clear policies which address South Africa’s particular needs.

Discussion panel from left: Brian Statham, Johan van den Berg, Erica Johnson, Dudley Baylis and Kiren Maharaj.

These needs, according to Mike Rossouw, and independent consultant, include low-cost energy, security of energy supply an low water usage. Rossouw pointed out that the South African manufacturing, mining and materials processing has changed significantly resulting in a reduced demand for base-load electricity.

Rossouw suggested that the DoE consider six factors when finalising the country’s IEP:

  • The energy adequacy factor (EAF)
  • Water usage in the generation of electricity
  • CO2 emissions from the generation of electricity
  • The reserve margin needed to ensure security of supply
  • The cost of generating electricity
  • The amount of generation from a variety of sources, including renewable, coal and nuclear sources.

Rossouw questioned the need for the cap placed on renewable energy sources in the draft IRP released for public discussion in November 2016, saying that without a cap on renewable energy sources, the amount of additional coal and nuclear sourced generation would be significantly reduced, with the associated savings in both money and environmental damage. Rossouw explained that if the country employed more gas and renewable energy sources, it would not need to spend money on CO2 reduction.

The CSIR’s Dr. Tobias Bischoff-Niemz, showed how renewable energy – particularly solar photovoltaic (PV) and wind – have become widely used in many countries. He said that PV has grown from 57 GW in 2015 to 70 GW in 2016, and wind from 54 to 63 GW. In South Africa, wind, solar PV and concentrated solar power (CSP) supplied 3,1 GW to the national grid in 2016 vs. 467 MW in 2013.

This growth – in excess of 6,5 times in three years – can be attributed to the significant price reduction in solar PV and wind components and the speed with which solar PV and wind farms are completed and come online.

Bischoff-Niemz said that the CSIR’s figures show that renewable energy is the least cost option as well as being the cleanest and least water-consuming electricity generating technology available today.

Using two countries which, like South Africa, have no electricity available from neighbours – Australia and Ireland – Bischoff-Niemz demonstrated that renewable energy can provide a sizable portion of a country’s electricity needs. In Australia, solar PV provides 6% of the country’s electricity and in Ireland 8% is supplied by wind. South Africa’s use of renewable energy, solar PV, CSP and wind combined, provides less than 3%.

Coal still provides the bulk of the electricity generated in South Africa with the accompanying CO2 emissions and high water consumption.

The DoE’s current plan will result in electricity generation coming from three sources by 2050: coal, nuclear and renewables plus gas in equal measure, said Bischoff-Niemz.

He showed that this is not a least cost solution, although it does address some of the CO2 emissions and water consumption issues. The CSIR’s least cost option, which is also the least water consuming option, would be ideal for South Africa both environmentally and economically. The least cost option would be almost R90-billion cheaper (in today’s money) in 2050 than the current draft IRP 2016’s proposal, and R80-billion cheaper than the DoE’s “carbon budget” option.

Savings of these magnitudes would result in lower electricity tariffs, resulting in reduced input costs and consequently higher levels of production and employment in the manufacturing sector.
Bischoff-Niemz said the DoE – and the country – must choose between cheap and dirty generation and cheap and clean generation. Nuclear, he said, while clean, is not economically suitable for South Africa.

Andrea Buser, from the World Energy Council’s office in the UK, showed how variable renewable energy sources (VRES) have reduced Italy’s dependence on traditional energy sources. Referring to the World Energy Council’s report “Variable renewable energy sources integration in electricity systems 2016 – How to get it right”, Buser showed how Italy, with the third highest peak demand after Germany and France, generates enough electricity by wind and solar PV to meet almost 50% of its peak demand.

Looking at the economic considerations around energy generation and usage, Rob Ashton from Swiss RE and André Snyders from Standard Bank, discussed handling the risks associated with energy generation. Risk can only be reduced by improving system resilience, they said. Improving system resilience, however, increases capital infrastructure costs but reduces overall production costs because power utilities with resilient systems don’t need to rely on expensive standby generation. If the DoE is promoting nuclear because it is concerned about security of supply
as well as a low carbon future, it will have to find practical and effective ways in which to improve the country’s economy to make a nuclear new-build programme affordable, they said.

Panel discussion

A panel discussion chaired by SANEA’s Brian Statham and comprising Johan van den Berg, Erica Johnson, Dudley Baylis and Kiren Maharaj considered identifying the critical variables in energy provision, and whether changing from the current model of large, centralised, coal-fired power stations to decentralised, smaller, non-fossil fuelled generation is worth the risk.

The panel felt that the transmission of electricity from large centralised power stations, which could cost between
10 and 15% of the electricity generated, keeps electricity prices artificially high. Costs of generation, though, should be seen in context. One has to consider the economic cost of no or insufficient energy generation. South Africa’s economy has suffered the results of insufficient electricity and is still struggling to recover.

There is concern that the DoE is trying too hard to get finite figures in its planning. The DoE, it was stated, “micro-manages” the plan. The panel suggested that technological and other developments, which are unknown at this time, could make the plan unworkable or undesirable in a few years. The DoE’s plan should extend to the next five years with another ten or 15 years being very flexible to allow for the unknown. The DoE should be encouraged to allow for ranges of values per technology rather than specific ones. It should also not apply artificial limits or caps on any generating technology.

The cost of a top-heavy monopolistic power utility which controls the country’s electricity supply is undesirable and a different model should be developed which allows for multiple generating companies and a few transmission and distribution companies.

Ongoing tariff increases are detrimental to the economy. Large industrial and commercial entities should have least-cost electrical supply. While some small commercial and residential users may decide to operate off-grid, surplus renewable energy sources from private generators should be made available to the grid to reduce overall generating costs.

Although some decisions made today might end up being poor decisions later, the panel agreed that a plan must be drawn up and approved. Unfortunately, the IRP process is too often seen as a business opportunity to be exploited, rather than a plan for the betterment of the country. People with vested interests try to convince decision makers that their particular technology is superior to another which has led to delays while decision makers try to check on the veracity of these statements. Equally, it was stated, financiers of energy projects should be less demanding on short-term returns.

With this in mind, the panel suggested that the DoE’s plan should not seek to procure wind, solar PV, coal, gas, or nuclear power, but rather seek to procure energy (kWh) and allow the energy industry to use whichever technology meets the requirement at the right price.

The panel agreed that change is inevitable. To comply with the agreement signed at COP21, South Africa must decarbonise its energy sector. That means that only the new coal-fired power stations will be in operation by 2050, and that the balance of demand will be supplied by power plants which emit less (such as gas) or no CO2 (such as nuclear, solar PV and wind).

Send your comments to energize@ee.co.za

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