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Transition Talk

Are renewable IPPs destroying Eskom?

Dr. Tobias Bischof-Niemz

The argument that renewable-energy independent power producers (IPPs) are destroying Eskom financially is a gross misrepresentation.

Fact is: the State-owned utility bought electricity from renewable IPPs in financial year 2018/19 at an average price of R2.06/kWh. Fact is also: the standard average price at which Eskom sells to its customers is closer to R0.90/kWh. At first glance, this sounds like selling renewable energy at a loss. But it is not. Eskom sells the IPP electricity at the exact same rate as it buys it for. Click to Read Full Article

How could black SA ownership be increased in renewables projects?

The renewable-energy industry in South Africa is effectively at the very beginning of an S-curve. With 5% of South Africa’s electricity provided by renewables, the industry is nowhere near its ultimate size. In 20 years from now, it should be at least ten times larger than it is today. When looking back on the sector’s development, say in 2040, key measures of success will be not only whether the fleet of solar, wind and flexible generators is delivering reliable, low-carbon electricity at least cost (see also Engineering News March 22, 2019, page 49 ) and with the most jobs (see also Engineering News March 8, 2019, page 51 ), but also whether the South African ownership base of those assets is reflective of the country’s racial demographics.

Indeed, the transformative opportunity associated with building a new industry from scratch, such as renewables, is surely many times more potent than is the case in established industries, such as mining or financial services. Instead of inducing transfers from one category of shareholder to another in enterprises that are typically in a steady state, the embedding of ambitious transformation targets in an entirely new industry holds genuine potential for black shareholders and for the country. Click to Read Full Article.

How should SA’s gas infrastructure be configured for a least-cost power system?

As outlined in the previous Transition Talk column (see Engineering News July 12–18), while gas will become more important in South Africa’s future electricity system, its role should not be overstated. Even in the absence of other flexibility options – such as batteries, pumped-hydro schemes, demand shifting, biogas, or the more flexible use of the existing coal fleet – only a relatively modest amount of gas will be needed to balance a system in which the penetration of variable renewable energy (VRE) – that is solar photovoltaic and wind – is rising progressively.

Under the least-cost scenario outlined in the draft Integrated Resource Plan 2018 (IRP 2018), the gas-based electricity generation is only 3%, or 10 TWh of the total in 2030. In the new coal scenario, IRP3, or in the new nuclear scenario, IRP6, it is similarly small amounts of gas required to fill the gaps between variable demand and the respective bulk electricity source (VRE, coal or nuclear). The installed gas-fired capacity of gas engines and gas turbines in 2030, according to IRP1, is 14 GW. Click to Read Full Article

How much gas is needed to support a power system led by renewables?

Imagine the planning of the electricity system as a builder who wants to build a sturdy wall at the lowest cost. In the old world, the cheapest way to construct such a wall was to use rectangular bricks, akin to coal or nuclear in the power sector. To hold the wall together, expensive cement (midmerit and diesel-fired peaking stations) was applied relatively uniformly. In the new world, irregularly shaped natural stones (solar photovoltaic (PV) and wind) have become almost 50% cheaper than the rectangular bricks. To build a natural-stone-based wall, at points more of the expensive cement is applied to close the gaps, at other points less. The outcome is still a sturdy wall, but one which is now cheaper than the brick-based wall. It is what a power-system planner would call ‘least cost’. Click to Read Full Article

Why should South Africa champion electric vehicles?

South Africa’s industrial, transport, energy, trade and fiscal policies remain heavily geared towards the private automobile and, more specifically, ones powered by the internal combustion engine (ICE).

The Automotive Production and Development Programme, which incentivises the assembly of ICEs locally, remains the centrepiece of government’s industrial policy. The country’s transport strategy is equally supportive of the nation’s 12-million ICE fleet. Fiscally, meanwhile, fuel taxes remain an important revenue stream (over R60-billion in 2017/18) and make up more than 40% of the final pump price. Click to Read Full Article

How should SA approach the procurement of least-cost power?

In the previous Transition Talk column (Engineering News May 17–23, 2019), I explored what it would take to depoliticise the process of drafting a rational Integrated Resource Plan (IRP) for South Africa. Such a plan will outline what investments need to be made in the electricity sector. The next step, which is the topic of this Transition Talk, is to procure the generation assets required in the plan in an efficient manner.

In regulatory terms, where prudence and efficiency are the two key objectives, the IRP stands for prudence (doing the right things), while the implementation of the IRP represents efficiency (doing things right).

Less than a decade ago, a least-cost IRP would have selected coal-fired power generators as the energy workhorses. Under this scenario, the coal plants provided both the bulk energy, or kilowatt hours, as well as firm capacity, or kilowatts (together with a few diesel-fired peaking plants to fill the gaps). The two largest cost items in the power system, energy and firm capacity, were hence provided by one technology, in the form of coal-fired power stations. Click to Read Full Article

How could South Africa depoliticise its electricity planning process?

Dr Tobias Bischof-Niemz

As South Africans know all too well, the processes involved in drafting and approving an Integrated Resource Plan (IRP) for electricity are emotive, opaque and highly political. It took nearly ten years to update the initial IRP 2010, despite the fact that the document lost relevance almost from the very day of promulgation, as the country’s electricity reality began diverging materially from the demand and technology-cost assumptions contained in the promulgated document.

Various update attempts fell short, particularly as the technoeconomic outcomes began clashing with the narrow interests of a powerful business and political elite. Even the most recent, comparatively coherent and transparent attempt at finalising an updated IRP (IRP 2018) fell prey to those able to use their political influence to usurp rationality in favour of self-interested lobby groups.

There is a way, however, for South Africa to depoliticise the IRP process and transition to a more transparent, technology-agnostic consultative methodology for determining the best technology mix to procure and, crucially, keep the plan up to date. Click to Read Full Article

Presentation: Power fuels and its potential for South Africa

ENERTRAG South Africa CEO Dr Tobias Bischof-Niemz delivered a presentation on power fuels and their potential in the South African context at a pre-event to the Berlin Energy Transition Dialogue 2019 in Berlin, Germany, on 8 April 2018. Click the Download Button Below to View the Presentation.

Presentation: South Africa’s IRP and Eskom restructuring

Dr Tobias Bischof-Niemz delivered a presentation on South Africa’s IRP and Eskom’s restructuring at the RMB’s SA Investment Forum in London, England, on March 6, 2019. Click Link Below to View the Presentation

More Transition Talk . . .

For thought leadership on South Africa’s Energy Transition, read Dr Tobias Bischof-Niemz’s Transition Talk column, published in Creamer Media’s Engineering News. Latest columns are listed below:

Can low-income homes be made to benefit from the energy transition?

In the previous Transition Talk column, I covered how South Africa’s world-class solar resource, together with falling solar photovoltaic (PV) panel costs, has made rooftop generation an increasingly realistic proposition for factories, shopping malls and high-income households. I also outlined how these small-scale embedded generators (SSEGs) could help with the current supply shortage. In this column, I focus on low-income households and how to make them beneficiaries of the energy transition and of SSEGs.

A portion of the yearly allocation for solar PV in the Integrated Resource Plan (IRP) could be set aside, through a policy adjustment, not only for embedded generation generally, but also for embedded generation from low-income households specifically. Click to Read Full Article

How can embedded generators help close South Africa’s power supply gap?

There has been no increase in overall electricity demand since South Africans first began experiencing load-shedding back in 2008. Yet the threat of rotational cuts remains, because of the precipitous decline in the energy availability factor of State-owned power utility Eskom’s coal fleet and the underinvestment in new generation capacity. New generation capacity is required urgently to restore the balance between supply and demand.

Under a steady-state scenario, such new supply would be added in line with Ministerial determinations for the procurement of various generation technologies as directed by an up-to-date Integrated Resources Plan (IRP). South Africa’s electricity supply industry is currently not in a steady state, however. In addition, the immediate supply deficit cannot easily be met through government’s centralised procurement system, as its rigorous processes take several months to complete, during which no construction is possible. Click Here for Full Article

If renewables are so cheap, why are we paying so much for them?

Hardly a week passes without a statement being made about the high costs of renewable energy in South Africa. Typically, the argument is made on social media and is framed to suggest that Eskom is buying electricity at R2.22/kWh from renewable-energy independent power producers (REIPPs) and that this is proof that renewables are much more expensive than other forms of electricity generation.

The proposition is at odds with the alternative narrative of onshore wind and solar photovoltaic (PV) being the cheapest form of new generation. It also conflicts with various analytical reports indicating that a new-build combination of wind, solar and flexible generators represents the least-cost electricity expansion scenario for South Africa.Advertisement

That such starkly divergent positions are able to coexist is obviously perplexing and is also resulting in a good deal of confusion about what direction South Africa should take with regard to its future electricity investments. Click Here to Read Full Article

If investment is the goal, what should SA’s electricity game plan be?

South Africa has correctly identified the lack of investment as a serious constraint to economic growth and job creation. President Cyril Ramaphosa has moved to address the problem by reaching out to domestic and foreign investors both informally and through the inaugural Investment Conference, which took place in Johannesburg in October 2018.

Without question, affordable and reliable electricity is a prerequisite for many investors, particularly in areas such as mining and mineral processing, where South Africa has a relative advantage, owing to its natural resources, as well as its well-developed capabilities in extracting, processing and exporting the mineral products. Likewise, the country’s reindustrialisation aspirations, as well as its plans to expand the agricultural and agroprocessing sectors, could well turn not only on security of electricity supply, but also on the pricing of that energy. Click Here to Read full Article

If there are more jobs in renewables, why are coal miners so unhappy?

As outlined previously, an electricity system made up of solar photovoltaic (PV) plants, wind farms and flexible generators will employ at least 30% more people than a comparable energy-equivalent coal fleet (see the Transition Talk column in the February 22-28 edition of Engineering News). This net jobs advantage is, however, disguised by the geographically disbursed nature of renewable-energy investments. Click to Read Full Article

More Transition Talk Columns

Are there really more jobs in coal than in renewables?

There is considerable support in South Africa for the notion that a transition in the electricity system from coal to renewable energy will trigger a jobs bloodbath at both Eskom and the Mpumalanga coal mines. The opposition to renewables is underpinned partly by the notion that there are more jobs in coal than in renewables. A detailed analysis of the job numbers, however, suggests quite the opposite. It points to there being at least 30% more jobs in a fleet comprising solar photovoltaic (PV) and wind farms when compared with an energy-equivalent coal fleet. Click to Read Article

Will unbundling Eskom ensure a sustainable electricity system?

That Eskom needs to be restructured is no longer in question. In its current form, the organisation poses a systemic risk to the South African economy and is ‘too big to fail’. The real question is what form this restructuring should take. For sure, the generation assets need to be separated from the transmission system operator (TSO) and from the distribution unit. But is that enough? Can the generation assets be kept in one legal entity? There is the risk, for instance, that the animal instincts of the separate board and executive team presiding over a 40 GW-plus behemoth could prove impossible to tame. In the absence of the moderating influence of Eskom’s prevailing unified leadership structure, the generation tail could truly end up wagging the power-system dog and undermining both the TSO and the regulator. Click to Read Article

Looking for more?

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