Coal, which has been the workhorse of South Africa’s electricity system for generations, will continue to play a significant role for years to come. Those coal-fired power stations that remain in operation will also need to secure continued supplies of the energy mineral and State-owned electricity utility Eskom has expressed a preference for doing this through long-term contracts.
There is a risk, however, that these long-term coal-supply agreements could lock in South Africa’s coal dependence at a time when many countries are starting to actively retreat from coal and when the international community is considering the imposition of trade and investment penalties against products with a high carbon footprint. Already, it is becoming increasingly difficult to raise bank finance for coal-related investments and this trend is likely to only intensify.
When released in October, the Integrated Resource Plan 2019 (IRP 2019) highlighted that South Africa would face an electricity capacity shortfall of between 2 000 and 3 000 MW for the coming three years, as well as relatively modest energy deficits (measured in gigawatt-hours, or GWh) over the period. Subsequent analysis by the Council for Scientific and Industrial Research (CSIR) points to a larger capacity deficit (up to 8 000 MW) and dramatically larger yearly energy shortages over the period, potentially rising from 2 000 GWh in 2020 to 4 500 GWh in 2022.
In other words, the CSIR is cautioning of energy shortages that are materially bigger than those of 2019, when South Africa experienced its worst-ever year of load-shedding. Last year, Eskom declared rotational power cuts equivalent to 1 350 GWh of customer demand shed, which cost the country anywhere between R60-billion and R120-billion, with the higher figure derived using the official cost of unserved energy of R87.50/kWh. Click to Read Full Article
When the question arises as to what South Africa’s most abundant source of energy is, the usual answer is coal. South Africa has built almost its entire electricity system, as well as a good portion of its liquid-fuels industry, on the back of its plentiful reserves of coal. Further, it is estimated that there is still another 33 Gt (where 1 Gt is equivalent to one-billion tons) of the energy mineral yet to be mined, which equates to about 300 years at the current rate of domestic consumption.
In reality, though, South Africa‘s solar and wind resources are infinitely more ‘abundant’ than its coal resources. Instead of mining these renewable resources, however, technologies need to be deployed to ‘harvest’ them. To do this involves not only solar panels and wind turbines, but land. Click to Read Full Article
Several large multinationals, such as Google and Amazon, are actively procuring renewable energy as part of efforts to transition their operations away from fossil fuels. Typically, these companies are seeking to take physical delivery of the clean energy produced by wind and solar plants to directly decarbonise their business processes. Click To Read Full Article
Germany’s electricity generation in 2019 year-to-date has been almost 47% based on renewables, a significant increase from only 9% in 2002. The cost of new renewables, specifically solar photovoltaic (PV) and onshore wind, are now by far the lowest of all new-build power-generator options. Why then are German household electricity prices some of the highest in the world? The average German residential household pays 30.22 euro cents (€ct) for a kilowatt-hour (kWh) of electricity, which is about R4.80/kWh. Click to Read Full Article
Until relatively recently, much of the world’s decarbonisation attention was on the electricity sector. The focus was natural because, firstly, the sector is a large contributor to global greenhouse-gas emissions, and, secondly, it is relatively easy to transition. Especially now, where, after two decades of continuous cost reductions and technology improvements, carbon-free electricity from wind and solar photovoltaics (PV) is by far the lowest new-build option in almost any power system.
As a direct result of having eliminated the economic trade-off between clean and cheap power, electricity is emerging as the fuel of the future for the energy sector as a whole. Serious initiatives are now under way to deploy increasingly decarbonised and ultracheap electricity in support of decarbonisation efforts in sectors such as transport, heating and cooling, as well as the heavy-industry sector.
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.
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. 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. 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). Click To Read Full Article
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 the Full Article.
Previous Transition Talk Columns:
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
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.
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.
To answer the question about why South Africa is currently paying so much for renewables when they are meant to be cheap, it is important to clear up a few basic facts about domestic renewable-energy costs. Click 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. Read The Full Article
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.
When juxtaposed against South Africa’s highly concentrated coal industry, which is located mainly in the northern provinces of Mpumalanga, the Free State and Limpopo, such spatial diffusion presents a serious obstacle in persuading those whose livelihoods are currently inextricably tied to coal to support a clean-energy transition.
The net jobs upside, as well as the health and environmental benefits, of transitioning to a renewables-led system are undoubtedly significant. For the individual coal miner, however, they are not accessible to mitigate the potential loss of income, or the disruption associated with relocating to where the new electricity prospects may be arising. To secure support from such individuals it is, thus, not enough to point only to the positive net employment and environmental effects. They also need to be shown how these positive net effects will directly benefit them, their families and the communities most affected by the changes taking place. Read The Full Article
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
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.
Download This Figure: eskom–generation-unbundling-scenario
Govt urged to include IRP adjustment that steers renewables jobs the way of coal regions: http://www.engineeringnews.co.za/article/govt-urged-to-include-irp-adjustment-that-steers-renewables-jobs-the-way-of-coal-regions-2018-10-10/rep_id:4136
Download Presentation: IRP2018 – ENERTRAG – TBN_4Oct2018
LISTEN: Dr Tobias Bischof-Niemz participating in a Classic Business Panel discussion –
Classic Business’ Michael Avery was joined by Dr Tobias Bischof- Niemz, (Director of ENERTRAG SA and the Head of Corporate Business Development at ENERTRAG AG), Chris Yelland, (MD of EE Publishers), Seeralan Chinaboo, (the Deputy Chair of EIUG) & Knox Msebenzi, (MD of NIASA) to Unpack the 2018 IRP.