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One of the most common remedies proposed for addressing Eskom’s financial and operational problems is that of reducing jobs at the State-owned utility.
Governments around the world are grappling with ways to reignite their economies and limit the duration of recessions precipitated by the response to the Covid-19 pandemic. South Africa is no different.
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.
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.
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.
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.
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.
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.
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.
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
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’.
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.
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).
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.
Previous Transition Talk Columns:
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.
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.
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.
If investment is the goal, what should SA’s electricity game plan be?
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.
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. Read The Full Article
Source: ENERTRAG
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.
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
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 –
LISTEN: Dr Tobias Bischof-Niemz participating in a Classic Business Panel discussion –
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