Energy – biggest challenge, greatest opportunity

From our series over the last few weeks on the epoch in which we are living at present, on our way to a new era in human existence, it has become clear that on a few fronts other than energy - combined with climate change and the development of a so-called green economy - challenges and changes are going to be more profound. It is, however, on this energy front that there are probably the most opportunities, particularly for South Africa.

In the report on the 2030 Conversations project referenced before, one expert participant stated that “most cities and towns will become unsustainable in their current structures and designs during and after the energy crisis.” The same expert, however, in looking at the Gauteng Vision 2055 scenario exercise, came to the conclusion that developments “present new economic and global opportunities for Africa in terms of both food production and switching to renewable energy.”

Michael Lee, founder of the South African chapter of the World Future Society, challenged South Africa to undergo an energy revolution. “During the period 2010-2030, we will move into an era of irreversible depletion of fossil fuels and diminishing economic returns of their associated industries,” the report states.

Lee said it was essential and urgent in view of impending fossil fuel depletion to convert South Africa’s energy order to renewable power and nuclear.

Africa needed to go solar. Solar power has the potential to provide over 1 000 times the total world energy consumption, yet provided only 0.02% of the total in 2008. On the plus side, it was growing at about 25% per annum.

“If we have one of the world’s best potential markets for solar power, why is less than 1% of the total electricity generated in South Africa based on renewable energy resources? When are we going to truly harness and harvest our sunny African skies?” Lee asked.

Energy revolution called for

“We must develop our own South African Oil Depletion Protocol. Between 2010 and 2025, we need an energy revolution,” Lee said, and advocated that nuclear power should be used to assist in the transition from fossil fuels.

He proposed an independent national energy indaba to plan the transition from a fossil-fuel dependent economy to a new energy order based on renewable and nuclear energy.

In Europe, under different climatic conditions, there is a strong move toward wind power; solar power is much easier to harness and more dependable. In this respect, South Africa and the rest of Africa have a distinct advantage, and it positions the continent well to become an energy exporter to Europe.

Importantly, the latest analyses from energy regulators and renewable advocates make the case for treating renewable resources not as fringe or add-on sources of electricity but as part of the mainstream flow of production. In a consultation document produced by the Council of European Energy Regulators in July this year, it is declared that “treating renewable as distinct from the rest of the market was no longer appropriate.”

Twin studies of renewable markets worldwide found that more power-generating capacity was added from renewable than non-renewable sources in Europe and the United States during 2009.

It is expected that in the next few years, worldwide investments in renewable energy will surpass investments in conventional energy. In addition, for the first time private sector investment in Asia and Oceania exceeded that in the Americas in 2009.

In recent years, there has been a large drop in the costs of solar photovoltaic cells (PV) and, besides utility-scale solar PV, 2008/2009 has seen record investment worldwide in small-scale or rooftop solar PV projects. There is an increasing trend of renewable projects attracting international investment, while development assistance to developing countries during 2009 saw $5 billion going to renewable energy projects - compared to $3bn in 2008.

South African developments

While more urgency in the process is called for, South Africa is clearly moving toward an energy dispensation in which renewable resources will play an increasingly more important role.

In February this year, President Jacob Zuma announced during his State of the Nation Address that an inter-ministerial committee on energy has been created to develop a 20-year integrated resource plan (IRP) for new generation capacity. He further announced the creation of an independent system operator, separate from state utility Eskom, to ensure a levelling of the playing field for independent power producers (IPPs).

During May this year, Eskom announced its aims to issue requests for renewable energy projects by the third quarter of this year, and to select projects between six months to a year thereafter. The timeframe depends on the National Energy Regulator of South Africa producing a generic version of the power purchase agreement to be signed between Eskom and IPPs.

In the interim, China-backed Mulilo Renewable Energy has already indicated that it intends to build five wind farms and six PV plants in the country. Eskom has declared its intention to start construction early next year on utility-scale wind and solar-thermal projects at a combined cost of up to R10bn.

It is said that there is R5bn in Chinese finance available over the next three years for South African green energy projects. One of the first projects is a PV project at Copperton, north of Prieska in the Northern Cape; while Mulilo is aiming at eventually developing a PV capacity of 500MW in South Africa.

Vestas, the world’s largest manufacturer of wind turbines, in June this year said it will be setting up a production plant in South Africa as soon as there is greater certainty about the country’s wind-generation plans.

In the interim, the first 25 turbines erected in Port Elizabeth’s Coega industrial development zone provided power to the Nelson Mandela Bay Stadium during the June/July Fifa Soccer World Cup.

It is South Africa’s first commercial wind farm and, when completed next year, will be able to supply the Nelson Mandela Bay area with an average of 45MW of green energy. It created 133 indirect construction jobs, 55 construction and 12 permanent jobs.

Last week, parliament’s portfolio committee on Energy was briefed by the Department of Energy on the second version of the IRP. There were concerns from MPs and industry players as well as interest and lobby groups, but the department said the plan was not cast in stone and would be reviewed next year.

Energy deputy director-general Ompi Aphane told MPs that the plan was merely to developed a range of scenarios aimed at deciding the energy mix best suited to the country at the lowest cost; Cabinet will have the final say on which scenario to choose. A decision is expected in October this year.

Aphane further noted that the costs of clean technologies were high, and that the country faces some tough choices.

It is clear that the energy sector, and electricity generation in particular, will offer the private sector substantial investment and innovation opportunities in the near- to mid term. There will also be a substantial transitional phase en route to a new energy dispensation, in which co-generation with Eskom – besides the possibility of nuclear generation – will offer real opportunities. There is an urgency on this front to avoid a major electricity crisis in 2014 and 2018, when old coal-fired power stations are decommissioned.

Piet Coetzer