Light at end of the SA electricity tunnel

Policy changes can dramatically brighten power future

Is there a solution to South African electricity supplier, Eskom's, shortfall?
Will the lights stay on.jpg

While South Africa faces a winter with a high risk of disruptions in electricity supply, future prospects on this front could look considerably brighter in the not too distant future. It would, however, require some drastic changes to the power plan, the Integrated Resource Plan (IRP), as a result of profound changes in the energy environment since it was adopted in 2010.

 

This is the conclusion of a supply model recently developed by the University of Cape Town’s Energy Research Centre (ERC), which was presented at an international energy meeting convened by the Stellenbosch Institute for Advanced Study.

The model, which was described as “not yet representing a new power plan” but work in progress, foresees an electricity future without more nuclear generation.

It suggests that electricity supply risks can be minimised through investments in a diverse portfolio of modular, less-capital-intensive technologies such as gas and renewable sources. 

It concludes that these alternatives can be deployed rapidly and flexibly to meet changing demand patterns. Conversely, investments in “lumpy, capital-intensive technologies, such as large coal or nuclear plants, run the risk of cost and time overruns and of under- or over-supply, depending on future demand variations.

Last week National Energy Regulator of South Africa (Nersa) COE Phindile Nzimande also warned that further electricity price hikes could be triggered if government forges ahead with plans to build at least six nuclear power stations. 

The ERC concluded that  a short three years after its adoption the IRP is outdated due to both domestic and global developments on the energy front. “Many of its assumptions no longer apply and its recommended investment decisions are not optimal. It would result in surplus, stranded and expensive generation capacity,” it is stated. 

Among the developments:

  • Over the past few years, renewable energy prices have fallen dramatically and globally while South Africa’s renewable energy independent power procurement programme has also seen prices fall. The country also has among the most favourable solar resources in the world and is well positioned to benefit from global technology developments;

  • Latest data on nuclear power and on imported liquefied natural gas (LNG), delivered via purpose-built ships show that gas is more cost-effective;

  • There has been an explosion in international gas markets over the past few years. Gas power plants have lower investment costs than nuclear, can be built quicker and complement variable renewable resources;

  • Profound changes are also occurring in the energy intensity of South Africa’s economy due to structural changes and accelerated energy efficiency investments as electricity prices rise sharply from historical lows; and

  • The ability to unlock the energy potential of otherwise untapped deep coal  via underground coal gasification (UCG) has improved considerably in recent years.

Last week it emerged that former Sasol executives Johan Brand and Eliphus Monkoe have made considerable progress with a project that will supply underground coal gas from a deep, stranded coal deposit in the Free State to an independent power producer (IPP).

Brand and Monkoe, who bought 1.4-billion tons of coal near Theunissen from BHP Billiton, have teamed up as African Carbon Energy (Africary), which has been operating since 2007.

South Africa, via the efforts of Sasol, has become a world leader in the technology to produce gas and liquid fuel from coal over a period of more than 50 years. Now the UCG-technology has been added to make possible the tapping of the potential of previously inaccessible coal deposits.

Brand was reported last week as saying “... we are able to compete with coal-fired power generation without the need for any rebates.

With the increase in tariffs, electricity generation by combined-cycle gas turbine(CCGT) is cost-competitive. We have the perfect storm. The South African electricity price has doubled in the last three or four years to the right pitch for us to implement this technology and hopefully we can make UCG far cheaper in the future. But for now, the economics look great for us, even on this small scale.”

He also said  he believes “that once UCG is seen to be commercial, opportunities will arise for poly-generation of electricity with the gases not conducive to making diesel, petrol and chemicals and use the rest for thermal energy”.

He  cautioned that unconventional UCG gas should not be confused with shale gas or coal-bed methane.

The Energy Research Centre in their presentation also noted that shale gas is not an option in the next five years until there are more data on the economically recoverable resources and the environmental effects in the Karoo.

It is clear that South Africa’s electricity supply picture need not be all that bleak, even in the relatively short term. However, heed needs to be taken of the EGC’s assessment

A series of policy and institutional issues needs addressing. First, there is a need for a unified vision and policy for South Africa’s electricity market. Few of the proposals in the energy policy white paper of 1998 have been implemented. A degree of competition for the market is being introduced through the contracting of independent power producers (IPPs). However, this is being done ad hoc.

What is needed is a clear policy statement on the role of Eskom versus private IPPs in the future of South Africa’s power sector. The competitive procurement of renewable energy IPPs has shown that prices can fall, but prices are still above international benchmarks. We need a more purposeful strategy for what we wish to achieve through the introduction of competing private power investors.”

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