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Lights out

The headlines spell gloom and doom. Indeed, as EE Cummings wrote: "this world is all aleak, and life preservers there are none."

The classic bumper sticker from the 1980s, imploring the last person to leave the country to"please turn off the lights", may have been on the money at the time. Today, though, there may not be any lights to switch off… Indeed, some experts predict that South Africa will face rolling blackouts from 2011 until 2016 – as those seen in 2008 if drastic action is not taken to introduce independent power producers and rapidly increase energy efficiency.

Their predictions followed the recent release of an executive summary of the draft Integrated Resource Plan (IRP2010) by the Department of Energy. The full draft IRP2010, which maps South Africa’s electricity future, is now available for public comment, and the aim is to promulgate the document by the end of the year.

Energy consultant Bert Havenge says the report paints "a grim picture, indeed". "Just months after hosting such a successful World Cup, we are now displaying an inability to keep the lights on. It’s a sad indictment of the energy situation in South Africa, and I don’t see things improving much in the near future," he says.

The report states that from 2011 to 2016, rolling blackouts are anticipated, "unless extraordinary steps are taken to accelerate the realisation of the non- Eskom generation and energy-efficiency projects." Dire, indeed. According to the Mail & Guardian, the report suggested Eskom’s current fleet would be hard-pressed to sustain required performance levels, as there was not enough time to perform adequate maintenance and improve the quality of coal being supplied to a number of its power stations.

The development of the draft IRP2010 considered a number of scenarios to map out the future of the energy landscape, and a number of the scenarios factored in delays in commissioning Medupi Power Station, as well as a possible cancellation of the Kusile power plant project. The IRP2010 was aimed at balancing the "cost of electricity production" with the "limiting of carbon emissions", said a statement from the Inter-Ministerial Committee on Energy.

According to the M&G, of the 17 scenarios considered, two the balanced scenario and the revised balanced scenario – that came out of discussions in the Energy department and workshops with the inter-departmental task team, presented the best case to meet the key priorities.

"The balanced scenarios represent the best trade-off between least-cost investment, climate-change mitigation, diversity of supply, localisation and regional development," it said.

Coal is here to stay
The balanced scenario included commit ted energy projects under the previous IRP and some additional renewable energy. Under the balanced scenario, the future electricity energy mix by 2030 would comprise coal at 48% of baseload power; nuclear energy would make up 14% of baseload power up from 6.5% at present; and a further 2% of baseload power would come from imported hydropower.

About 5% of mid-merit power would be supplied by gas, while peaking power would come from open-cycle gas turbines (OCGTs) supplying 9% and pump storage 5%. The inclusion of OCGTs has been controversial, given the high cost of running this plant that runs on diesel fuel to supply power when demand is at its highest. About 16% has been set aside for power from dispatchable renewable technologies. A large emphasis on energy efficiency is factored into the plan.

The draft document notes that the balanced scenario provides for a 30% reduction in carbon emissions, while only requiring an extra 8% in funding compared with the least-cost scenario. Weighed against a low carbon scenario, which will require an additional R790 billion, the balanced scenario could be significantly cheaper.

However, states the M&G, the finalisation of the IRP2010 will come against the backdrop of intense work in the medium t e rm to save power and keep the lights on.

On another front, an ambitious plan to reduce South Africa’s reliance on coal by almost half by 2030, and to more than double the use of nuclear energy, was released by the Department of Energy recently, while the contribution of renewable energy technologies is poised for a significant increase. According to Business Day the proposals, which are part of the department’s draft integrated electricity resource plan, show the government’s preferred energy mix for the next 20 years.

"They provide prospective investors with an indication of the shape of South Africa’s future energy industry. The integrated resource plan is a 20-year electricity capacity plan that gives an outcome of projected future electricity demand, how the demand would be met and at what cost," the newspaper says.

It adds that the Inter-Ministerial Committee on Energy, set up to consider energy policy issues, has approved the IRR "The committee’s approval paves the way for a second round of a public consultation process. The department held the first round of consultations in June.

"In the draft IRP, the department is proposing that coal contribute 48% to the energy mix by 2030, followed by renewable energy (16%), nuclear (14%), peaking open cycle gas turbine (9%), peaking pump storage (6%), mid-merit gas (5%) and baseload import hydro (2%). These point to a window of investment opportunity mainly in renewable energy and nuclear technologies," adds the Mail & Guardian.

"The draft plan envisages 5 2248 megawatts of new capacity in the next 20 years".

While coal will still be the largest contributor to electricity generation, the department’s proposals represent a significant reduction in its contribution. Business Day states that coal currently accounts for over 90% of electricity generation. Eskom’s two nuclear reactors at the Koeberg power station supply 1 800MW or 6% of South Africa’s electricity needs.

The renewable energy industry is yet to take off in the country. The Energy department said, in drawing up the draft IRP, the Inter-Ministerial Committee considered various scenarios. These included cancelling the Kusile Power Station, or delaying the building of the Medupi and Kusile power stations. Eskom managing director for systems operations and planning Kannan Lakmeeharan repeated the utility’s commitment to completing Kusile. "These are just scenarios. In fact, the final proposal includes both Kusile and Medupi.

"The department also says we should not delay the two projects because they are important for security of supply," he added. Lakmeeharan said Eskom had in the past alluded to the looming supply constraints "because the rate of capacity addition will be less than the (electricity) demand reduction.

"The report says we must do something. Options include energy efficiency, independent power producers (contribution) and the energy conservation scheme", he said.

Energy programme manager at growth consulting company Frost & Sullivan, Cornelis van der Waal applauded the Energy department "for coming up with something that portrays the real scenario as we see it. Urgent action is needed." He told Business Day that the required action includes commissioning power from independent suppliers.

New developments
In another development, South Africa is to acquire six new power stations worth R1.3 trillion in an effort to eradicate power cuts, according to reports.

China, France and South Korea would help in the construction of the proposed new stations, said the Energy department’s directorgeneral, Nelisiwe Magubane. The power stations, which formed part of the government’s new proposed energy plan, would use "different technology".

"This project has actually not yielded the required results… we need them to relook the research projects," said Magubane.

"But in the meantime, we are still going to need additional power plants and we are going to use what we call conventional nuclear power as we use it in Koeberg, in Cape Town."

In the interim, Frost & Sullivan estimates that the South African co-generation market will be worth $30.4 million by 2012. The market will experience significant growth of approximately 30% to 50% per annum over the next five to 10 years.

"Co-generation has the ability to achieve up to 90% efficiency, while current generation in South Africa has less than 40% efficiency," notes Van der Waal.

"With higher efficiencies, co-generation plants will be able to attain higher profit margins than regular sources of generation. This would offset the significant start-up and maintenance costs in the long run"

Frost & Sullivan expects the co-generation sector to experience a compounded average growth of 48% for the next five years from 2007. The market was set to expand significantly to meet Eskom’s plans of increasing its total output energy level to 900MW through co-generation by 2012. Sizeable start-up costs are one of the main restraints hindering companies from establishing co-generation plants. For instance, a three-megawatt turbine costs $1.37m, while burners can cost between S8mand$20m.

"Despite the offer of financial assistance from Eskom and the government, the market is adopting a cautious approach," notes Van der Waal. "Joint ventures in the private sector could, however, help minimise start-up costs"

According to Business Report, co-generation or the production of electricity from industrial waste and heat streams – looks as though it has become the buzzword of the moment in the South African energy sector.

"That might have something to do with the Co-Generation World Africa 2010 conference in Johannesburg recently, but all the same, Public Enterprises Minister Barbara Hogan used the occasion to advise that co-generation would feature strongly in the 2010 Integrated Resource Plan under development by the government" Business Report says.

"This will provide a blueprint for the country’s electricity mix when it is finalised any day now. ‘Thus far, six independent power producers (IPPs) have signed offtake agreements for 380MW under Eskom’s medium-term power purchase programme while being granted generation licences by the National Energy Regulator of South Africa" the newspaper reports.

"They include JSE-listed Ipsa, which had shelved its Newcastle co-generation project for two years; petrochemicals group Sasol; and pulp and paper group Sappi.

"The licensees’combined initial contribution to the national grid is a fraction of what is required to boost South Africa’s electricity reserve margin," according to Business Report.

"The co-generation programme will have to be stepped up considerably, even beyond Eskom’s stated intention to add between 1 000MW and 1 500MW of cogeneration capacity up to 2013"

On the renewable energy side, southern Africa’s capacity has not even come close to being realised. A commercial wind farm has been established outside Darling on the Cape West Coast, and a new wind farm in the Eastern Cape at the Coega Industrial Development Zone is going to be funded by a large Belgian renewable energy company. Solar energy is another potential growth area, with a suitable climate in large parts of southern Africa providing potentially the perfect environment for solar power plants.

One small-scale but successful example of solar water heating was launched at Anglo Platinum Brakfontein shaft in early September, where the project was looking at saving the shaft 421.54 megawatt-hours a year. Biofuels is a less prominent energy source and there is great debate surrounding whether burning certain crops such as maize or canola increases the price of these commodities, to the detriment of the poor.

Despite the controversy and the government’s non-committal attitude toward any major biofuels projects, there are a number of projects developing new ways of producing energy. In the Eastern Cape, a project is taking place at the Nelson Mandela Metropolitan University in Port Elizabeth, with InnoVenton – the university’s Institute of Chemical Technology – announcing a pilot project to use marine algae to convert carbon dioxide into biofuels.

There are also projects springing up in KwaZulu-Natal and in the North West, where they are looking for investors and further expertise. More notably, the energy potential of hydroelectrical power is immense. There is the Mphanda Nkuwa hydropower station on the Zambezi River in the Tete Province of Mozambique; the Itezhi Tezhi hydropower station to be built on an existing dam in the Kafu River in Zambia; the Kariba North Bank Extension (an existing dam on the Zambian side); and lastly, the massive potential of the proposed Inga Dam and hydroelectric power harnessed from the Congo River.

The Inga 3 site is set to provide 5 000MW of power and, as part of the multinational agreement, South Africa is set to import 3 000MWofthattotal. All these projects are part of the Southern African Power Pool plans to match the energy demands in southern Africa by 2016. Lastly, despite the shelving of the Pebble Bed Modular Reactor project in September, South Africa is looking to go ahead with nuclear power. There is, however, opposi tion from environmental groups about the disposal of nuclear waste and the general dangers of nuclear technology as well as the costs involved in developing the technology.

In a recent meeting between South Africa’s Energy Minister Dipuo Peters and the United States Energy Secretary Steven Chu, the two discussed and put pen to paper on a bilateral agreement on research into next-generation nuclear technology. Finance is a challenge There are many alternatives, and Eskom’s challenge is to raise the finance for those projects that are most feasible particularly in the next five to 10 years.

It has rolled out an expansion plan that will cost about R380bn, so there is no doubt that the task ahead is a challenging one. All this comes in the wake of the decision by the World Bank’s Board of Executive Directors in April to approve a US$3.75- billion loan to help South Africa achieve a reliable electricity supply while financing some of the largest solar and wind power plants in the developing world. The loan – the Bank’s first major lending engagement with South Africa since the fall of apartheid 16 years ago – aims to benefit the poor directly, through jobs created as the economy bounces back from the global financial crisis and through additional power capacity to expand access to electricity.

The loan was provided to South Africa’s power utility Eskom, and was brought about by unique circumstances including South Africa’s energy crisis of 2007 and early 2008, and the global financial crisis that exposed the country’s vulnerability to an energy shock and severe economic consequences.

"Without an increased energy supply, South Africans will face hardship for the poor and limited economic growth," said Obiageli K. Ezekwesili, World Bank vice president for the Africa region.

"Access to energy is essential for fighting poverty and catalysing growth, both in South Africa and the wider sub-region. "Our support to Eskom combines muchneeded investments to boost generation capacity for growing small and large businesses, creating jobs and helping lay the foundations for a clean energy future through investments in solar and wind power," he added.

The Eskom Investment Support Project will co-finance the following blend of energy technologies:

… US$3.05bn for completing the 4 800-megawatt Medupi coal-fired power station, using for the first time on the African continent the same proven, efficient supercritical technology used in member countries of the Organisation for Economic Co-operation and Development;

… US$260m for piloting a utility-scale 100-megawatt wind power project in Sere and a 100-megawatt concentrated solar power project with storage in Upington;and

… US$485m for low-carbon energy efficiency components, including a railway to transport coal with fewer greenhouse gas emissions.

In approving the project, the World Bank Board of Executive Directors noted South Africa’s achievement in increasing energy access from around 30% of citizens to more than 80% since the fall of apartheid in 1994, and noted its Free Basic Electricity policy that provides 50 kilowatt-hours of free electricity per month to poor families.

The Board further noted South Africa’s pivotal role as generator of 60% of all electricity consumed on the African continent, and the importance of a functioning electricity sector for job creation, economic progress, human welfare and poverty reduction. Also discussed were South Africa’s efforts to diversify its energy sources and address climate change through its Long- Term Mitigation Scenarios and the United Nations Framework Convention on Climate Change, through which it has confirmed ambitious emission reduction targets.

"The Eskom project offers a unique opportunity for the World Bank Group to strengthen its partnership with the Government of South Africa, Eskom and other financiers, and help South Africa chart a path toward meeting its commitment on climate change while meeting people’s urgent energy needs," said Ruth Kagia, World Bank country director for South Africa.

A key vision guiding the project is to assist South Africa in taking the first important step toward a low-carbon future by investing in large-scale renewable energy projects, and catalysing the nascent renewable energy industry across Africa. By using a mix of technologies and setting a goal to save more than 3 000MW of electricity through demand-side management by 2013 (a plan that is on target, having already saved 1 000MW by 2009), the South African government is taking steps to renew its electricity sector for greater private sector investment and mobilising expensive renewable energy technologies for wide-scale adoption.

Bottom line? South Africa requires additional energy supplies fast. Either it finds them, or candle sales will soon rocket once more. It is that simple – and that bleak.

David Capel