Renewable Energy: Eskom and Minister of Environmental Affairs briefing

Forestry, Fisheries and the Environment

25 October 2016
Chairperson: Mr P Mapulane (ANC)
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Meeting Summary

The Portfolio Committee and Eskom expressed divergent views over South Africa’s future approach to power generation, with the utility arguing that renewable energy sources were too unreliable and costly to consider as an alternative to coal and nuclear, while the Department countered that issues such as pollution, the community’s health and safety concerns should be factored into the equation.

The meeting had been called after a report that Eskom would not be signing any further Independent Power Producer programmes for renewables. The Committee was concerned that this decision would have a severe effect on South Africa’s ability to comply with the Paris Agreement – an agreement within the United Nations Framework Convention on Climate Change (UNFCCC) dealing with greenhouse gas emissions mitigation - which was recently ratified by Cabinet and already signed by the country.

Eskom said it would support the government’s ratification of the Paris Agreement, but this was dependent on South Africa moving to a zero emitting base load option. A base load was needed, together with interruptible power sources such as renewables that depended on the availability of wind or sunshine. Such an extra power source added extra cost to the already high bill for renewable energy. It said the Renewable Energy Independent Power Producer Programme (REIPPPP) would cost the country R1.1 trillion over 20 years. This was the same amount as the proposed nuclear build programme that would ensure uninterrupted power. Currently the country’s carbon emissions were at 518Mt of carbon dioxide per year. So far, only 15Mt were avoided with the REIPPPP.

The Minister of Environmental Affairs said pure cost was not the only thing that should be taken into account when making decisions about the source of South Africa’s energy - environmental factors, health and possible disasters had to be looked at as well. The country’s energy response in the Integrated Resource Plan (IRP) stated that up to 42% of renewables should be used by 2030. SA had an “energy mix policy,” and there was no choice but to comply with that policy. Funding could be sourced and the world was working on advanced technology to store renewable energy.

It was agreed that the involved parties, and other relevant entities such as the CSIR , would meet again after the 22nd session of the Conference of the Parties (COP 22) which was scheduled to take place from 7 to 18 November. 

Meeting report

The Chairperson said that the Committee wanted to get information from Eskom and the Department of Environmental Affairs (DEA) on renewable energy as part of the preparations for the Conference of the Parties (COP22). South Africa was part of the Paris Agreement that required countries to do certain things to respond to the climate change agenda. Eskom had been identified to share its progress on clean energy as part of the independent power producer (IPP) programme. The DEA would start with a presentation on “Renewable Energy and South Africa’s Greenhouse Gas (SA GHG) Emission Reduction System”

Renewable Energy and SA’s Greenhouse Gas (SA GHG) Emission Reduction System

Ms Judy Beaumont, Deputy Director General (DDG): Climate Change and Air Quality, DEA, introduced Ms Deborah Ramalope, Chief Directorate: Climate Change Mitigation, and asked her to deliver the presentation.

Ms Ramalope said that South Africa had significant solar and wind resources and that renewable energy technology costs have dropped dramatically which presents an opportunity for the scale up of solar and wind technologies.

The SA GHG Emission Reduction System was an organized structure that consists of interrelated and interdependent elements that are critical for the country’s greenhouse gas emission reduction. These elements directly and indirectly influence one another to maintain the existence of the system, and would include a range of measures as contemplated in the National Climate Change Response White Paper (NCCRWP) aimed at achieving the overall national goal.

In 2015, Cabinet approved South Africa’s climate change mitigation system framework. The system includes the following key elements:

  • A carbon budget for each company;
  • Desired emissions reduction outcomes for key economic sectors;
  • Pollution prevention plans by companies with carbon budgets;
  • A reporting system, to gather information on the actual emissions of users;
  • A variety of other measures to be applied to support and/or complement the carbon budget system including a carbon tax.

The system was introduced in phases. Phase one (2016 – 2020) will be voluntary as there is no legal basis to set emission limits for sectors or companies. Phase two (post 2020) will become mandatory only when climate change response legislation is in place.

Ms Ramalope said that carbon budgets for 18 companies, including Eskom, have been finalized. They are relying heavily on those companies to submit pollution prevention plans. A 5% tax allowance was given to companies, even if they do not make their budget.

In closing she said that 5 003 GWh (Gigawatt Hour) of energy were produced in the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) and the emission reduction realised from the programme was 8.4 Mton carbon dioxide (CO²) equivalent. She said the emission reduction options are absolutely critical for SA to reduce carbon emissions. If emission was not reduced in the power sector, the rest of the economy had to take deeper options. The power sector was the sector that produced the most greenhouse gases (GHG).

Renewable Energy: Eskom

The Chairperson of the Eskom board, Dr Baldwin Ngubane, asked Mr Anoj Singh, Chief Financial Officer of the organisation, to introduce the rest of the Eskom delegation.

Mr Singh completed the introductions, and said the presentation would cover the impact of the REIPPP’s contribution to reduce carbon emissions, as well as Eskom’s current status and efforts to reduce carbon emissions, and South Africa’s ability and options to be adopted to comply with the Paris Agreement.

He said the country was committed to peak, plateau and decline emissions. The peak would be reached in 2025 and after 2036 emissions would start to decline. Currently, the country’s emissions were at 518Mt of CO² per year.

The growth in the percentage of emissions avoided due to the capacity from renewable energy resources were growing in line with what was expected in the REIPPP. This year, 3% would be reached compared to 2.7% last year. However, the around 15 Mt of emissions avoided came with a relatively large price tag – a R1.1 trillion cost to the country over the next 20 years. Eskom’s costs were sitting at R28 billion, and that did not include the cost of the base load required to back-up renewables. The base load was the capacity which was needed to ensure continuous electricity with the intermittent power supply provided by wind and sun.

Eskom contributed around 44.5% of the national GHG emissions. Currently it was compliant with its emissions. The cost of compliance was significant, however. Full compliance, including the refitting of stations near the end of their technical life, would cost over R300 billion. To comply in the future, Eskom would need to identify zero-emitting energy options. These would include hydro -- although it was the least logical as it was susceptible to drought -- wind, solar and nuclear. Of these, only nuclear could be used as a base load option. The country’s long coastline made it ideal for nuclear power, as the plant used water to cool down. Another benefit was that fresh water may be created in the process.

Mr Singh said that the country was looking to increase economic growth, which historically resulted in an increase in industrialisation, which had a direct consequence on the amount of emissions generated. 

Eskom’s current initiatives on carbon emissions included:

  • Medupi and Kusile are supercritical plants – higher efficiency translates to lower emissions;
  • Internal energy efficiency programmes include the Compact Fluorescent Lamp (CFL) programme and solar water heaters;
  • Photovoltaic (PV) augmentation at existing coal plants and buildings;
  • Sere wind farm facility;
  • Hydro-electric plant (eg Gariep, Van Der Kloof, Mabashe, Ncora);
  • Koeberg Power Station.

Mr Singh said that Eskom would support the government’s ratification of the Paris Agreement, but this was dependent on South Africa moving to a zero emitting base load option.

Dr Ngubane said Eskom took the issue of climate change, as well as the issue of adhering to the Paris Agreement, very seriously. Eskom hoped that the country would sign the commitment by 3 November, so that South Africa remained a player among the bigger parties and groupings. The country’s full adherence to the Kyoto protocol meant that it should have mechanisms in place for zero carbon emissions.

He repeated that with renewable energy, base load generation was still needed. The only reliable base load for SA was nuclear and coal. The storage of energy from renewables was very limited and very costly. He gave an example. A determination had been made on 100 megawatts of concentrated solar power, which involved building tanks with salt as a store for the sun’s energy that could be released at night. The total cost of that 100 megawatts was R12 billion, whereas R68 billion could provide the country with something like the Kusile or Medupi plants. This was “irrational”.

The discussion now with the Department of Energy was to promote renewables, but not to promote the culture in the country and in the media that renewables was the only solution, as that was impossible. All the things needed to grow the economy would not be achieved using only renewables. Dr Ngubane said he hoped that the Committee would help Eskom to make this situation be seen in a sober, clear and understandable way.

The Chairperson thanked Eskom for its presentation, and explained that the Committee had been worried when it realised there had been a change in policy and it had needed to engage with the entity.  

Minister’s comments

Ms Edna Molewa, Minister of Environmental Affairs, said she had been part of the process of writing the earlier presentation of the Department. She participates in the economic cluster of Cabinet, where the matter of renewable energy was also discussed. Four departments -- Energy, Public Enterprises, Science and Technology and Environmental Affairs -- had discussed what appeared to be a policy change. A report was expected to come out of that.

She said that it had been found very prudent to work with Eskom directly, and therefore they would meet with Dr Ngubane to walk through the programme and processes, to better understand where each one came from. Therefore, her comments that were to follow were preliminary ones.

Where the presentation had discussed considerations of economic growth and eradicating poverty, environmental considerations should have been included, as the country subscribed to sustainable development which had three pillars – people (poverty eradication), economic growth and environmental considerations -- and none of the three considerations could be put aside “even for a minute”

The Minister’s second comment had to do with conditions of commitment. She said that all role players should help each other to understand the target of the intended nationally determined contribution (INDC). There was no word “condition” in this target. There were “assumptions”. The Minister explained the difference between these terms. She said that South Africa was a responsible citizen of the world and a top emitter that needed to do all it could from its side.  In the discussion that was taking place around the world, South Africa was sitting on the board of the Green Climate Fund (GCF) fund -- a strong fund that was expected to have $100 billion by 2020. At a recent meeting she attended, a roadmap of funding beyond 2020 was discussed. The challenge of funding in Eskom’s programme, necessitating a seeming policy change, had been picked up. Funding was not a condition of the programme, however. Other possibilities of funding would be discussed at a future meeting, where the political head would be present, and would perhaps involve other countries in the Southern African Development Community (SADC) region with similar problems, who might do power pooling of renewables with South Africa.

The Minister referred to the report about the 100 megawatts costing R12 billion, and said that while it might appear that there was not value for money now, over the long term there could be other inherent benefits that were not apparent at present. The issue of cost could not be the only factor. Other issues like peoples’ health and avoidance of possible disasters also had to be factored in.

South Africa’s energy response was the Integrated Resource Plan (IRP), but nowhere in that plan was it stated that the country would focus on renewables only. The IRP stated its goal was 42% of renewables up to 2030 - the rest was made up of coal, nuclear and gas. Therefore, SA had an “energy mix policy” and it was building up to the 42% use of renewables. There was no choice but to comply with that policy until the IRP2, which was now in the making, came into play. Linked to this was SA’s Climate Change Response policy, which had to be read together with policies that had to do with poverty, pollution and the carbon tax, which was under the Treasury and the Department of Finance.

Regarding the signing of the Paris Agreement before 3 November, she said that the signing had already been done in New York in May. Also, South Africa’s intended nationally determined contribution (INDC) had already been presented. There was no other document that needed to be submitted. All of the 168 countries involved now only had to do a review to look at the gaps - like funding, the emissions gap and the technology gap.

The Minister said that it was understood that the technology to store renewable power was still not available, and that the whole world was working together on that problem. However, right now solar power was being pumped into the grid, so one could not say that the power generated by renewables was going nowhere. Also, solar panels were the possible solution for small villages up in the mountains. 

The Chairperson thanked the Minister and said her clarification of some issues had been welcome. The speed with which the ratification of the Paris Agreement had been taken to Cabinet was appreciated, even though South Africa had not been part of the first 32 countries.

He assured Dr Ngubane, who wanted to respond immediately, that the Committee was not seeing Eskom as being in conflict with national policy and it understood the concerns raised about the costs from the Department’s perspective.

Discussion

Ms J Edwards (DA) asked, in the light of problems with the Medupi power station’s water licence and the fact that the water in and around Medupi was poisoned and polluted, what the effect on the ocean’s water and the eco-system would be if it was used for cooling nuclear power stations. Secondly, she said that nuclear power would cost “more than an arm and a leg,” and wanted clarification on Eskom saying that renewables were too expensive. She had done oversight in the private sector and had seen solar power, and wanted to know why big businesses and malls could not put power back into the grid. Was there red tape around it?

Mr T Hadebe (DA) said the Minister had highlighted issues that were of concern to him too. One of these issues was that of “putting money before the people.” For him, it was not about the profitability of the entities but the effect it had on communities. The country was required to have 20 million megawatts from renewables by 2030. He referred to a statement made by the CEO of Eskom, that he would not sign up any further IPP’s on renewables. That was not something that Eskom could decide for the country. Would Eskom honour the bid made in the REIPPP for renewables?

Ms H Nyambi (ANC) asked what the global state of research about renewable energy storage was. How was the concept of a carbon budget going to be implemented to measure entities like Eskom? Were the budgets going to be reduced over time, and what was the carbon budget for Eskom at present?

Mr S Makhubele (ANC) thanked the Minister for putting the situation into context. He said the last slide in Eskom’s presentation had had contradictions because within the energy mix, power sources other than renewables were accommodated and that the need for a “base load” should therefore not be emphasised as such. Whereas environmentally damaging fossil fuels were limited, renewables never run out. He asked if the Department could share who the 18 companies were that had had their carbon budgets finalised, and what criteria had been used. Was it known what the cost of back-up would be, where Eskom had said in the presentation that it had not been included? Also, what would the cost be of the strategy that involved a peak, plateau and decline? Because of South Africa’s commitment to the Paris Agreement, it needed to have the decline, and it must start factoring in what these costs would be. What was also important was whether all of these possible new power sources would be affordable for the poor.

Mr P Mabilo (ANC) asked if Eskom was aware that wind and solar-powered TVs were now the cheapest options by some margins. There had been massive investment in the country in renewables, especially in his native province, the Northern Cape, which was turning into a solar hub. How then did Eskom justify the assertion that renewables were expensive? Did Eskom appreciate the contribution of renewables to the national energy grid? What role would renewables play in the energy mix? Why were biomass and geothermal not mentioned as sources, when they had proved to be successful?  Why in the 93 years of Eskom’s existence were they starting to move towards zero reductions only now? One would expect a company like Eskom, being a high emitter, to be leading the way. How was the current drought affecting power plants that needed constant cooling?

The Chairperson asked to what extent the country was still committed to the integrated resource plan.

Ms Mandy Rambharos, Manager: Climate Change and Sustainable Development, Eskom, responded to the question about the oceans and nuclear. She said that Eskom had the fortunate benefit of Koeberg operating for a number of years, on which to base information. In the last 20 years of research at Koeberg, there had been no impact. The small impact that there was, was that Eskom should add biocides to its pipe system, being in water all the time, and a small temperature change in water that dissipated within a few metres. She said Eskom did have water licences at Medupi. Because the Medupi and Kusile plants were more effective, they did not exceed emission levels and they were accounted for in the carbon budget.

Mr Singh said Eskom was aware that the global cost of renewables had dropped, and this was encouraging. He said that the cost of wind, for example, and coal was now the same, but that wind was available only 30% of the time, while coal was available 80% of the time.

Dr Ngubame pointed out that Eskom still had to pay for all the megawatts of power it was supposed to generate, even when the IPPs were connected to grid.

Mr Singh referred to the environmental considerations, and said that Eskom had to transition from high emissions to low emissions, and there was a role for wind, solar and other sources to play. Eskom had to look at all the available options. Renewable sources were only one of the options in the mix. The issue should not be only about profit, but also about people – therefore, what gave the most value for money. Eskom was not completely averse to commitments, and holistically they wanted to support an option that was not only associated with cost, but also the environment and energy security. The discussions about cost were not just about absolute cost – but value for money. Over the next 20 years, renewables would cost R1.1 trillion. The Nuclear Build Programme would cost the same, for dependable energy, and it could be broken up into chunks by not building the ten reactors all at once. He believed that there was a case to be made for the affordability and cost of nuclear power.

Dr Ngubane said that the cost of buying the power should be passed on to the consumer. As it was, National Energy Regulator (NERSA) tariffs would continue to climb through the roof. It was an issue that should be examined thoroughly.

The Chairperson said Eskom was missing the point that renewables had been identified by the country as the way to reduce emissions, so that buying energy from renewable sources was part of the commitment of reducing carbon emissions. Health and the commitment to zero emissions should also be considered. Eskom may have a point, but the information they had should perhaps be packaged for a national discourse. The rest of the country may not necessarily see things the same way as Eskom. Many other countries realised that the economic imperative was not the only thing that should be taken into account.

The Minister proposed that there should be an opportunity to have the meetings to which she had previously referred. She reluctantly referred to a document written by the Council for Scientific and Industrial Research (CSIR) entitled, “Response and possible solutions to Eskom’s allocating concerns,” which spoke to the issue of 30% availability. She said a “value for money” approach made sense, but that approach should also take into account people’s health, possible disaster, and pollution – a net present value, therefore.

The Chairperson said it was the Committee’s commitment to be part of an activist Parliament. There was a need for Eskom to come back to them.

Dr Ngubane said Eskom welcomed the Minister’s commitment and was happy that the Minister was pushing for this.

The Chairperson invited Eskom to come to the colloquium that Friday.

Mr Hadebe said the Committee should be asked if they agreed to such a meeting.

The Chairperson said he was representing the Committee and he thought that it made sense, as policy could not be changed on one’s feet, and all effected stakeholders should be involved.

Mr Makhubele said he thought they could agree with the Minister’s proposal, and that the Department should build capacity, and not rely on companies.

Mr Mabilo said he had a lot of follow-up questions for the next engagement, and Eskom should be ready to respond.

Dr Ngubane said Eskom would welcome such an interaction. It was very important for the people of South Africa to understand how Eskom worked. Eskom was an executor of policy – it did not change policy, and merely pointed out the alternatives.

After the break, the adoption of the Budgetary Review and Recommendations Report (BRRR) was approved.

DEA Quarterly Performance Report

Because of time constraints, Ms Limpho Makotoko, Chief Operating Officer, DEA, mentioned only the targets not achieved by the Department.

These included:

  • The employment equity target, where even if every available position were filled by a female, it would still not be met;
  • The inception meeting for minimum environmental requirements for the preparation of Spatial Development Frameworks (SDFs) – that was an internal problem and consultation had taken place with the SA National Biodiversity Institute (SANBI);
  • The delays in the promulgation of the greenhouse gas reporting regulations;
  • Data collection and analysis had not yet been done for a number of climate change response policy interventions – the bid to appoint a service provider had been advertised again;
  • The benefit sharing agreement between Mokuti Herbs International and the Tlou le Tau traditional council was not yet finalised;
  • The number of youths benefiting from the Youth Environment Service, which had been due to budget cuts;
  • The number of jobs created within the waste management sector.

The Chairperson suggested that they would start their meeting next week with a discussion about this presentation. Members agreed.

The meeting was adjourned. 

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