South Africa’s future electricity mix: CSIR briefing

Energy

21 February 2017
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The Council for Scientific and Industrial Research briefed the Committee on the scenarios surrounding the introduction of various energy sources to meet the electricity demand up until the year 2050.

Since the year 2000 both wind and solar PV had been heavily subsidised by government however various market changes had resulted in those products becoming far cheaper with the effect that the subsidises are not almost redundant. Over the last eight years the price for wind and solar photovoltaic had reduced by approximately 35% and 80% respectively in that regard.

The Integrated Resource Plan dealt with two aspects: a planning and a real-world scenario. The planning scenario is determined using software called PLEXOS which is utilised across the globe by energy planners, which allows for various inputs such as limitations on Co2 emissions, actual and projected electricity cost and demand, amongst others. Those inputs are then fed into the system which then calculates the least cost scenario based on all of those various factors.

Once the planning stage has been completed the simulation output is placed into a real-world scenario which is fleshed using various means such as Ministerial proclamations and government objectives. Once that has been completed then a procurement process would follow which allows for actual real world costs to be calculated. This is different from the planning stage which is based only on assumptions

First, the Integrated Resource Plan deals with the least cost base scenario, derived solely from technical planning and assumptions to achieve the techno-economical optimisation, which refers to the cheapest way to produce the required amount of projected demand for energy. The model however cannot always capture all relevant factors, policy and other factors itself, which could then require additional adjustments to meet those goals. It was noted however that any deviation from the projections in the least cost base case, would result in increased cost for energy overall. This is done primarily through introducing various constraints into the system inclusive of limitations on Co2 and the introduction of various other sources of power such as hydro and wind, for example. This produced a further calculation based on those additional factors if they were to be introduced. Public consultations would then result in additional adjustments but as of the present the Integrated Resource Plan is still in a draft form as it is still been formulated.

Two comments were made on the IRP assumptions:

First, in terms of the cost inputs for solar photovoltaic and wind, the Integrated Resource Plan projected a steep decline in the cost for that energy source from the year 2010-2030. The programme does not calculate tariff costs as such, but those costs can be calculated according to a cost input that goes into the PLEXUS programme. The 2016 Integrated Resource Plan makes much the same predictions in this regard as the 2016 draft Integrated Resource Plan. In 2010 the assumed costs were roughly 80 cents going down to 75 cents in 2030; but by 2016 the cost was roughly 62 cents, indicating a faster reduction in cost than anticipated.

Second, in terms of the limitations for build rates for solar photovoltaic and wind, h photovoltaic ad generated a degree of scientific debate. The assumptions themselves only affect the costs produced whilst the limitations affect the actual outcome of the energy produced. The 2016 Draft Integrated Resource Plan provides for various limitations regarding the amount of solar photovoltaic and wind which can be used in any given year which appeared on slide 30 of the presentation. This resulted in additional category been used which compared the relative contribution of solar PV and wind, as the 2016 IRP capped the amount of solar photovoltaic and wind at a fixed rate for the entire period up until 2050. The limitation and its static cap was criticised on two grounds: first, there is no techno-economic justification for the limitation and second, if the limitation is to be retained it should not remain static but should adjust according to the relative needs of the power supply. In 2020 the relative input is projected at 2.2% of solar photovoltaic and wind whilst by the year 2050 that same figure reduces to approximately 1.2% of total relative input in terms of total demand; if those levels are not adjusted.

Four different scenarios where then presented. First, the 2016 Draft IRP base case and second the 2016 draft Integrated Resource Plan carbon budget case. The primary difference between the two is that the second scenario imposes tighter restrictions on carbon fuel use to meet electricity demand. Third, the “unconstrained base case” run by the Department of Energy and Eskom per a request by the Ministerial Advisory Council on Energy. The primary difference between the third scenario and the others is that the Ministerial Advisory Council on Energy case imposes no constraints on solar photovoltaic and wind building. Fourth, the least scenario which had been formulated by the CSIR. The primary difference there was that no restrictions were placed on solar PV or wind as per the other scenarios.

Those scenarios were then compiled into a common analytical format and the results were then analysed against one another in terms of the various scenarios to determine various outputs such as cost, total energy produced and capacity as well as the possibility of utilising nuclear power in the various scenarios which in terms of the Integrated Resource Plan base case, would result in nuclear energy providing one constant source of energy.

A DA Member had various questions surrounding nuclear energy. He is not anti-nuclear energy per se but it is positive to have an input on the issue from a non-government entity which provided a more objective analysis. His primary concern was the actual cost of nuclear as Eskom did not appear in his view to be concerned about that issue, they appeared to adopt the position that any additional costs would simply be picked up by the consumer, if nuclear were to be introduced. Eskom had also publicly criticised the use of renewable energy believing it to be unsustainable and unrealistic and he wanted additional comments on that point. He also had concerns about the impact of the introduction of nuclear and other sources on GDP growth, as if their introduction resulted in higher electricity costs that would have a negative effect on GDP and also on employment figures.

An EFF Member had various concerns about nuclear energy. It appeared from the presentation that nuclear provided little benefit besides simply reducing Co2 emissions as well as being the most expensive option. Second, it appeared as though the CSIR endorsed the use of wind and solar energy, but was that a feasible option considering the economic context and climate of South Africa.

The Council replied that the presentation and the work of the entity in general is limited purely to scientific and mathematical research and findings. Any final decision regarding the various scenarios and the respective socio-economic implications is a decision which they do not have the requisite expertise to make proper findings. The primary aim is simply to provide the results of their research and conclusions in order to better inform the Committee and the Department of the various cost implications of the various scenarios and the possible options. Whether any of the scenarios are eventually adopted is an issue for other stakeholders and entities of government to make. The entity’s work is limited purely to objective scientific and mathematical findings. The final decision as to which policy factors and other cost to consider falls to other entities and Departments better equipped to make those decisions than the CSIR which does not take a firm position on any of those issues beyond the scientific and mathematical results.
 

Meeting report

The Chairperson said the prior week the Committee had received a presentation by the Department of Energy (DOE) on the updated resource plan. In that context, the presentation by the Council for Scientific and Industrial Research (CSIR) was a follow up, looking into various issues relating to the energy mix within the country. It was noted through engaging with all the various stakeholders on that issue, the Department could formulate a proper assessment of the issues in that regard and the benefits (or otherwise) of various solutions which had been proposed to those issues.

It was noted that ESKOM would also be required to give a presentation and their comments on the energy mix before the Committee at some time in the future, as it is a central government stakeholder on the energy mix issue as well as on the matter of nuclear procurement.

Both the Minister of Energy and the Deputy Minister had informed the Committee that neither of them would be able to attend due to prior commitments.

Briefing by CSIR
Dr Rachel Chikwamba, Group Executive: Strategic Alliances and Communication, CSIR opened the presentation. The presentation dealt with the CSIR’s research findings regarding possible scenarios relating to scenarios in the electricity energy sector. The primary presentation itself was delivered by Dr Tobias Bischof-Niemz, Manger: Energy Centre, CSIR.

Dr Bischof-Niemz then introduced various members of the delegation which comprised their full technical team; as well as their parliamentary and communication managers. The various members of the delegation from the CSIR were: Ms Joanne Calitz, Senior Engineer: Energy Planning; Mamahloko Senatla, Researcher: Energy Planning; Jarrad Wright, Principal Engineer: Energy Planning; Crescent Mushwana, Research Group Leader: Energy Systems; Tendani Tsedu, Group Manager: Communications; and Azeza Fredericks, Parliamentary Liaison.
           
Background:
The research conducted is being done across the entire value chain. This is inclusive of energy technology on the demand side, energy efficiency and demand response on the supply side, as well as on various energy systems. It was noted that the research conducted on the various energy systems on an international level was headed by Mr Wright who would give that portion that of the presentation following the primary presentation.

Before moving onto the main points regarding South Africa, the first slide dealt with a comparison of the various energy developments in relation to gigawatts (GW) of wind and solar capacity which had been installed globally. The primary reason for focusing on wind and solar capacity is because those are the two newest forms of energy which had been introduced within the last 50 years. Solar energy was represented by yellow bar graphs, whilst wind technology was represented by blue bar graphs. The research indicated that since the year 2000, both of those forms of energy had resulted in a substantial increase to the global energy supply, however in the year 2016 only four extra GW’s of energy was added due to those two energy sources on a global level.

The large growth of both wind and solar energy was driven largely since the year 2000 by various large government subsidies which enabled their growth. As the market subsequently expanded, that led to the manufacturing of various additional products providing both wind and solar energy, which resulted in increased technology improvement.  This resulted in various cost reductions which finally normalised in 2008, resulting in a reduction of cost of 35% for wind and roughly 80% for solar energy over the last eight years. Present indications were positive indicating that if current levels continued, subsidies for those forms of energy would soon no longer be required.

South Africa first implemented the renewable energy power programme in 2011, which then came online in 2013. Slide six illustrated the amount of GW generated from wind and solar energy from the year 2013 up until 2016. By December 2016, South Africa had approximately 3134 GW of renewable energy from those sources.

This however had to be viewed in perspective in relation to the total system load for energy. In 2016 the total demand was roughly 238 terawatt hours. The total system load is defined as the total customer demand as well as the total export demand. Of that figure, roughly 7.8 terawatt hours came from solar and wind energy; which is approximately 3% of the total demand. This illustrated that since the introduction of renewable energy sources in 2013, roughly 3% of the total system load was met by those sources, which resulted in a roughly 1% total increase per year. In relation to the global context that is a relativity fast rate of deployment, especially considering that South Africa does not have a high experience curve with technology of this sort.

In terms of cost within the South African context, the deployment of solar photovoltaic (PV) and wind through the competitive auction programme led to tangible cost results for all new technologies. In November 2011, the average tariff for solar PV was R3.65 and for wind the tariff was R1.51. Those figures came from all projects which had submitted figures during the first bit window. In March 2012, those figures had decreased to R2.18 for solar and R1.19 for wind which was already significantly lower. In November 2015, both of those tariffs had decreased to R0.62, which was a global precedent where both energy sources had come in at the same cost. In total: there had been an 80% cost reduction for solar PV and almost 60% for wind energy since both sources were introduced four years previously.

Comparing the R0.62 figure for both tariffs with other sources is however quite tricky which appeared on slide 9. The problem with comparing those figures, especially with other international sources, was that various factors had to be considered regarding the price difference, such as differences in the underlying technology used and different risk profiles, for example. In October 2016, the DOE had announced the first competitively procured coal project from independent power producers. The announced tariff for that project R1.03. Since that project had been announced for the first-time South Africa has three different technologies and corresponding tariffs competing with one another on a level competitive basis. The only difference between the various sources is the underlying technology. The indications thus far show that wind and solar PV is roughly 80% cheaper than the new coal project.

CSIR’s Approach and Project Team
The presentation then dealt with the Integrated Resource Plan (IRP).

On a conceptual level the IRP consists of two aspects: a planning and an actual real world scenario.  

At the core of the planning/simulation world is he IRP model which uses a programme called PLEXOS to run those simulations. It is possible in principle to use other software for that purpose, but both the CSIR and ESKOM had decided to use the PLEXOS product, which is used by power system planners and operators across the globe. The programme runs various technical optimisation programmes and scenarios in order to achieve the optimisation of the power system. This occurs when input assumptions such as current and projected electricity consumption, demand and technology cost are placed into the programme. Various constraints can also be placed into the model such as Co2 limits, which then requires the programme to optimise its figures which cannot go higher than a certain Co2 limit. All of those inputs are then fed into the system, which uses a mathematical optimisation tool which produces a particular output. That output then indicates what would be the cheapest way of producing power reliably within the next 25 years or further.

Once that least cost output had been produced then various policy adjustments would have to be factored in. This is because the first output deals purely with first order technological costs which can be directly quantified and accounted for within the power system. If various relevant policy factors are then adequately captured within the first model, those policy adjustments then need to be dealt with after the fact.  

Once the simulation phase has been completed the next step is to apply that simulation output to the real-world scenario. At this stage the IRP plan then gets formalised through various means such as ministerial determinations based on IRP capacities. Practically, this occurs where the Minister looks at the simulated plan and makes a determination as to whether to set particular targets in order to meet the objectives set by the simulated plan. Once that ministerial determination had been made, the IRP then moves into the procurement process which consists of a competitive procurement process through a tender for example.

Once the procurement process has been completed actual technology costs can be calculated. This can be contrasted with the costs which are inputted into the programme at the planning/simulation phase which are only assumptions.

The IRP process then deals firstly with a least cost base case which is derived purely from technical planning, which is referred to as the technico-economical optimisation. The optimisation usually forms the least cost base case, which refers the overall cheapest way to produce the required and projected amount of power required. Whilst there might be certain scenarios which are not captured in the model itself it could then be necessary to consider various other policy factors as raised above. It should be noted however that any deviation from that mathematical value as derived from the technico-economical optimisation will result in an increase of cost for energy.

This then gives rise to various scenarios such as where a constraint is put in place which then can limit the number of renewables which can be placed in the system. This allows for additional sources to be placed into the calculation which might not be part of the least cost base scenario, such as nuclear, gas, hydro and other sources. This allows a calculation to be made as the total amount that cost would increase if those sources were to be introduced into the system.

Once those scenarios have been calculated the IRP is adjusted further according to public consultation on the projected cost scenarios and policy adjustments of the base case, which then results in the final IRP.

At present the IRP for 2016 is currently in the process of being developed. The first draft was published at the end of last year, which did indicate a limitation on the base case in terms solar PV capacity, as the model is limited by the total capacity of solar PV which is permitted to be built in any given year.

Comments on IRP Assumptions
Two comments were made regarding the assumptions: cost inputs for solar PV and wind and limitations on build-out rates for solar PV and wind.

Cost inputs for solar PV and wind
Slide 22 dealt with the IRP forecasted steep cost decline for solar PV from 2010 to 2030. The PLEXUS programme does not use tariffs as a factor in terms of its input as such, but rather a tariff can be calculated according to the cost input that goes into the PLEXUS model. In the 2010 IRP there was an assumption that the cost for solar PV would reduce in the near future. The planning assumption was that the tariff reduction would be from roughly R2.40 to R1 and the assumption was then that by 2030 the cost would be in the range of 50 cents. In 2016 the cost was around 90 cents and thus is very quickly approaching the cost assumption. The conclusion reached is that thus far, the current figures have confirmed to a large extent the cost assumptions which the IRP in 2010 had projected.

The 2016 IRP largely uses the same cost projection calculations as the 2010 IRP. As the projected cost assumption is expected to materialise in 2030, the practical effect is that projected cost across the planning horizon has effectively increased.

The 2010 IRP did not assume a cost funnel and only assumed one technology with one profile and all projected costs determined those parameters. In 2010 the assumed cost was roughly 80 cents going down to roughly 75 cents in 2030. At present the cost is around 62 cents as of 2016 which is significantly lower than the assumption which was made for 2030. The 2016 IRP has introduced various additional cost factors for wind with various cost funnels. The minimal cost is more or less in line with the projections that were made by the 2010 IRP assumptions but is slightly higher than previous projections.

Limitations for build out rates for solar PV and wind
The cost assumption does generate a degree of scientific debate as the assumption will inform what the different scenarios eventually cost, but it does not affect the actual outcome. The limitations placed on the build out rates for solar PV and wind do however affect the actual outcome.

The 2016 IRP imposes an annual new build limit on solar PV and wind, which effectively means the model is not allowed to build more capacity on either solar PV or wind in any given year. The graph illustrating the various new build limits appeared on slide 30 of the presentation.

An analysis was conducted which compared the annual new build limits with the size of the system which is currently been planned for. This was analysed according to the system peak demand, by the year 2020 the total system peak demand estimation is approximately 44 916 GW. By 2050 the projection almost doubles to around 85 804 GW. The new build limit however remains constant throughout that period as it is capped at 1000. This gives rise to two comments. First, the CSIR sees no real technico-economic justification for the new build limit in the first place. Second, if a new build limit is imposed for any technology, that limit should be relative to the size of the power system at any given time and should not remain static throughout the various periods.

To provide for further information the research added an additional category which calculated the relative new build limit for solar PV as derived from the IRP. In 2020 the relative limit is projected at 2.2% whilst by the year 2050, those forms of energy, if keep at the same new build limit, would only be added to contributed 1.2%.

Those figures were then analysed comparing what other countries had also done in this regard, which appeared on slide 31. The two black lines on the graph dealt with the new build limits solar PV as imposed in the IRP model for the years 2030 to 2050. The graph then indicated how many other countries had installed of those energy supplies over the last 10 years. Germany began with a relative new build limit for solar PV of 4% in 2007 which then increased to 9% by 2011. Italy began with a relative figure of 1% in 2010 up to 17% in 2011, but it was noted that this figure is an outlier. Various other “follower” countries had also begun to make increased use of those energy sources, with the UK, Japan and China reaching percentages of up to 5-7% of their total relative power supply in terms of solar PV energy. This was then followed by various “second wave” countries such as China where solar PV contributes a relative 2% of their total energy supply. The conclusion is that overall most countries are investing far more resources into building their solar PV capacities as a total relevant percentage of their energy supply than South Africa, given the annual new build limits imposed.

In terms of wind energy, the new build limit is also limited to a static figure of 1600 per year, with a total relative percentage of 3.6% in 2020 which has a projected decrease to 1.9% relative figure in 2050.

Much of the same conclusions as pertain to solar energy also apply to wind energy as most countries have invested comparatively more resources than South Africa as a total relative percentage of energy. Germany, Spain and Ireland have all added a total relevant percentage ranging from 4-8% during the 2006 to 2016 period.

Various possible reasons to limit the annual build rate is that those sources can not adequately meet the demand for GW supply. A second possible reason is that if the power system were made too reliable on wind and solar PV, that could lead to the power system becoming unstable, if those sources were to fail. As a total global comparator, however, South Africa utilises far less wind energy than other countries. Germany, Spain and Ireland are all sitting at around 60% and higher in terms of total wind penetration. China, India and Brazil were currently at around the 20% mark. The current IRP however limits the wind penetration by 2050 at around 35%.

IRP Results and Least-Cost Scenario
Input Assumptions
Much of the input assumptions were more or less, exactly the same as they appear in the 2016 IRP.

In terms of electricity demand, the research figures appeared on slide 37 of the presentation and are measured in terms of terawatt hours per year (TH). The TH is then forecasted from the current period up until the year 2050. The assumption is that the country is currently moving from roughly 250 TH presently to around 500 TH in the year 2050, which is approximately a doubling of the current electricity supply which is consonant with the projected demand for electricity. It was noted that a doubling of the current supply is quite an ambitious goal, but is far better to plan according to the highest common denominator as if a plan were implemented which did not attempt to reach higher targets, it would then be more likely that such a plan would not adequately meet all of the projected demand. Whilst this approach does run the risk of creating excess capacity which can have negative economic implications, the converse situation where there the supply cannot meet the demand leads to far worse consequences.

A decommissioning plan and schedule is currently in place for existing coal power plants which appeared on slide 38 of the presentation. The research indicated that at present, much of the current coal fleet is quite aged and will be due for decommissioning within the next 10 to 20 years. The solar PV and wind plants have a life span of around 20 and 35 years respectively. The figures did however take account coal plants which are currently under construction such as Medupi and Kusile power station.  Assuming that no additional coal power plants are constructed and completed up until the year 2050, the figures then indicate that only those two coal power stations will contribute towards the electricity supply up until that year. As existing coal stations are decommissioned however the supply of electricity will accordingly drop creating a supply gap. The IRP however addresses this issue by filling that gap in the least cost and most efficient manner primarily through shifting that demand away from coal power to sources such as wind and solar energy.

Cost assumptions are measured in terms of lifetime cost per energy unit (LCOE) which are then measured in terms of rand per a kilowatt hour, which appears on slide 41 of the presentation. Those figures indicate that as of April 2016, it costs roughly R1.41 per kilowatt hour mid-merit coal and gas, R1.09 for nuclear power. The peaking energy sources are diesel and gas, which cost around R2.89 and R3.69 respectively during particular times of the year, such as winter.

It is important, however, to read those figures alongside their corresponding Co2 emissions figures as the model caps Co2 emissions at a particular level. In principle, there are three different power generators of those sources of power in relation to the issue of Co2 emissions. Carbon neutral which is renewable, nuclear and carbon intensive which consists primarily of coal. Gas and diesel fired power stations are not strictly carbon intensive nor neutral but somewhere in between those two energy generators. The aim however is to gradually decrease Co2 emissions from the current rate of around 250 Co2 omissions tonnes per year in 2016 down to around 200 by the year 2050.

Results
Four scenarios had been formulated. The first is the 2016 draft IRP base case and the second is the 2016 draft IRP carbon budget. The primary difference between the two is that the Draft 2016 carbon budget scenario imposes tighter carbon reduction targets than the base case scenario. The third scenario is the draft IRP 2016 “unconstrained base case” which was a scenario run by the DOE and Eskom per a request by the Ministerial Advisory Council on Energy (MACE). The difference between the MACE case and the other scenarios is that the MACE case does not impose any constrains on solar PV and wind. The final scenario is the Least Cost case which had been formulated by the CSIR did not fall under the ambit of the DOE as the other three scenarios. The differences between that scenario and the others is that no constraints are placed on solar PV, wind and Concentrating Solar Power (CSP) costing as aligned with the latest IPP results as well as to meet the demand response for the residential warm water.
The base case results are then analysed and compiled into a common reporting format in order to allow the different scenarios to be easily compared against one another. An annual report is then compiled and published by the Department which shows the annual capacity growth for each technology in the entire year. It was noted that this is important as it allows the Department to determine how much more capacity had to be introduced to meet their targets. Those figures did not give the actual power capacity at any given time within the system as a whole, rather it estimated how much energy was produced every year and how much more energy would have to be introduced in order to meet the targets in the future.

In terms of the IRP 2016 Base case, the total TW hours of electricity produced per annum would be roughly one third coal, one third nuclear and one third renewable and other forms of energy by the year 2050.

In terms of the carbon budget case, stricter limits are placed on energy sources which are carbon based. Approximately 40% would be nuclear energy with a far smaller proportion of coal by the year 2050. The reason is that the carbon budget case attempts to limit as far as possible the use of carbon based energy. This is achieved primarily through not building new coal stations or sources and minimising what coal is currently utilised.

The removal of those limitations then results in the least cost case. This scenario has an approximately 80% renewable energy share by the year 2050 with a residual supply on the existing coal stations namely in the Medupi power station and hydro power.

Through removing the renewable limits, the model then does not build or factor new coal or nuclear sources and phases out the existing fleet of coal and nuclear then replacing all existing and newly built sources with either wind or solar PV or a mix of those two sources. This allows for a greater degree of flexibility through combining various sources both renewable and non-renewable carbon based sources. It was noted that it is often thought that a large amount of renewable energy requires a large amount of gas. In terms of the least cost case the amount of electricity produced by gas is 44 terawatt hours whilst in terms of the IRP base case the amount produced is 39 terawatt hours. In terms of the carbon budget case however 60% more gas is required to produce the same amount of energy as in the other two scenarios. The conclusion was that an inflexible share of nuclear energy is unsustainable as it requires a constant continuous output of supply. This is because when using an inflexible system such as nuclear, those inflexibilities then need to be compensated for by other sources such as coal and gas to ensure a stable supply.

In terms of a capacity perspective the results are slightly different in relation to the various outlined scenarios. This is because wind and solar PV have a lower capacity factor than coal and nuclear energy, this requires more capacity to be built in order to achieve the same amount of energy.

The least cost case then has 240 GW power system by the year 2050, 90GW wind, 70GW solar PV and a large fleet of coal and gas powered stations making up the remainder. However, in terms of the least cost scenario the gas power contribution is slightly less than the carbon budget case. In terms of that scenario however no new nuclear or coal power will be added to the existing capabilities.

An extensive study had been conducted over the past two years determining the efficacy of solar PV and wind across the country. Two important results were summarised. First, if one looks at the renewable energy zones only in terms of the study conducted by the Department of Environmental Affairs, the area that was allocated to those zones is enough to create approximately 1200 GW of solar PV and roughly 500 GW of wind. Second, the conclusion is that if one looks only to those areas, there is more than enough potential capacity to meet the demands at least in terms of the least cost case.

The study conducted by the DoE in terms of removing the renewable energy limits resulted in very similar modelling results as those found by the CSIR. Those results arose from the MACE DoE study which requested a new study which removed the limitations in terms of solar PV and wind. Those results indicated the following. By removing the renewable constraints, the Departments new model does not build new nuclear stations but does build 7GW of new coal compared to the 15 GW of new coal energy in the constraint case. The conclusion is that the unconstrained case by the Department is very similar to the least cost case as conducted by the CSIR.

The next aspect of the presentation dealt with a time plot outlining a typical week under the three distinctly different scenarios presented.

The 2016 Draft IRP base case, indicated that the energy supply in terms of nuclear energy would run at a constant output. The coal fleet would also run constantly as it is a base power generator however when there is low demand but where the wind supply is relatively high, the coal supply then curtails to allow for a balance in terms of supply and demand.  The rest of the demand would then be made up in terms of wind, solar PV and gas.

In the carbon budget case, the main supply of coal is reduced whilst the nuclear supply increases. That then reduces the carbon emissions in that case, with a corresponding higher supply of gas which supplies the majority of energy during the day. The capability that then comes from the flexible demand side for electricity is then met using gas.

The least cost scenario functions where the demand functions as a constant. The stimulated data indicated that there were periods during the week when there was a low supply of wind due to the wind not blowing very strongly. That then requires an increase in gas to meet that lower demand. However, the results indicated that during the week the wind began to produce higher amounts of energy which then allows for a corresponding reduction in the gas supply. The model however does not save any energy which is generated and thus any energy generated in excess of demand, from an economic perspective, is then effectively thrown away. The residual coal fleet in terms of Medupi however would run at a more or less constant rate, as it would be more economical to follow that route.

The final aspect of the presentation dealt with the cost of running of power generation in terms of each scenario to achieve the estimated demand by the year 2050.

In terms of the Draft 2016 IRP base case, it costs Eskom roughly R130 billion to run its total power generation fleet per annum. The results indicated that the total power generation costs then increase by the year 2030, which is due to two reasons. The first reason is the current models are not currently cost reflexive due to various tariff increases. Second, the demand growth costs would naturally increase over time.

From a costing side, the IRP base case and the least cost are more or less the same. A difference however is that in terms of the least cost case is that by the year 2050, the least cost case would cost around R86 billion per annum less than the IRP 2016 base case scenario, which is a roughly 20% higher cost.

Discussion
The Chairperson noted that it would be beneficial to have various stakeholders present simultaneously such as National Treasury and Eskom, in order to be able to make a decision regarding real world policy and financial costs in relation to energy. This would allow for multiple considerations to be taken into account regarding each of the scenarios, such as the global financial situation and the economic context. His concern was that whilst the scenarios presented illuminated much of the issues, the problem was that those scenarios appeared to be purely hypothetical, which then raised issues regarding their real-world application and implementation.

Mr Mackay noted that it was positive to receive opinions from a non-governmental agency regarding the possible introduction of nuclear energy which aided the Committee in establishing a level of objectivity regarding those issues. In response to the comments by the Chairperson, it was noted that this would be a perfect opportunity for the Chairperson to deliver of his promise of public hearings in relation to nuclear energy to achieve that purpose. Dr Malcom Kim had recently written an article regarding the great deal of public interest in nuclear power. The gist of that article was that there was a great deal of anti-public sentiment towards the possible introduction of nuclear power into the energy mix. Whilst the Member was not inherently opposed to the use of nuclear energy, he had various concerns around its cost. In that regard it was positive that the presentation provided information regarded estimated cost as well as the proposed tariff increase. Specifically, in relation to the tariff has the CSIR modelled the impact of the percentage increase of the tariff in relation to its impact on GDP growth? Whilst input costs regarding electricity is expensive any increase would have a corresponding impact on economic growth and employment. A key question is whether if a more expensive energy plan was adopted, what would be the implications in relation to GDP growth as that would be a very important factor in determining which plan to ultimately adopt. He noted that Eskom did not appear to have much concern regarding the actual cost of the various programmes, as their approach was simply to pass the cost on to the consumer and then the consumer would be forced to pay those higher rates.

Mr Mackay also wanted to know what level of interaction the CSIR had had with the DoE outside of public hearings? Whilst he did not have technical training in mathematical modelling, his reading of the research conclusions showed that there was a great deal of divergence between the findings of the CSIR and the Department. He also wanted to know if any key assumptions in the IRP are problematic in their opinion. There had been a large amount of criticism from various sectors and stakeholders criticising those assumptions, which arose largely due to the research conducted by Eskom which appeared to indicate a tendency towards wanting to adopt nuclear energy as the most affordable and suitable option. Eskom had also raised concerns regarding the suitability of renewable energy with the argument that it would be unsustainable leading to various negative consequences. Did the CSIR have any comments regarding those claims, and if that were the case how much would it cost to remedy those shortcomings to implement renewable energy? Finally, Eskom had stated in a report last year that renewable energy is essentially 18% of the cost base for energy generation but only provides 2% of the total output. Did the CSIR believe that figure to be either fair or realistic, as questions to Eskom to clarify those findings had not been answered.
 
The Chairperson wanted additional clarity on which report Mr Mackay was referring to specifically in relation to his concerns regarding renewable energy and Eskom.

Mr Mackay replied that the figures came from the Eskom quarterly report to the Public Enterprises Committee at the end of last year, when Mr Brian Molefe was still the Eskom CEO. Mr Molefe had claimed that as the renewable energy output was so low in relation to cost, Eskom was reluctant to issue additional IPP’s and renewable’s more generally. That claim would have to be tested for invalidity if there was any chance of getting Eskom to authorise additional IPP’s and to adhere to sustainable energy policy more generally.

Mr Dlamini (EFF) stated that it was not true that the EFF was always unreasonable in its disagreements with the ANC, but would agree with the ANC when they began to take deal with issues and policies which the EFF had raised concerns about. For example, the party did agree with the possible amendment of s25 of the Constitution dealing with the expropriation of land, as well as the suggestion of the Chairperson to bring the various agencies and stakeholders into one room to discuss the various issues which had been raised. The former Eskom CEO had stated that under the current IPP’s Eskom was losing around R9 million, he wanted further comments on that issue. The presentation appeared to recommend wind and solar energy in particular. Is the landscape and climate appropriate for those energy sources also considering the economic context? In relation to the nuclear energy issue on page 41, the presentation dealt with the issue of costing. in relation to all the other energy sources such as coal, solar and wind nuclear appeared to be the most expensive option. If that is the case, then what benefit does nuclear energy actually offer besides simply reducing a fraction of the carbon emissions?

Page 38 of the presentation dealt with electricity demand but the findings indicated that even with nuclear power there will still be a demand gap, requiring other sources of energy in order to meet that gap. On page 64 the solar and wind projections indicated that less water would be utilised if a greater dependence was placed on wind and solar energy. Was the conclusion then that solar and wind was a preferable option as it would reduce water consumption, which was a highly relevant factor given the current drought in the country. Was the conclusion then that nuclear should ideally not be pursued at the expense of other alternative energy sources?

Dr Bischof Niemz replied that their research did not endorse any particular resource or outcome. Their approach was simply to place various inputs into their least cost model and whatever conclusions that model produced, that would be what they would base their research and conclusions on. The research simply provided scientific and mathematical conclusions and those results were then shared with the Members of the Committee.

In relation to the question regarding to the cost on the economy, it was noted that the work of the CSIR is limited purely to technical findings regarding electricity use. The conclusion was that the average tariff would be around 50 cents more expensive in the base case compared to the least cost scenario. Any figures and conclusions beyond that technical and scientific findings are not considered in their research as they are not properly equipped to make those findings, which should rather ideally be done by other entities and organisations with the appropriate expertise and training to make those conclusions regarding socio-economic conclusions.

On the question regarding interaction with the DoE, in most cases both the research and conclusions reached are ether similar and in some cases even completely identical to, those conclusions which are reached by the DoE in similar research findings. Other data generated over the last two years regarding wind and solar energy were almost completely identical to those made by the Department in similar studies. Other input assumptions were in exactly the same manner as those of the Department such as in relation the IRP programme. The primary difference was that the CSIR removed the limitation in the IRP regarding solar PV and wind, when conducting their research. The main reason for removing those limitations was because they were of the view that firstly there is no technico-economical reason to limit those two sources and secondly because their research was designed largely to remove such limitations in order create a model that would create energy according to the least cost. Whichever scenario is implemented or not is a completely different question and it is even possible that a scenario could be implemented which is completely different from those proposed thus far. The primary purpose is simply to provide information as to the various implications of adopting a given path or scenario and the ultimate decision as to which scenario, given all the negatives and benefits, should be adopted falls then to other decision makers within government.

In relation to the question regarding the cost of nuclear, it was noted that the cost calculations are exactly the same as those used in the draft IRP. The reason is that the costs calculated and used by the CSIR are taken directly from the IRP draft with no corresponding alterations. Again, it was emphasised that whether the benefits outweigh the negatives of potentially adopting nuclear power has not been considered by the NCIS. Their main role is simply to conduct scientific and other research, to calculate costs and then to present those various findings to whomever may be interested. The ultimate decision as to whether to adopt nuclear or not would then be up to different stakeholders and government officials. The NCIS is not adequately equipped and lacks the relevant expertise to essentially recommend a policy decision outside purely mathematical and scientific conclusion. The reason for the water reduction on page 64 in the least cost case, is primarily due to a reduction in reliance on coal. In the planning scenario, the reason that the nuclear option results in less water consumption is that it does not require any fresh water consumption to power, however it was stressed that the reduced water consumption was not due to nuclear per se, rather it was due to the reduction in coal consumption which consumes a large amount of water. The least cost case also did not propose closing down all coal power stations prematurely. Rather it advocated running those power stations for so long as they remained operational, as once a coal station had been built it is quite cheap to run. What the least cost case stated rather was that no new coal power stations should be built beyond those either already in existence or for which construction has already begun. The reason is that to create additional power stations would be far more expensive than the proposed alternatives.

Mr Wright dealt with the questions relating to variability and sustainability of solar PV and wind. A differentiation had to be made between intermittency and variability. Intermittency is something which is variable and over which one does not necessarily have full control over with the implication that one cannot make fully accurate predictions in relation to intermittent factors. Variability is more variable and which changes over time, however the major difference is that there is a greater understanding and degree of certainty as to how those changes can or will occur. In a number of countries around the world variability has been applied in relation to solar PV and wind. Whilst the two power sources do vary considerably in certain respects there is a certain amount of variability available and accurate predictions can be made to a certain extent regarding how those resources may change or not in the future, allowing appropriate planning to be made, which has been calculated into the model. As the bulk of the energy comes from the solar PV hours, those hours are then calculated first and the rest of the system is integrated around that power to calibrate for any changes to meet the energy demand. This allows for a greater degree of flexibility to be introduced into the system to meet demand.

On grid stability, there are various components as to what constitutes grid stability and one cannot make blanket predictions overall. A key issue that is often raised is the inertia of the power system. Typically, the power system has been operated with large synchronous generators which provided a high amount of rotating mass which allows the system to be quite resilient to sudden changes in demand and supply. In the future those power generators will be integrated into the system which then decouples it from the grid, subsequently changing the inertia characteristics of the grid. This does raise concerns about grid stability but those concerns can be fairly easily overcome.

The Chairperson thanked the delegates for their presentation and noted that the Committee would request their presence again in the future once further engagement has occurred with Eskom and other relevant stakeholders. He had declined to ask various questions until that date, particularly relating to the various assumptions which had been made in the various scenarios which appeared to be quite large in his opinion.

Dr Chikwamba reiterated what had been said by Dr Bischof. Their work is limited purely to scientific and mathematical research and not making policy decisions as to what is ultimately implemented. It was emphasised that they do not endorse any particular scenario or any sort of position even though it may sometimes appear that way. In essence, the ultimate policy decision as to which scenario to adopt is one to be made by government and various other stakeholders who have the appropriate expertise and knowledge to make those decisions outside of the purely scientific and mathematical findings which they have presented.

Adoption of outstanding minutes
Committee minutes from 12 April 2016 to 29 November 2016 were adopted.
Minutes of 03 May, 12 October and 25 October 2016, were not adopted due to a lack of a quorum.

The meeting was adjourned.  
 

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