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ENERGY TRANSITION IN SOUTH AFRICA10th October 2019

Oil and Gas Conference 2019

Stanley SemelaneCSIR Energy Centre

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Presentation outline

About the CSIR

The CSIR Energy Centre

CSIR Just Energy Transition Research Work

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Our mandate

CSIR MANDATE

“The objects of the CSIR are, through directed and particularly multi-disciplinary research and technological innovation, to foster, in the national interest and in fields which in its opinion should receive preference, industrial and scientific development, either by itself or in co-operation with principals from the private or public sectors, and thereby to contribute to the improvement of the quality of life of the people of the Republic, and to perform any other functions that may be assigned to the CSIR by or under this Act.”

(Scientific Research Council Act 46 of 1988, amended by Act 71 of 1990)

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Vision and mission

VISION

We are accelerators of socio-economic prosperity in South Africa through leading innovation

MISSION

Collaboratively innovating and localising technologies while providing knowledge solutions for the inclusive and sustainable advancement of industry and society

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Strategic objectives

Conduct research, development and innovation, localise transformative technologies and accelerate their diffusion

Diversify income, maintain financial sustainability and good governance

Collaboratively improve the competitiveness of high impact industries to support South Africa’s re-industrialisation

Drive the socioeconomic transformation through RD&I which supports the development of a capable state

Build and leverage human capital and infrastructure

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The CSIR in numbers

The CSIR is a science council, classified as a national government business enterprise.IN NUMBERS:

*Science, engineering and technology figures as at 31 March 2019

1 608*SET base

62%Black South Africans

36%Female South Africans

2 344Total staff base

320Staff with PhDs

586Staff with M-qualifications

536Publication equivalents

319Journal articles

19 New patents

50 New technology demonstrators

R2 534 mTotal income

R5.42 mRoyalty and

licence income

+R126 mTotal investment in HCD

31%Grant

Funding

PretoriaJohannesburg

DurbanCape Town

Stellenbosch

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The CSIR Energy Centre

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§ Energy Efficiency and demand shaping

§ Energy Meteorology§ Renewable Energy

tech§ Thermal energy

Technology-focussed Research GroupsEnd user-focussed Research Groups

System-focussed Research Group

§ Hydrogen Technologies

§ Synthetic fuels

§ Energy System Design

§ Energy System Operation

Energy Supply & Demand

HySA Energy Systems

Energy Industry

Energy-Autonomous Campus

Real-world implementation of research programme

§ Batteries§ Fuel cells

Electro-Chemical Energy

Technologies

§ Industrialisation support

§ Socio-economic analysis

§ Techno-economics§ SMME development§ Just transition

CSIR Energy CentrePositioned to assist with the regional energy transition

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• Industrialisation support (local component manufacturing)

• Financial & Economic modelling (Techno-economics)

• Financial & economic modelling (Techno-economics)

• SMME Support in the energy sector

• Socio-economic analysis (Energy Transition)

• Energy Diversification pathways

Energy Industry Capabilities

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CSIR Energy Transition Research Work

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Possible future: RSA’s energy system based on electricity transitioning todecarbonisation basedonpredominantly renewablesHypotheticalenergy-flowdiagram(Sankeydiagram)forSouthAfrica’sfutureenergysystem

Transport

T

CO2

H2

PtL fuelsH2

Liquid biofuels

ElectricityE

HeatH

Sun

Wind

Flexibility(supply/demand)

Heat

Elec-tricity

H2

H2

Electricity

Electricity

Electricity

Sources: CSIR analysis

Natural gas

Biomass

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Two drivers require a global energy transition: Natural resources are finite and CO2 emissionsneed to be capped

Today 300 yrs

Regulatory/policy pressurePrice pressure

Oil

Gas

Coal(140 to 300 yrs)

(60-100 yrs)

(40 – 60 yrs)

ResourcesReserves

Sources: WEC; BCG; CSIR analysis, National Development Plan

Resources are finite CO2 emissions need to be reduced

NDP Vision 2030

Reliable and efficient energy service at competitive rates, while supporting economic growth through job creation

Social Equity through expanded access to energy at affordable tariffs and through targeted,

sustainable subsidies for needy households

Environmental sustainability through efforts to reduce pollution and mitigate the effects of climate change

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2MW 2MW 3MW 4MW5MW

14MW

20MW

30MW32MW

34MW

0

5

10

15

20

25

30

35

2023

Decommissioning schedule in MW (‘000)

32MW

3MW

20201MW

2024

34MW

2021

20MW

20502022 2025 2030 204520402035

1MW2MW 2MW

4MW5MW

14MW

30MW

Megawatts

• Unemploymentrateis30%inMP

• 42%noteconomicallyactive

Coal shut-down schedule and implications

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Affected power stations in the short-term

1515

Eskom power stations shut-down implications on coal mining

46%

10%

8%

7%

6%4%

8%

2%1%1%

ChinaUnitedStatesAustraliaIndia

Kazakhstan

IndonesiaRussiaSouthAfricaColombia

Poland

• SAproduced183milliontonsofcoalin2018

• 80+millionwasconsumedbyEskom

• 60+milliontonswasexported

• Sasolisproduced40milliontons

• Howlongcanwecontinueexportingcoal?

1616

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2024

2030

Constructionjobs[‘000]

2020

2021

2022

2027

2023

2025

2026

2028

2029

50

0

250

150

350

200

500

400

300

100

450

17

2023

147

4

271

36

2021

265 245

2022

17

11 7

36

265

2024

183

2

36

314

326

4

Operationsjobs(net)[‘000]

367

258

2025

2020145

736

2026

41

71436

233

2027

36 1

1

1

3

818

36

217

2028

36 6

1

2

264

923

5

202

2029

7

7

278

2

36

1132

2030

314 314297 285

270

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SolarPVGasWind

EG(PV) CoalNuclear

Planning for the transition

• 12ofSACoalPowerStationarelocatedinMpumalanga

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Net job decrease in coal of ≈100k but net gain overall as gas grows to ≈55k jobs towards 2030, RE contributes up to ≈110k by 2030

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Local Content Requirements (LCRs)

ArethecurrentLCRsenablingajusttransition?

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5%

15%

JobCreation OwenershipLocalContent

BlackCompaniesManagementControlPreferentialProcurement

EnterpriseDevelopmentSocio-EconomicDevelopment

25% 25%

10%

5%

15%

Economic Development (30% of IPP BIDS)IstheED

enablingajustenergy

transition?

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Actual tariffs: Reductions in tariff for new wind, solar PV and CSP

3,84

1,230,96

0,65

1,601,25

0,920,72 0,65

3,74 3,503,28

3,06

2,13

0

1

2

3

4

5

Nov 2015Aug 2014Aug 2013Mar 2012

2.29

Nov 2011

-59%

-43%

-83%

CSPWindSolar PV

Sources: http://www.energy.gov.za/fil es/renewable- energy-s tatus-report/Market-Overview- and-Curr ent- Levels- of-Renew able-Energy-D epl oyment-NERSA.pdf; http://www.saippa.org.za/Portals /24/D ocum ents/2017/C oal%20IPP%20factsheet.pdf; http://www.ee.co.za/wp-content/uploads/2017/10/N ew_Pow er_Generators_RSA-CSIR-14Oct2017.pdf; StatsSA on CPI; BW = Bid Window; Dates shown are the bid submission dates; CSIR analysis

Actual average tariffs in R/kWh (Apr-2017-R)

BW1 à BW 4 (Expedited)

212121

Planning for the transition

BidWindow4

Ø459435MW

BidWindow4.5

(ExpeditedRound)

BidWindow3

398MW

BidWindow2

415MW 417MW

632MW

BidWindow1

+59%

SolarPVInstallationtodate

• Noprojectsinthisregion(MP)

• ProposedREDZcoverEmalahlenionly

• Solarradiationis5.61kWh/m2/d10%lessthanNorthernCape

• Gridinfrastructureavailable

Isthecurrentenergypolicyenablingajust

energytransition?

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Economic outlook of Mpumalanga

7%

34%

8%

19%14%

8%

6%

16%

5%

LimpopoGautengMpumalangaNorthernCapeWesternCape

EasternCapeFreeStateNorthWestKwazuluNatal

NationalGDPR4.65trillion

4%

13%

6%

15%

5%

25%

3%

3%

13%

13% Manufacturing

Agriculture,forestryandfishingMiningandquarrying

ConstructionElectricity,gasandwater

WholesaleandretailtradeTransport,storageandcommsFinance,insurance,realestateGeneralgovernmentCommunitysocial

232323

Most affected province employment status

21%

29%

32%

30%

MpumalangaUnemployment

rate

29%

MpumalangaUnemployment

SAUnemployment

NkangalaDistrict

Emalahleni

SteveTshwete

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Parameters Economic evaluation inputs

Plant size 10 GW solar panel manufacturing plant

Units produced p.a 3 225 806.45

Capital investment cost $ 30 million

Equity 30%

Amortisation 70%

Interest rate 10%

Capacity factor 80%

Calculated MSP $43 per 310 watt module ($ 0.14/W)

IRR = 1.75%

Solar PV local panel manufacturing assessment techno-economics results

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Solar PV local panel manufacturing assessment and labour index between China and RSA

Costoflabouris33%moreexpensivewhenmanufacturinginSouthAfrica

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Energy transition presents opportunities for RSASouthAfricaiswell-positionedtobeamongregionalandgloballeaderstransitioningtheenergysystem.ThereforestrategicinvestmentinR&Dinitiativesthatspeaktotechnology innovationandindustrialisation isparamount

Opportunities – a select few Research and Development agenda

• Abundantand inexhaustible wind and solar energy resources

• Even by 2050, RSA would not have used 10% of its exploitable wind and solar resources

• Strategic global competitive advantage (excellent resource and available land)

• Planning and operating a power system with high share of renewables (stability/reliability)

• Technology localisation (industry, jobs, SMMEs)• Energy storage (battery development and

localisation) – beneficiating local mineral resources

• Global finance available to decarbonise the energy system and make countries resilient to climate change effects

• Opportunities to address present liquidity challenges (Eskom and municipalities)

• Hydrogen a fuel source of the future• Local energy mix diversity, and possible

export opportunity (Europe and Japan)• Reduce RSA balance of payments

displacing imported liquid fuels• Platinum beneficiation in fuel cells and

electrolysis

• Determining the future role of hydrogen in the RSA energy mix and end use applications and new industries including hydrogen as a feedstock for CO2 utilisation in the production of clean synthetic fuels

• Localisation and beneficiation to supply the global hydrogen value chain

• Valuation of waste • Carbon dioxide utilisation• Fly ash-based geopolymer binders for reduced

cost building materials

Wind & solar

Financing

Hydrogen economy

4IR at the core of industrialisation; Using IoT, Robotics, VR and AI to improve and enhance our way of life (productivity/efficiency)

Circular economy

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The energy transitions needs to be just and requires the development of new industries and business models

Opportunities – a select few Research and Development agenda• New jobs in Gas, Storage and Renewables• Renewable energy manufacturing and

deployment in coal regions• Net increase in jobs• Localisation and industrialisation of new

technologies

• Re-purposing aging coal-fired power stations• Labour migration and social plans• Economic sector diversification in coal regions

(e.g. special economic zones)• Skills plans for new industries (new skills and re-

skilling)

• Consumers participate in the provision of electricity (small scale embedded generation)

• Off-grid and mini-grid electrification

• New business models for prosumers and the municipal utilities. Financial sustainability of new tariff structures and trajectories

• Democratisation of energy and opportunities for SMMEs

• New tech for electrification Universal Access

• Change from a vertically integrated power utility business model

• Entrance of new players in the Electricity Supply Industry (ESI)

• New energy markets with aggregators• Capacitate infrastructure maintenance and creation• Ensuring the performance of existing (Eskom) fleet

• Carbon neutral synthetic fuels• Battery and fuel cell Electric Vehicles for

domestic and export markets• Reduce dependency on imported liquid fuels

• Electrochemical technologies (batteries, fuel-cells) key to the future transportation system –localisation and industrialisation

• Revenue opportunities & increased electricity sales

Consumers Prosumers

Utility business model

alternative/low-emissions mobility

4IR at the core of industrialisation; Using IoT, Robotics, VR and AI to improve and enhance our way of life (productivity/efficiency)

H2

Just Transition

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A just transition will have substantive positive impactDeliberatechoiceswillenableSouthAfricatotransitionfromthepresentpainpointsandsupport theNDP

Impact Social Economic Enviro

Net increase in jobs

Reduced emissions and water consumption

Creation of new industries (Gas, Renewables, Electric Vehicles)

Lowest cost energy – longer term strategic advantage

Export hydrogen and clean synthetic fuels

Increased energy security

Support universal access to energy

Flexibility to respond to changing economic growth and energy demand

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Key energy transition enablers in SA

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Thank you

Stanley SemelaneSSemelane@csir.co.za

012 841 3464

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Meeting with Emalahleni and Steve Tshwete

2018

30 Apr4 Mar

Project conceptualisation

Economic profiling

Resource Assessment

Progress report

I-JEDI Modelling Manufacturing Assessment

Final report 2020

• Publications (SAAEE)

Market traction

Project inception

Report Preparation

Key Project Milestones:

CSIR Just Energy Transition Research (2019)

3 Apr 3 Nov 17 Nov15 Dec

28 Feb

Inception

5 April

Key provinces data collection

Presentation to Emahleni and Steve

Tshwete2019

JobsandEconomic ImpactModellingMay - Sept

1 – 30 Oct

Jan14 OctFindings analysis

4 Feb

SIDP

1 – 30 Oct• Outstanding questions