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W Cape Energy Strategy – options for sustainability

Presentation to Western Cape Sustainable Development Conference

June 2005

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SA Energy Flows

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Electricity Demand by Sector

Agriculture3% Commerce

10%

Industry68%

Other0%

Residential17%

Transport2%

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Changes in global energy market• Concern re limits on fossil fuels reserves• Risks to fossil fuels market because of

emissions• Increasing pressure to reduce impact on climate

change• International Energy Agency estimates a 15-

20% of total energy supply contribution from renewable energy by 2010, up from 10% in 1999

• Scenario analyses by Shell show renewables meeting around 40% of world energy needs by 2050

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Changes to SA electricity market

• New generation capacity will push prices towards LRMC

• Supply shortages from 2007 will put upward pressure on prices

• Potential SA emission reduction commitment from 2012 will penalise coal based power

• Emerging market for IPPs• CDM credits and subsidies for renewables

6Electricity sales forecast – national & foreign

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Eskom generation capacity

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Some problems with coal• Polluting - in 1995, stations generated 600

millions tons of carbon dioxide, 1.3 million tons of SO2 (includes other sulphur compounds) and 150 thousand tons of NOX

• located at the coal fields in the northern interior of South Africa

• power has to be transmitted long distances to coastal centres causing problems with the quality of electricity

• conventional cooling towers use between 1.8 and 2.0 litres of water for every kilowatt-hour of electricity generated

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New generation options• Coal-fired plant with Flue Gas Desulphurisation

& Fluidised Bed Boiler Technologies• Importing Hydro electricity from SADC• Combined cycle gas turbines using natural gas• Open cycle gas turbines using diesel (peaking

plant)• New nuclear technologies e.g. Pebble Bed

Modular Reactor• Renewable technologies – hydro, biomass,

landfill gas, wind and solar

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SA Renewables Target• 10 000 GWh contribution to final energy

consumption by 2013, to be produced mainly from biomass, wind, solar and small-scale hydro

• To be utilised for power generation and non-electric technologies such as solar water heating and bio-fuels

• This is approximately 4% (1667 MW) of the projected electricity demand for 2013

• Equivalent to replacing two units of Eskom's combined coal fired power stations

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Renewables supply curveFirst

1,000 GWh

Next 4,000GWh

Total 10,000GWh target

Sugar sugar mills spare capacity 55 55 55

reduced process steam 109 109 109

full scale cogen 551 1,380

SWH 175 1,000 3,633

Pulp &Paper Ngodwana 65 65 65

additional projects 20 170 340

Hydro identified projects 210 210 210

additional projects 75 1,000 3000

LFG identified projects 240 240 240

additional projects 51 600 600

Wind 0 0 308

Total 1,000 4,000 10,000

12SA cost data for technologies making up 10 000 GWh target

GW h ou tputDy namic f inanc ia l

c os t R/kW h

Landf ill gas : la rge 32 0.17Landf ill gas : med ium 215 0.18Landf ill gas : s ma ll 160 0.19B iomas s pu lp & paper : mill 1 65 0.10Hy dro: la rge : re f urb is hment 273 0.11Landf ill gas : mic ro 191 0.30Sola r c ommerc ia l: o f f ic es & banks 224 0.23Sugar bagas s e: inc lud ing h igh pres s ure bo ile rs 3795 0.22B iomas s pu lp & paper : mill 2 39 0.23Sugar bagas s e: reduc ed p roc es s s team 570 0.24Sola r c ommerc ia l: hos te ls - educ ation 581 0.30Sola r c ommerc ia l: hos pita ls 267 0.30Sola r c ommerc ia l: hos te ls - s ec ur ity s erv ic es 339 0.30Sugar bagas s e: inc lud ing tops & tras h 1483 0.29Hy dro: s ma ll: unc onv entiona l 205 0.34Hy dro: la rge : in te rbas in trans f er 526 0.30W ind energy : c las s 1 63 0.38Sola r res iden tia l: low inc ome hous eho lds 930 0.35Hy dro: la rge - ROR - LH 41 0.34

CaBEERE 2004

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Barriers to renewables• Technologies expensive• Significant initial investment needed• Relatively long periods before reaching profitability• Lack of consumer awareness re renewable energy• SA energy market based on centralised development

around conventional sources • Lack of non-discriminatory open access to national

electricity grid • Market power of utilities• Financial, legal, regulatory and organisational barriers

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Creating market for renewables• Currently Eskom pays 10 – 11c/kWh for energy from

IPPs onto grid• Long run marginal cost of energy from new coal fired

plant is now estimated at 25c/kWh • Additional social costs from pollution and climate change

mean that full economic cost is 30c/kWh• Historical investment by SA in generation capacity allows

Eskom to subsidise its tariffs to consumers• New renewable generation capacity should be allowed to

sell onto grid at full economic cost of new coal fired plant• Renewable energy targets should be set for REDs

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SA Integrated Energy Plan• Energy supply will remain reliant on coal for next two decades• Diversify supply through natural gas, new and renewable energies• Continue investigations into nuclear as a future energy source• Promote energy efficiency management and technologies• Maximise load factors on generation plant to lower lifecycle costs• Lessen reliance on imported fuels by developing oil / gas deposits• Increase oil refineries capacity rather than greenfields development• Continue with synfuel plants, supplement with gas as feedstock• New electricity generation to be coal based with potential for hydro,

gas and nuclear • Ensure environmental considerations in energy supply and end use• Promote universal access to clean and affordable energy• Policy and legislation for renewables and energy efficiency

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Some issues for W Cape• Distance from main generation capacity• Risk of electricity price increases and pollution

penalties• Vulnerability to climate change• Deteriorating urban air quality• Major industrial expansion in metro and

Saldanha• First mover advantage with RED 1• Considerable local renewable resources

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RED 1• Launch on 1st July• 600 000 customers in current metro• Need to manage risk of changes in energy

market by diversifying capacity• Advantage of first mover at scale – can tap

available low cost renewables• Test market by offering retail option based

initially on TRECs

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Solar water heating• Energy savings and technology tested in

Kuyasa and Lwandle• Net saving on household energy bills• Technically and financially feasible to

integrate into all low income housing• Significant available subsidies and carbon

finance• N2 Gateway project should offer these

benefits to households

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Key interventions for W Cape• Adoption of provincial integrated energy strategy• Integrating renewable energy into first Regional

Electricity Distributor• Promote energy efficiency in public buildings

and through procurement • Including energy efficiency in settlement

planning, and installing SWHs in new housing developments

• Regulatory support for new investments in renewable energy