General History of Africa - Volume VI - Africa in the Nineteenth Century Until the 1880s
Power generation Opportunities in South Africa until 2030
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Power Generation Opportunities in SA until 2030. A commentary on the IRP2010 Ross Bruton, Research Analyst Energy and Power Systems Africa
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Transcript of Power generation Opportunities in South Africa until 2030
Power Generation Opportunities in SA until
2030. A commentary on the IRP2010
Ross Bruton, Research Analyst
Energy and Power Systems
Africa
2
Discussion Guideline
� Structure of the IRP 2010
� Effects of the IRP on the tariff path
� Impact and Importance of IPPs
�What has changed?
� The REFIT & COFIT Programs
�What does this mean for the power generation industry?
3
Structure of the IRP 2010
4
The IRP2010 only addresses new build after Medupi and Kusile up to 2030
“Catch-up”
100
90
80
70
60
50
40
30 IRP 2010 Current Fleet Replacement
GW
2010 2040 2045 2055 206020502015 2020 2030 203520252000 2005
Supply Crisis
Low Planning
•Non-Eskom Generation
Supply Crisis
Low Planning
•Non-Eskom Generation
Price Path?
Affordability?
Renewables?
Price Path?
Affordability?
Renewables? Carbon?
Coal?
Nuclear?
Carbon?
Coal?
Nuclear?
Total System Capacity
Total System Capacity
Source: Frost & Sullivan
5
Rating of Scenarios
Plans
Av. Annual
CO2
emissions
Price path
peakWater Uncertainty
Localisation
potential
Regional
developmentTOTAL Ranking
Base Case 0.0 - 21.74 - 2.73 - 6.08 30.54 9
Emission 1.0 12.41 18.03 5.24 16.14 6.47 6.08 64.36 2
Emission 2.0 9.43 21.17 2.53 16.14 6.47 6.08 61.81 4
Emission 3.0 21.74 - 10.87 19.57 6.47 - 58.65 5
Carbon Tax 0.0 11.5 13.86 3.5 19.26 6.47 2.77 57.36 6
Region Dev. 0.0 0.67 21.36 0.37 - - 10.87 33.27 7
Enhanced DSM 1.54 20.31 0.94 3.04 - 6.08 31.91 8
Balanced 10.46 19.88 2.74 16.71 11.02 1.85 62.65 3
Revised Balance 11.01 20.9 2.92 14.73 15.22 8.85 73.63 1
Swing Weighting
(/100)21.74 21.74 10.87 19.57 15.22 10.87 100
The Revised Balanced Scenario was heavily influenced by government objectives in terms of localisation, carbon mitigation, job creation and regional
development. The impact of these choices needs to be analysed in terms of the price path they create. If it is believed that these requirements are
crucial to the future of South Africa and cannot be adjusted, one must test other variables influencing the price curve in order to find efficiencies. In
the past , electricity tariffs were determined solely on price (i.e. 100%) – the shift to 21.74% represents a major change in expansion planning criteria
with significant long term implications.
6
The South African Electricity Market 2010 to 2030
YearDecommissio
ningTotal New
BuildTotal System
CapacityPeak Demand (net sent-out) Forecast
Demand Side Management
Reserve Margin
Peaking and OCGT
RM (Real)
MW MW MW MW MW % % %
2010 0 640 44535 38885 252 15.28 8.7 6.6
2011 0 1112 45647 39956 494 15.67 8.5 7.2
2012 0 703 46350 40995 809 15.34 8.3 7.0
2013 0 2625 48975 42416 1310 19.14 10.7 8.5
2014 0 2447 51422 43436 1966 24 12.1 11.9
2015 -180 2364 53786 44865 2594 27.24 11.6 15.7
2016 -90 1532 55318 45786 3007 29.31 11.2 18.1
2017 0 3068 58386 47870 3420 31.35 10.7 20.7
2018 0 1623 60009 49516 3420 30.18 10.4 19.8
2019 0 2820 62829 51233 3420 31.41 9.9 21.5
2020 0 2594 65423 52719 3420 32.71 9.5 23.2
2021 -75 2186 67609 54326 3420 32.81 9.2 23.6
2022 -1870 845 68454 55734 3420 30.85 10.3 20.6
2023 -2280 2054 70508 57097 3420 31.36 11.1 20.3
2024 -909 2066 72574 58340 3420 32.14 11.6 20.6
2025 -1520 2285 74859 60150 3420 31.96 12.3 19.7
2026 0 2200 77059 61770 3420 32.06 12.0 20.1
2027 0 2755 79814 63404 3420 33.06 12.5 20.5
2028 -2850 1555 81369 64867 3420 32.42 13.3 19.1
2029 -1128 2027 83396 66460 3420 32.29 13.9 18.4
2030 0 1845 85241 67809 3420 32.39 14.0 18.3
Total -10902 41346
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Planned Generation Capacity Additions
33% of the new build plan is committed to RE technologies and
almost all to carbon neutral technologies
The amount of renewable or “clean” energy being added to the grid will significantly reduce South Africa’s carbon emissions. From 2022
there is also a significant amount of OCGT capacity being added, potentially as a means of balancing out the uncertainty regarding the
renewable feedstocks. OCGT plants will use petroleum based feedstocks, which could expose South Africa to the volatility of
international oil prices. The combination of high capital costs for renewables and high operating costs for OCGT plants inflates tariffs
and increases uncertainty regarding security of supply. The inclusion of additional baseload coal plants would mitigate the supply risks
and allow us to reduce the number of OCGT plants. A slower transition to renewables?
The majority of new build
technologies are carbon neutral.
The green series represent the
IRP’s planned renewables
technology contribution.
The light blue series represent the
IRP’s planned nuclear technology
contribution.
Source: Frost & Sullivan, IRP2010
8
New Allocations for the Development of South Africa’s Energy Mix, 2010
to 2030
� Significant focus on renewable energy development
� 33% of additional capacity attributed to renewables
� Coal still to represent 48% of total generation mix
� With current funding constraints, Eskom is unlikely to be able to implement the entire build program
� IPPs and private sector investment is expected to play a major role in the security of electricity supply, particularly over the next ten years
� Since the publishing of the IRP 2010 there has been a new interest in the development of large scale, grid connected PV and CSP driven by the Upington Project
9
Changes in South Africa’s Energy Mix 2000 – 2030
10
Effects of the IRP on the Tariff Price Path
11
Future and Historic Electricity Tariffs (IRP 2010 – RBS)
The planned increases in renewable energy build programs will result in significantly increases in capital expenditure on power generation
projects. As a large contributor to end-user tariff calculation, this is expected to have a significant inflationary effects on an already
rapidly increasing price path
12
Treasury has suggested the implementation of carbon taxation
with an effective rate of 1c/kWh for every R10/ton of CO₂
Given that there is such a controversy surrounding global emissions targets at the moment, the commitment towards such a biased
renewable energy dominated new build programme could be criticised as overly expensive. The implementation of carbon taxation at
R100/ton over the period to 2020 and R250/ton to 2040, will add an additional 18c/kWh to the original RBS price curve. Whilst there is
no doubt that South Africa needs to address carbon mitigation strategies, these need to be balanced with maintaining a competitive
economy and ultimately an affordable price path.
Various scenarios incorporating
carbon tax, revealed that the
original IRP model was
particularly insensitive to CO₂taxation. This has been addressed
in the IRP2010 v2, as can be seen
in the new price curve
represented by the dotted line
above
Source: Frost & Sullivan
13
Effect of Tariff Price Increases
Once the non-ferrous metals outlier has been removed, it is easier to gauge which sectors will be most easily impacted by price increases.
Many of these sectors are targeted by the IPAP and are also export focused. In order to compete on the global market, it is assumed that
these sectors have little ability to pass on increased costs to consumers i.e. they are price “takers”. Given the declining skills base and the
lack of productivity as measured against the labour force, it is possible that these sectors will not be able to easily finds other competitive
advantages once electricity prices start to rise. Therefore any increase in the electricity price will directly impact on their profitability
14
Impact and Importance of IPPs
15
Executive Summary
The allocation of new build to either Eskom or IPPs can alter the price path
trajectory
Frost & Sullivan believe that one likely future scenario for the allocation of new build, is one in which Eskom manages the nuclear
programme and IPPs are responsible for all other new build projects – this is reflected in the EN1 scenario in the chart above. Frost &
Sullivan have compared this scenario with two others. In the IPP scenario (red line), IPPs are responsible for all new build. In the EN1
scenario, Eskom is responsible for Medupi and Kusile as well as the nuclear program . In all the scenarios it is clear that allowing IPPs to
enter the market substantially lowers and flattens the price path.
16
Current IPP Contracts Held in the Private Sector
Company Total Generating Capacity (MW) Facilities
Sappi 45MW
Sappi currently holds 2 Power Purchase Agreements (PPAs) with Eskom amounting to a total of 48MW.
Power is to be generated through renewable cogeneration facilities utilizing waste wood chips and saw dust as feedstock
The PPA is valid until 2013
Tangent Mining PTY Ltd 103MW
The return to service of the Bloemfontein coal fired power station by Tangent Mining is expected to contribute 103MW to the national grid
Sasol 200MW
Power is generated by two open cycle gas turbines at the companies Secunda complex
Furthermore, the company is in the process of constructing a 80MW heat recovery steam turbine along with their OCGT which has the potential to increase electricity sales through the establishment of an additional PPA with Eskom
The companies current PPA is valid until 2014- 2015
Ipsa 18MW
Independent Power South Africa was the first private company to sign a PPA with Eskom for the supply of electricity to the national gird. Its combined cycle gas turbine(CCGT) power plant in Newcastle, Kwazulu Natal, has a total installed capacity of 18MW. Combined cycle power plants utilize excess heat from electricity generated from gas power to fire boilers and generate further power from additional steam turbines. Resulting high efficiencies allow these thermal plants to have 40% less emissions than coal fired power plants. The companies PPA expires in 2013.
Total Added Capacity: 366 MW
17
What has changed?
18
New Allocations for the IRP
� New allocations for generation capacity may have significant effects on the price path
� Previous allocations indicated that 4,500MW of wind power and 600MW of solar power were allocated for
development before 2020.
� For the period 2020 to 2030, 7,400MW of additional renewable energy development was allocated with no
technology segmentation provided
� New allocations dramatically alter renewable energy allocation within the IRP document
� Despite events in Japan, no change has been made to the allocation for nuclear power
� However, impacts of power supply shortages to the manufacturing sector of the country as well as a new inward
focuse on the redevelopment of Japan is expected to significantly effect the countries export market
� As one the leading international exporters of nuclear components, this could seriously effect lead times and final
cost of production of facilities in the near to medium term
� Current allocations for renewables include the following:
Technology MW Allocation, 2010 to 2030 Allocated REFIT
Solar PV 8,400 3.94 R/kWh
CSP 1,000 3.14 R/kWh, 2.10 R/kWh (with storage)
Wind Power 8,400 1.25 R/kWh
Nuclear 9,600MW -
Coal 2027 allocations brought forward to 2016, -
19
The REFIT and COFIT Programs – Comparison of
Electricity Generation Technologies
20
Feed-In Tariffs
PARAMETERS UNITS
REFIT I (2009) REFIT II (2010)
COFIT (2011)
Type 1: Recovery of Waste Heats or
Energy from Wastes
Type 2: Combined Heat and Power
Type 3: Renewable Cogeneration
WindSmall Hydro
Landfill Gas
Methane
CSP, Parabolic Trough
Storage (6 hrs per
day)
CSP Trough Without Storage
Large Scale Grid
Connected PV ( > 1
MW)
Biomass Solid
Biogas
CSP (Tower)
with Storage of
6 Hours per Day
Discard coal (FBC)
Waste Heat
Furnace off gas
Coal Natural
Gas/LNGWood chips
Bagasse (Cane
Fibre 1) new
Cane Fibre 2
upgrade
Technology * RNW RNW RNW RNW RNW,FS RNW RNW RNW RNW ST ST ST GT ST ST ST
Capital cost: EPC $/kW 2255 3020 2631 5545 5152 4200 3289 3015 6180 2 862 2 946 3 402 1 033 4 354 3 153 1 317
Economic life years 20 20 20 20 20 20 20 20 20 15 15 15 15 15 15 15
Assumed load factor
% 27% 50% 80% 40% 25% 16% 80% 80% 40% 80% 80% 80% 80% 80% 49% 55%
LCOP R/kWh 1.25 0.94 0.9 2.09 3.14 3.94 1.18 0.96 2.31 0.665 0.975 0.672 1.178 0.761 1.835 1.875
New Tariffs R/kWh 0.938 0.671 0.539 1.938 1.836 2.311 1.06 0.837 1.399 - - - - - - -
21
What Does this Mean for the Power Generation
Industry?
22
What does this mean for the power generation in the country
� The new focus on renewable energy is expected to drive increases in electricity tariffs beyond that
of initial price curves
� 5,300 MW of renewable energy is to be added to initial IRP allocations
� Of the planned 17,800MW of allocated renewable energy, 9,400MW (52.8%) is to allocated to solar
power
� The majority of planned solar power will most likely be attributed to the 5,000MW Upington
project, with the first PV unit planned to be commissioned by the end of 2012
� High capital costs of solar power and very attractive REFIT tariffs are expected to further drive tariff
increases, placing large strain on energy intensive industries
� In order to maintain a price path that is not damaging to the countries economic growth and its
ability to achieve job creation targets as specified in the IPAP2, it is imperative that the private
sector be allowed to contribute the majority of renewable energy development over the next ten
years
23
About Frost & Sullivan
24
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