W Cape Energy Strategy

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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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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

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Electricity 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 curve
First 1,000 GWh Next 4,000 GWh Total 10,000 GWh 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
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SA cost data for technologies making up 10 000
GWh target
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