The draft twenty-year plan for electricity generation, also called the Integrated Resource Plan (IRP) 2010, was released a few weeks ago for public comment. The IRP process is all but a fait accompli. But what goes into the plan will determine the future of South Africa’s energy mix for the next two decades.
The energy choices available to us are between coal, nuclear, gas, hydro and other renewables.
With a projected GDP growth rate of 4.6% over the next 20 years, South Africa will need new capacity of about 52,000 megawatts (MW). Renewables will constitute 16% of the new technology mix to provide required electricity demand, while nuclear energy will provide 14% and coal 48%.
Why is an IRP important?
Well, energy or electricity is like blood running through the veins of an economy. Without it, our fledgling modern state would collapse. Never mind the myriad other things that are stalled without electricity, but crucially, without it, we would be unable to expand the economy and attract new investments, which in turn could limit the scope of job expansion.
The IRP process also tells us about how we think about energy-economy linkages, how we think of energy in relation to environmental and social justice issues, projections of future demand and how we use every unit of energy. At the heart of it, too, is the appropriateness of the energy mix.
Some are casting a close eye on the proportion of power generation that will come from coal, nuclear and renewables. There are lots of views about what should be included and excluded.
It at once also sums up the normative transitions we have made from the past to the present when thinking about energy. At once, all the country’s vices and virtues are nestling their way into the IRP process itself.
The IRP, which is so crucial to South Africa’s economic future, is a process run by a few experts within the state and some major users like mining companies. It is observed by ‘outsiders’ such as policy wonks, industry lobbyists, energy experts in policy think tanks, universities and civil society activists.
But in the end, it literally amounts to a few people making profound decisions on behalf of the majority.
Hearings on the IRP 2010 will be held sometime – in different provinces – at the end of November running into early December. The interest in the new plan from consumers, civic groups, business, unions, financiers and international investors is overwhelming.
You are, after-all, talking about throwing another large chunk of new taxpayers money beyond the current infrastructure projects already earmarked by the state at a new set of infrastructure projects.
How does the IRP process work?
The plan lays the basis for Eskom to submit an application to the National Electricity Regulator (NERSA) to permit it to go ahead with the financing of new power projects or the purchase of power from private generators.
In other-words, NERSA approves a tariff that would accommodate the cost of building the new power infrastructure. The tariff seeks to reflect the true cost of electricity generation. Once a tariff has been approved these costs can be recouped from consumers. Eskom can then go and raise additional funds to build the power stations it needs or procure power from private generators of electricity.
The current plan, while still in an initial state, has some good, but also worrying things about it.
The first positive thing is that we have actually have embarked on a planning process for electricity. It is the first time that this is being done in South Africa and this in itself sets a good precedent. It is a process we can learn from and build on in the future.
The second good aspect of the plan is a tacit admission that coal’s future looks slim. The share of coal as a major source of electricity generation for the future is declining.
The main reason, despite the claim that we have 200 years of coal (which is proving to be untrue given recent coal estimates), is that any new sources of coal have an inherent insecurity in them because of question marks about the quality of the coal and the unpredictability of the future price. This situation is worsened by the fact that we may not have the infrastructure in place in time to dig out enough coal from the ground to supply demanding and hungry coal-fired power stations.
Eskom and SASOL have at least acknowledged that coal, as a generous energy feedstock, is constrained. Thus, the golden days for coal are over.
The third good thing about the IRP is that this is the first plan to be literally operating with a carbon budget in mind. Some may argue it does not go far enough. But the fact that ‘reducing our carbon emissions’ is chosen as a parameter for consideration, is a major conceptual breakthrough for energy planning and electricity generation in South Africa. It has never been done like this before.
However, as much as it is convenient to have a carbon budget approach and ratchet up the numbers on renewables to support a low carbon path, it also serves as a justification and a way to sneak in nuclear energy as a low carbon solution. No doubt there will be furious debate on the inclusion of nuclear.
The diminishing prominence of coal-fired power also has other reasons attached to it. Any new financing, at least from the Western World that has carbon reduction as a goal, will not be easily forthcoming for coal plants. Soft finance will be more readily available for renewables and to some extent for nuclear.
The fourth positive aspect relates to drawing power from other sources in the Southern African region – mostly in the form of small and some large hydropower opportunities. South Africa’s demand for power could stimulate more investment in hydro projects in the region. The amount of hydropower that will be drawn will be close to 3,300MW. This is almost equivalent to one coal-fired power station.
As other countries in the region become more stable this share of power from the region can increase.
But there are also weaknesses in the plan. The plan still adopts the “old school” way of thinking about electricity, which is etched through its fabric of scenarios and assumptions. In this way, it is very supply side orientated.
Thus, while the IRP takes a ‘least cost’ approach for supply solutions, it does not do so for demand management.
Compared to a lot of modern economies South Africa does not score too well on energy efficiency and the new electricity plan is quite meek in its ambitions for energy efficiency.
We need an economy in which participants use less for more and in which economic planners shift to sectors that are diversified away from energy intensive industries towards low energy sectors that produce higher economic value.
Yet the IRP covers very little about how we can reduce South Africa’s energy intensity, especially, with respect to collective behavioural change and a unified vision for a new type of economy.
The plan seems to exude deep scepticism about our ability to shift behaviour and relies on engineering solutions rather than a values approach that can alter future demand patterns for the consumption of electricity.
The fact that there are interesting numbers in the plan for different types of technologies does not mean it will be executable. The new build – as it is sometimes described – will require R800bn of additional funding. The cost of electricity will rise from 40c/kWh to about R1.10/kWh. This is a 275% cost rise for electricity generation within the next ten years.
This has profound implications for how much of the plan’s vision can be achieved.
In the meantime, existing plans to build two new coal-fired power stations will go ahead. A portion of renewables like wind energy could be slotted in expediently because we are desperate for quick wins in the next five years to avoid load shedding.
The call on a fleet of nuclear power stations is still to be made. It is not as yet a done deal. Too much spend on nuclear may well squeeze out a higher generation target for renewables – what economist call the “crowding out” effect.
What is executable will also be encumbered by the governing realities of our politics and economy. Without a radical solution, the status quo remains in place and some vested interests will continue to prevail.
The IRP 2010 will no doubt be a plan that will be intensely fought over because undergirding it all will be a contest to assert different visions for our energy future and economy.
However, despite the IRP 2010 being seeped in technocratic language, it is, after all, a plan about our future that must be driven by what values we posit for that future. Getting there in unified way is no small task. Either we build consensus organically or the state manufactures consensus.
Fakir is an independent writer based in Cape Town.