Integrated Resource Plan (IRP) 2010 Submission


David Lipschitz , a proud member of SAAEA, comments on the South African IRP 2010 version 8.

This is a copy of my comments on the South African Integrated Resource Plan. The presentation will be on the 29th November at 11.15am. If you have any comments or suggestions, please let me know.

Government consists of the cabinet which sets strategy and helps South Africa to maintain and increase its wealth as a whole. Below this we have the departments that make this happen. [These include central government ministers, local governments, sub-councils, ward forums, residents associations, NGO’s and any organisation that works for the betterment of society as a whole or a part of society. These people are paid one way or another either through taxation or through fund raising. Their responsibility is to govern and be our agents ensuring that our common resources are used wisely and are increased so that future generations can enjoy the fruits of our labours and not have to deal with the fallout of our possible narrow minded and myopic thinking.]

By wealth I mean the wealth of the entire country. This should be measured not only in terms of monetary wealth, but also in terms of health wealth, land wealth, resource wealth, food wealth, farm wealth, top-soil wealth, forestry wealth, river and marine systems wealth, etc. If we allow our water resources to be reduced because of our concentration on saving money at the expense of the environment, we will have fewer people and less wealth.

Wealth involves considering the future. Some of the world’s oldest wisdom, contained in the Old Testament, Genesis chapter 1 vs 28, says that we should “go forth and multiply, and replenish the earth.” Deuteronomy 5 vs 9 says that “the sins of the fathers will be on the children to the forth generation.” From an environmental point of view these two quotes are ancient warnings that we should put back and not simply take. We should consider our great-grand-children in any actions we take.

We all need to be concerned about the new electricity bill which stands at R2 trillion (R2,000,000,000,000) over the next 20 years. Big power station building costs escalate at about 15% per annum. Never mind the cost of fuel and the environmental cost of pouring concrete and digging coal and uranium and various pollutions. At the same time photovoltaic panel’s decrease by 18% for every doubling in worldwide capacity. The industry is growing at more than 35% per annum.

Although the primary objective of the Integrated Resource Plan is to determine the long-term electricity demand, I believe that as it is called the Integrated Resource Plan it should deal with the resources we have in our environment and not only energy and electricity.

Page 11 (Section 2.2) of the IRP says this is not an energy plan, but rather an electricity production plan. One can see why alternatives have not been seriously considered, especially considering that 80 GW might be needed over the next 20 years, not 41 GW as suggested in the IRP. At a currently projected cost of R25 Billion per GW for coal fossil fueled base load power, we are looking at a cost of R2 trillion over the next 20 years, which for an emerging economy is unaffordable.

One also needs to consider why South Africa is only really considering renewables from 2020 onwards, when this industry is already growing at 35% compound per annum world wide and millions of people are being employed world wide by this industry.

The management of our resources is fundamental to our wellbeing in the 21st Century. This must be considered for South Africa to survive the anticipated environmental onslaught of the following resources: water, energy, forests, fauna and flora, food, housing and employment. This management should seek to redress the wrongs of the past in a holistic way which looks at the entire ecological and environmental system as a whole, rather than considering a particular aspect of that system in isolation.

[An example of this is electricity cost. Most people want to minimize this, but by not taking externalities and the entire system into consideration, our entire civilization is at risk. What happens if our electricity cost is higher than it is now, but our water costs, food costs, etc, come down as a result of an investment in alternatives?]

One should also consider weather patterns. At the moment we are experiencing a strong La Nina weather pattern which means higher than normal rainfall over Southern Africa. So right now, while rainfall is relatively high, we should be preparing for drought conditions. Besides water collection, storage and recycling systems, organic farming will become a necessity as organically-grown plants are more drought tolerant. Mining and fossil fueled power stations create a huge drain on the water resources. Renewable energy helps to reduce this future problem, but in order to be ready, we must start now before the drought period and the El Nino starts.

On page 6 (Executive Summary) of the IRP, it says that the plan needs 41 GW of new capacity by 2030. This excludes plant that will be decommissioned and will need to be replaced by 2030. Graphs I have seen suggest that none of our existing capacity will be online in 20 years. This means that we actually need closer to 80 GW of new capacity to be built in the next 20 years assuming we follow “business as usual.”

Page 75 (table 37) of the IRP shows risks inherent in the calculations that have been done. Interestingly wind scores 2 (low risk), concentrated solar power (and possibly photovoltaics) scores 5, coal scores 7 and nuclear scores 10 with 12 as the highest risk. So if we can clearly see what the costs and risks of wind and other renewable sources of energy are, why are we going on such a risky path? We know we can’t adequately identify the costs, lead times, security of supply or operational risks of coal and nuclear at a time when these aspects of the projects are becoming more vital than ever.

Our power stations and the power grid system is owned by the people of South Africa and is managed on our behalf by Eskom and the government of South Africa. After the huge inflation of the past 50 years, peoples of the world want to reduce their cost of living and want an environment that is safe and clean – a system which is managed holistically. The IRP doesn’t take this into account.

The IRP ignores the following three topics:
Net Metering
Understanding the costs
A Marketing Plan

1. Net Metering

Net Metering hasn’t been considered in the IRP. Net metering means that the consumer buys and sells electricity at the same rate or tariff. So if I buy electricity at R1.06 including VAT per kilowatt hour then if I produce excess electricity I sell this at R1.06 to the utility which is my case is the City of Cape Town, but which could be Eskom or another electricity provider.

Net Metering is great for people who are already connected to the grid as it means that no additional transmission or distribution infrastructure is required. Electricity is consumed where it is produced minimising the losses on long distance cables. It provides for security of supply as long distance cables can malfunction or be damaged by terrorist activities. Big power stations can malfunction and close down meaning that no local electricity is available or there is load-shedding. Net metering doesn’t cost the treasury anything, unlike Feed In Tariffs which provide a higher rate for the production of electricity by Independent Power Producers and which acts as an incentive to get this activity going.

[Incentives are not uncommon. Whilst the FIT has received negative press, incentives have been provided to get new cities going (eg Atlantis near Cape Town). Incentives are still provided to the car manufacturers in South Africa even though they are established businesses. This amounts to as much as R6 billion per annum and allows such things as the import of components for cars duty free.]

Incentives that are available to businesses can be made available to private individuals who install renewable energy systems. These can include VAT refunds, 30% installation costs rebates and pre-tax investments. For someone in the 40% tax bracket, this could amount to a 63% discount of the build cost.

[Banks could also come to the party by providing loans at the inter-bank rate and getting the carbon credits that their customers cannot apply for as they are too small. The 30% rebate is generally used as this is the “avoided cost.” So it would have cost 30% of this for a coal powered power station. Hence if the private individual or business is reducing their need for the grid, they should be compensated.]

Net Metering uses grid tie inverters to feed the grid and has a minimum of components. Net metering is much more efficient than off-grid systems. Net metering allows government to get the ball rolling and grid tie systems to be legally installed. This can be done whilst the Feed In Tariff (FIT) and the Power Purchase Agreements (PPA) are finalised.

It also allows for systems smaller than 1MW to be connected to the grid and doesn’t need EIA’s and other processes that delay the installation of systems. It doesn’t take up land as the main systems are installed on roofs or private property where EIA’s might not be required.

Note that some small users have been given permission to connect to the grid and these include Villiera Wine Estate, Pick ‘n Pay and Aquila. If systems between 35KW and 100KW are being given permission to connect to the grid, then smaller systems should also be given permission.

I have been given four reasons why government doesn’t want to allow net metering or grid tie systems:

a) It destabilises the grid;
b) Reverse feed can damage the local transformer;
c) Reverse feed can electrocute a technician working on the power lines;
d) Electricity revenue will go down.
Each of these is a misnomer in my opinion.
a) The grid can handle me switching on my kettle, stove, oven, heater, and iron and quickly drawing 8 or more kw without crashing. Likewise the grid can handle large power stations switching on and off and supplying or reducing 1 GW or 2.5 GW of power from or to the grid at any time and without warning.
b) In the event that I produce excess electricity, it will just go to my neighbours. [Most of the transformers in my neighbourhood are between 750 KW and 1MW and there are at least 3 transformers within 1 km of my house. Over R35 million needs to be invested in my area per transformer before there is potential reverse feed at the transformer. I have also spoken to electrical engineers who ensured me there is no problem with reverse feeding these transformers. However there could be a problem at one of the big substations, but it will take years before this problem surfaces.]
c) The electrocution problem was resolved in 1999 with the introduction of UL1741 and IEEE 1547. These are international standards that grid tie inverters must adhere to. These require them to disconnect from the grid if the grid is unstable, ie if the voltage or frequency is outside a predetermined range, or if the grid is switched off for maintenance.
d) Revenue is another example of myopia and narrow minded thinking. Electricity provision will grow. More and more people will be connected to the grid. Eskom is forecasting electricity shortages starting next year, so the more availability of private generation the better.
2. Understanding the costs
When Kusile was started we were told it would cost R74 Billion. Two years ago this number was upped to R100 Billion and now it stands at close to R125 Billion for 5 GW of “base load” power.
It is fairly obvious to this citizen that there is no way to determine the cost of big projects. Kusile is now 69% over budget. Phase 1a of the Integrated Rapid Transport bus system in Cape Town is 300% over budget (R4.5 Billion instead of R1.5 Billion) and isn’t even operational yet.
What is fairly obvious is that one cannot go so far over budget for small scale systems, for example if I quote a client R140,000 for a 1.6 KW photovoltaic system, then the client won’t pay if I am even 5% over budget. The same goes for a solar water heater. If I quote R10,000 for a solar water heater, the client expects it to cost R10,000.
This means that small systems can be costed more accurately than large systems and that the finance for these systems can be identified in full before they start. This is also borne out in Table 37 on page 75 of the IRP document.

Let’s understand the big numbers and what alternatives there are. Everyone I speak to has no idea what R100 billion is.
Two years ago, R100 Billion bought one 5GW power station.
The power station requires about 8,000 people to build and about 1,000 people to run and several hundred more to supply it. It requires 35 tons of coal every 15 seconds to run, needs coal mines, trucks, fuel to dig the mines, run the trucks, roads to be built and serviced, ongoing maintenance, etc.
It requires a huge amount of concrete to be poured. [As most of you know making concrete is the biggest source of pollution after converting coal into oil.]

Let’s look at an alternative that can be easily understood.
R100 Billion is equal to 10 million * R10,000 solar water heaters.
[Ie 10,000,000 * R10,000 = R100,000,000,000]
Assuming that there are 200 working days per year, then over 8 years there are 1600 working days.
Assuming we wish to install 10 million solar water heaters in 1600 days, we need to install 6,250 solar water heaters per day. This would mean that the entire suburb of Milnerton where I live would get solar water heaters in one day.
Assuming a team of three people to install one solar water heater per day, we need 18,750 installers. Together with manufacturing, support, supply chain, maintenance, sales people, electricians, inspectors, this industry might permanently support 35,000 people.

And best of all it would replace 20 GW of power stations, ie it would need 20 GW of electricity to power 10 million electrical water heaters, so it can be said that our money is at least four times more efficient when spent on solar water than on electricity to heat water.

3. A Marketing Plan

The general public needs to be educated as to all the alternatives. Historically fossil fuel systems had their place, but it is now time for us to consider our environment and our future generations and to employ proven technology which is readily available and which is decreasing in cost each year and which doesn’t destroy the environment as much as big concrete power stations and huge coal and nuclear mines.

A marketing plan is part of any strategic document, but is missing from the IRP. The marketing plan should seek to change the paradigm with which we currently live.

The current paradigm says that “successful people have new cell phones, big houses, luxury cars, possibly yachts and planes, have expensive holidays, and generally consume ostentatiously.” The paradigm needs to change to “successful people live off the grids and have a negative carbon footprint.” The grids include the electrical grid, the water grid, the transport grid (eg working from home), the food grid, the waste grid (recycling), the cooking grid.

The marketing plan should seek to offer a balanced opinion going forward. It should seek to use African cultural traditions such as building energy efficient houses such as rondavels which have low energy consumption or adobe, mud brick and straw bale houses which use local materials and knowledge in their construction and also have low energy consumption.

[People who might be against my solar water heater idea and my renewable energy idea might be car companies, as a person who wanted to buy a car might divert this capital purchase into an alternative product. The thing is that these car companies have 1000’s of engineers, technicians, electricians, managers and other staff who can be quickly trained to make either solar water heaters or renewable energy systems. There are electrical components in cars, and almost all the other knowledge is already in our car companies. If the car companies concentrated on building smaller cars, they would have the capacity to use their excess resources to build South Africa’s renewable energy requirements. This would help them become green and in time they can even produce small, electric, cars to use the renewable energy systems that they are building.]

This would go back to my introduction about keeping the wealth of South Africans and Africans inside Africa and not exporting that wealth to other parts of the world.

Thank you.

David Lipschitz

David Lipschitz

I Manage Internal and External Energy; Reduce our Cost of Living for ourselves and on our environment. at My Power Station
Cape Town