IRP2010….Power plan clings to pragmatism over ambition

The draft second integrated resource plan, or IRP2010, is unlikely to receive universal acclaim and even its drafters will acknowledge that errs far more on the side of pragmatism than on perfection.
There will certainly be deep unhappiness in some quarters about the fact that a decision on nuclear has been placed on the “critical path” for early 2011. There will also be disquiet over what can only be perceived as a slower-than-anticipated build-up of renewables, which truly only begins to gain traction from 2016 – the 1 025 MW of immediate renewable capacity outlined in the IRP1 notwithstanding.
No doubt, these anxieties, and more, will be expressed during the upcoming public hearings, which the Department of Energy (DoE) has requested the National Energy Regulator of South Africa to convene.
The DoE confirmed on Friday that the comment period for written submissions on the draft would be extended by 30 days to December 10, 2010 and also announced that the public hearings would begin in Durban on November 26, before moving to Cape Town on November 29, and then to Johannesburg on December 2 and 3.

The extension, DoE said, meant that the IRP2010 would “most likely be promulgated by the end of the first quarter of 2011″ instead of by the end of the year, as had initially been planned.

The extension could mean that some of the concerns may be addressed before the final version is taken to Cabinet early next year. However, they could also simply be held over as key considerations for the next round, already know as IRP2012.
In the circumstances, though, the plan is relatively useful, despite an overreliance on many less-than-firm assumptions and the fact that it has been drafted in the absence of key policies, including a fully fledged climate change policy, as well as in the absence of overarching macroeconomic and energy master plans.
The vagaries of planning for 20 years hence are compounded further by the fact that there is imperfect visibility as to how electricity technologies could evolve in future.
For instance, the heavy weighting given to nuclear in the so-called ‘balanced scenario’ is based on the prevailing knowledge of the available baseload technology solutions. As such, it necessarily discounts the possibility of the emergence in future of clean-coal technologies. Similarly, it is unable to integrate likely renewable-energy advances that might materially close the gap between the rated capacity of installations and their actual capacity factors.
The net result is a plan that leans heavily on new coal and nuclear for baseload solutions, while providing an outline for a medium-term scaling up of wind, solar, landfill and hydropower.
Also outlined is a price path, which indicates that South Africa’s ‘real’ price of electricity will probably rise from just over 40c/kWh currently to above 100c/kWh by 2020, and remain above that level for the subsequent decade.

This is significant for two reasons. Firstly, it should provide impetus for the energy efficiency cause – vital given that the IRP2010 assumes a step change in this area.

Secondly, it has implications for South Africa’s mineral beneficiation aspirations.

It is widely accepted that the structure of the South African economy is energy intensive and that it is probably necessary to reduce the level of intensity. But government policy is also fashioned such that it is supportive of further industrialisation and mineral beneficiation – activities that are energy intensive by their very nature.

The IRP2010 warns that, under the balanced scenario, the price path will already place strain on the country’s beneficiation aspirations, particularly when compared with competitor economies. Moving to an even lower carbon path, the draft document avers, could lead to a contraction of mineral beneficiation, which, in turn, could leave new generation capacity stranded and raise prices further for the remaining consumers.

The other point made in the draft docment is that there are “inherent diminishing returns” associated with a lower-carbon option. In fact it argues, that for an 8% increase in funding, when compared with the lowest-cost option, the balanced scenario can achieve a 30% carbon saving. By contrast, the move from the ‘balanced’ to the ‘low-carbon’ option requires 50% more capital for only a 10% improvement in carbon emission – a point that will, no doubt, be heavily contested during the hearings.

In sum, the IRP includes the following:
• the continuation of Eskom’s 10 000-MW-plus committed build programme, as well as its medium-term power purchase programme for 390 MW of cogeneration and own-build options;
• the construction of Eskom’s 100-MW Sere wind farm;
• phase one of the renewable-energy feed-in tariff, or Refit 1, programmes, for 1 025 MW; • the DoE’s 1 020-MW open-cycle gas- turbine (OCGT) project; • a 2011 decision on a 9 600-MW nuclear-fleet strategy, starting in 2023; • a 3 800-MW wind programme beyond Refit 1, starting in 2014; • a 400-MW solar programme, in addition to Refit 1, starting in 2016;
• a further 7 200-MW renewable-energy programme from 2020;
• imported hydropower options totalling 3 349 MW between 2020 and 2023, mostly arising from the Zambezi river; • some 1 896 MW of closed-cycle gas-turbine capacity, fuelled with imported liquefied natural gas from 2019 to 2021;
• additional own-generation or cogeneration options worth 1 253 MW as identified in the medium-term risk mitigation plan (MTRMP);
• up to 5 000 MW of generic coal-based power generation from 2027 to 2030, in addition to Medupi and Kusile;
• up to 5 750 MW of peaking OCGT gener-ation; and • demand-side management programmes.
In essence, nothing startlingly new. But, given that it is a rolling and ‘self-healing’ plan, it is possible that future versions could integrate some of the emerging clean-energy solutions that are beginning to arise.
That said, there is still the well-founded fear that, given the long lead times associated with nuclear and coal, an early commitment to these solutions could end up closing the door on future innovations.
The problem, though, lies in balancing hope with reality. For instance, the drafters would have been slammed had they dared to incorporate carbon capture and storage solutions into the plan.
Therefore, the decision to cling to pragmatism over aspiration is probably wise in the circumstances.
Another piece of pragmatic wisdom lies in the decision to associate the IRP2010 process with the drafting of the MTRM plan, which focuses on ways to address the near-term power shortfalls.
Indeed, once the hype surrounding the IRP2010 public hearings has died down, most of the attention is going to shift to the MTRM, which aims to deal with the tight reserve margin period that will prevail between now and 2016.
A failure of these projects will change the economic and energy demand assumptions quite dramatically – but not for the better.