South Africa

South Africa

South Africa’s Electricity Choice, Part 3: Decentralised power generation is the pathway to ‘energy democracy’

South Africa’s Electricity Choice, Part 3: Decentralised power generation is the pathway to ‘energy democracy’

New nuclear power lacks a business case for South Africa, whichever country provides the technology. There is no rational basis for policy to discriminate against efficiency and renewables. By ANTON EBERHARD and AMORY LOVINS.

Read parts 1 and 2 of this series here and here. A fourth chapter will follow

The global nuclear industry faces major challenges – there are significant risks of project failure or abandonment and their massive installation costs, construction and operational difficulties result in delays as well as huge financial losses for investors. Of the 259 US nuclear plants ordered between 1955 and 2016, only 28 units (some of which are slated for closure) remain economically viable to date and 49% – almost half – were abandoned before start up. Renewable energy, on the other hand, is growing in popularity around the world.

Reliability of renewable energy

A regular critique of renewable energy made by proponents of nuclear power is that it is unreliable – the wind does not always blow and the sun does not always shine. However, the objective function of the computer model – PLEXOS – used to prepare South Africa’s IRPs is a least-cost, optimal generation mix that meets a specified security of supply each hour of the day throughout the year. The latest IRP2017 modelled by Eskom also records that there is sufficient “dispatchable power” to fully cover peak demand.

The IRP 2017 incorporates concentrated solar power plants procured in the first three renewable energy auctions. While this power source is still regarded as expensive in South Africa, global developments indicate that it is becoming increasingly competitive. Night-time solar power from stored solar heat – similar to the 9.3 hours of thermal storage in South Africa’s new Bokpoort solar plant in the Northern Cape – sells in Chile for 9.7 US¢/kWh, one-half above the day-time solar price (6.5¢) but one-third below the EU nuclear price (~13–15+¢).

But even without bulk electrical or thermal storage, wind and PV’s accurately forecastable variability can readily be managed by approximately several proven methods that are generally profitable in their own right. This is not just a theoretical possibility but well proven in practice. In 2014, four EU countries not rich in hydropower, met about half their electricity needs from renewables (Spain 46%, Scotland 50%, Denmark 59%, Portugal 64%) without increasing bulk storage or decreasing reliability. They run their grids as a conductor leads an orchestra: no instrument plays all the time, but the ensemble continuously produces beautiful music. Similarly, renewables met 33% of Italy’s 2014 electricity needs, 27% of Germany’s, 22% of Ireland’s, 20% of France’s, and 19% of Britain’s. Most of these renewable fractions continued their upward progress in 2015 and 2016, generally accompanied by increasing reliability of grid supply and by moderating or decreasing wholesale electricity prices (often overlooked by those who focus on high retail prices in a few countries, notably Denmark and Germany, where long-standing policy heavily taxes household electricity).

South African wind and solar tend to work best at different times, together making contributions to morning and evening peak loads. The government wants nuclear power lest “variable” renewables prove unreliable, but modern experience abroad has resolved this problem: in 2015, the ultra-reliable former East German utility 50Hertz was 46% powered by wind and PV, and its CEO said 60 to 70% would be feasible without added storage. On the contrary, it is nuclear power whose rather inflexible output, traditionally blended with varying output from coal and gas plants, complicates integration with the renewables now rapidly replacing those polluting and erratically priced fossil fuels.

It might be argued that the South African grid is isolated – certainly more so than, say, that of Denmark, whose strong links to the Nordic and German grids have let its wind power produce up to 140% of total national demand, and on one autumn day in 2015, to turn off all the country’s central power plants. But such grids as Ireland’s and Portugal’s are only lightly interconnected with neighbouring countries, and in 2016, 63%-renewable Portugal was a net electricity exporter to Spain. Moreover, Germany (32% renewably powered in 2016, and 82% for several days in May 2017) and Denmark (62% renewably powered including 42% wind power in 2015, and 100% on many days each year) both have electricity grids roughly tenfold more reliable than those of the United States, which in 2016 met 16% of its net electricity needs with renewables, or 9% without hydropower, or 7% from wind and PV.

South Africa’s heavy industry potentially offers a dispatchable resource – co-generating industrial heat and power together – which is far more efficient and economical than producing them separately, and could advantageously use emerging regional supplies of natural gas. South Africa plans to strengthen interconnections to neighbours’ hydroelectric and other electricity resources. And in not infrequent circumstances, mines can often provide economically advantageous demand response by adjusting major loads like milling and beneficiation to match grid needs: ore and product are far cheaper to store than electricity. By the same logic, some metallurgical industries abroad can make more profit by selling demand response than selling metal.

It clearly makes sense to invest in the lowest-cost power generation sources – solar and wind –and it is now clear that increasing the share of these variable renewable energy resources can be done without prejudicing system reliability provided sufficient flexible and demand-side resources are also contracted. The IRP models show that this combination still offers the lowest system cost.

A recent engineering study “confirms that the South African power system will be sufficiently flexible to handle very large amounts of wind and PV generation … to cope with increased flexibility requirements resulting from the installation of 4.2 GW of wind generation and up to 12.8 GW of PV by 2020, and 11 GW of wind and 27.5 GW of PV by 2030; flexibility requirements can be handled by existing and planned power plants at moderate additional costs.”

It is only a matter of time before debunked notions lately introduced by the coal-and-nuclear-centric U.S. Administration (to general ridicule in the electricity community) enter the SA debate. In reality, nuclear and coal-fired power stations have few of the magical properties claimed for them by their U.S advocates, and in particular, have little effect or statistically, a somewhat negative effect on grid resilience. However, as is abundantly clear from the French example, nuclear plants’ relative inflexibility makes their massive installation a serious impediment to operating a grid to take proper advantage of renewable energy’s many attributes, including resilience (such as the ability to keep providing local power despite transmission faults that disconnect remote central stations).

One further aspect of reliability bears mention: the global nuclear industry continues to suffer major risks of project failure or abandonment, akin to “dry holes” in oil exploration. A new analysis indicates:

Of 259 US nuclear units ordered in 1955-2016, 128 (49%) were abandoned before start up and 34 (13%) prematurely closed later. Of the 97 units (37%) operating at mid-2017, 49 are uneconomic to run; 35 have suffered 45 year-plus safety-related outages; and just 28 units (11%), some slated for closure, remain economically viable and have not yet suffered a year-plus outage. Globally, too, serious delays and operational challenges abound. Such disappointing performance shrinks nuclear plants’ expected carbon savings and burdens them with often-overlooked abandonment costs. Such large gaps between promise and performance are almost unheard-of with modern renewables.

Nuclear construction and operational problems also occur in South Africa, where objective conditions make them arguably more likely and far riskier to the national economy. Renewable projects’ smaller unit size and shorter lead times help mitigate that risk.

Energy efficiency and electricity demand

Even at old costs – low nuclear, high renewables – government’s ignored IRP 2013, 2016, and 2017 updates found nuclear new-build unjustified if electricity demand grew slowly. In fact, as Eskom more than quadrupled its nominal electricity price and nearly tripled its real price over the past decade from levels originally among the lowest in the world, not just growth but absolute annual national usage of electricity in 2017 has fallen to below 2007 levels. Total electricity sales dropped even in the thriving City of Cape Town. Week-on-week Eskom demand in MW has also dropped.

This drop is attributable to the fact that customers who can are buying efficiency. Because saved kWh and kW are just as valuable to Eskom as generated ones, Eskom bought back over 2.5 GW of “negawatts” (saved watts) from 2008 to 2013 – 90% cheaper than Medupi coal capacity, let alone the coal it burns. Far more efficiency remains unanalysed and unbought: for example, the Rocky Mountain Institute’s 2004 collaboration with South African engineers found that a vast South African mine could save 43% of its energy, repaying the investment in three years at Eskom’s very low tariff then prevailing. Those who assert that SA’s efficiency potential is nearly at theoretical limits are badly out of touch with both theory and modern practice. South Africa’s electricity intensity – the number of kWh per unit of GSP output –reached a peak in 1998 and has now fallen for nearly two decades, yet it can profitably fall very much further.

Figure 2: South Africa’s GDP growth, electricity intensity and electricity consumption

South Africa’s energy and electricity intensities are among the world’s highest not only because of its heavy industry (attracted by policy and by historically very low energy prices), but also because commendable recent efficiency efforts barely scratch the surface of the profitable potential in all sectors. This is illustrated by the most detailed and rigorous published analyses for both a developed and a developing country’s 2050 potential:

  • The United States could run a 2050 economy 2.6-fold bigger than that of 2010 using no oil, coal, or nuclear energy and one-third less natural gas, with tripled efficiency (roughly quadrupled for electricity) and quintupled renewables, at a net-present-value private internal cost (i.e. valuing all externalities at zero) $5tn lower than business-as-usual, emitting 82–86% less fossil carbon than in 2000, using no new inventions, needing no Acts of Congress (as the needed policy changes can be done administratively or subnationally), but led by business for profit – a trajectory on track in the marketplace since 2010.
  • China could increase its real GDP 7-fold by 2050, in accordance with official targets, using scarcely more primary energy than in 2010 and getting most of it from non-fossil sources with 13-fold higher carbon productivity than in 2010, hence using four-fifths less coal, emitting two-fifths less carbon, and costing $3.4tn less in net present value than business-as-usual.

Meantime, Eskom’s haemorrhage continues. Electricity sales in its 2017/8 financial year are expected to be 14% lower than projected in its original MYPD3 tariff application. For the coming year, it applied to the National Energy Regulator of South Africa for a 19.9% tariff increase—in part to compensate for lost sales, but was awarded only 5.2%. Despite a R23bn state bailout in 2015, which came after a state R60bn subordinated loan – subsequently converted into equity – and state guarantees of R350bn for its debt, it still can’t cover its costs and can’t escape a junk rating even after years of above-inflation tariff increases. It will need R60 to 80bn per year in additional finance over the next five years to complete its capex programme, so further price rises seem inevitable. To keep raising prices without strongly adjusting the demand forecast for observed and likely longer-term price elasticity risks severe overshoot – as SA, to its great cost, experienced in a previous burst of central-station construction.

Indeed, Eskom may already have triggered the sort of “death spiral” already seen in another commodity-dependent economy, Australia where costlier electricity, falling demand, rising prices, then defection to PV (over 6.5 GW now installed, often on roofs) plus efficiency, flexible loads, and local storage, combined to cut grid sales further. In 2014, Australian electricity demand was expected to rise 20% in ten years. Instead it fell 9% in six years despite robust GDP growth.

Australia’s rising prices, plummeting demand, and burgeoning renewables signal a market-led transformation of the coal-based, central-plant, big-grid model. A similar trend is now being observed in South Africa of falling demand and progressively lower electricity forecasts, although these are probably still too optimistic.

We believe South Africa’s exceptional endowments – in wind and sun, energy efficiency potential, and human resources and resourcefulness – are every bit as good as Australia’s. A further advantage of these resources is that they can contribute to electrification of remote areas. Decentralised power generation in every isolated corner of the nation is the pathway to “energy democracy” – investing in power for people and places lacking it, not just adding more for people who already have it. Choosing the best buys first can bring power to three million unelectrified South African households faster and cheaper from the sun than from the grid. It would also complement, and foster robust competition with, the ~100-MW renewable blocks planned by the DoE and even contemplated by Eskom.

In summary, new nuclear power – with its costs rising, sales shrinking, 2016 global output 7% below 2006’s, retirements of old plant about to outpace new additions, and renewables and efficiency decisively beating it in the global marketplace – lacks a business case for South Africa, whichever country provides the technology. There is no rational basis for policy to discriminate against efficiency and renewables, which all avoid the same fuels and emissions and can provide the same electrical services with equal or better reliability at far lower cost and policy risk than nuclear power. But there is special cause for concern about South Africa’s proposed nuclear deal, particularly with Russia, as we explore next. DM

In our fourth and final instalment we explore the danger of dealing with Russia

Physicist Amory Lovins is a world’s leading energy expert. A former Oxford don, honorary US architect, Swedish engineering academician, advisor to business and government leaders for 44 years in over 65 countries including South Africa, he has won many of the world’s top energy and environment awards, received 12 honorary doctorates, taught at 10 universities, and written 31 books and over 625 papers. Time named him one of the world’s 100 most influential people; Foreign Policy, one of the 100 top global thinkers

Anton Eberhard was inspired to undertake his PhD in the field of energy and development in 1979 after reading Amory Lovins’s seminal publications on renewable energy and energy efficiency. He has recently been elected to the rank of Emeritus Professor and Senior Scholar at the University of Cape Town after 35 years of research, teaching and policy advocacy in energy and sustainable development in Africa.

File Photo: A general view of the Koeberg nuclear power station on the West Coast outside Cape Town, South Africa, 18 February 2015. EPA/NIC BOTHMA


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