Opinionista Robyn Hugo 27 September 2018

Integrated Resource Plan: Time to end the madness of new coal

Substantial obstacles, including multiple legal challenges, render SA’s coal IPPs unlikely to go ahead.

The draft Integrated Resource Plan for Electricity (the IRP) is a significant improvement on the 2016 draft, and many were relieved to see a decision on future nuclear energy pushed out until 2030.

But others, including the Life After Coal Campaign (consisting of Earthlife Africa, the Centre for Environmental Rights, and groundWork) and Greenpeace Africa, have slammed the inclusion of 1,000MW of new coal-based electricity. This power is planned to come from two independent power producer (IPP) coal-fired power stations – Thabametsi (557MW), largely owned by Japan’s Marubeni and South Korea’s KEPCO, proposed near Lephalale; and Khanyisa (306MW), proposed near eMalahleni, with the Saudi-owned ACWA Power, its biggest shareholder.

The IRP acknowledges that a least-cost electricity plan includes no new coal, and no limit on renewable energy. The Minister’s reason for forcing the coal IPPs into the plan – as a “policy-adjustment” – was that they are “already procured and announced”, and that jobs they would create would minimise Eskom job losses, and ensure continued utilisation of skills developed for Medupi and Kusile.

The truth is that Thabametsi and Khanyisa are a long way from being “procured”. Multiple legal challenges stand between them and commercial and financial close. This includes pending High Court reviews of environmental authorisations for both projects, and challenges to their water use licences, generation licences, and atmospheric emission licences – all on Constitutional grounds. Unless and until all of these disputes are resolved in their favour, the coal IPPs cannot reach close.

The Request for Proposals for the Coal Baseload IPP Procurement Programme (RFP) also makes clear that the Department of Energy (DoE) is not obliged to continue with the coal IPP Projects.

The coal IPPs’ second enormous hurdle is that there is no logical basis to argue that the power purchase agreements (PPAs) with Eskom would be “value for money”, as required by legislation. The DoE itself recognises that these coal projects have no place in a least-cost plan. In addition, a recent report by the Energy Research Centre (ERC) demonstrated that they would add some R20 billion to a least-cost energy system, in circumstances where we do not need the coal IPPs to meet demand and ensure security of electricity supply. Where future capacity is needed, this is met much more cheaply, quickly, and flexibly, and with far fewer harmful impacts – from sources like wind, solar pv, and flexible power generators.

The coal IPPs are also bad for Eskom, which is forced to buy this electricity despite existing excess capacity. This not only reduces the output from Eskom’s own fleet, but will probably accelerate its death spiral and cause further grid defection.

Eskom’s board is also required to comply with onerous Public Finance Management Act obligations in deciding whether to sign the PPAs; including acting in Eskom’s best interests in managing its financial affairs; and seeking “to prevent any prejudice to the financial interests of the state”.

Eskom is aware of these problems. At the National Energy Regulator of South Africa (Nersa) hearings in March 2018, Eskom made clear that it does not support the granting of generation licences to the coal IPPs. It has also since confirmed that it does not agree with the draft PPAs, and that it has not received the “value for money” assessment from the DoE.

Clearly, the coal IPPs are neither in Eskom’s, nor the state’s, best interests, financial or otherwise. They are not only not necessary, but will result in more expensive electricity being passed on to consumers – with knock-on impacts for municipalities, which are already struggling because of grid defection.

As the ERC report demonstrates, the coal IPPs would also render redundant the majority of government’s plans to mitigate climate change. Thabametsi’s climate change impact assessment determined that it would be one of the most greenhouse gas-emission-intensive plants in the world – releasing about 10 million tons of CO2 equivalent annually, with an emission intensity almost 60% higher than Medupi and Kusile. This, in circumstances where South Africa is particularly vulnerable to climate change – which, according to Thabametsi’s own assessment, will pose significant risks for the station itself, in terms of limited water availability and temperature increases, impacting its ability to operate. Ultimately, these coal IPPs could likely be stranded assets.

As the recent ERC study on Coal Transitions points out, the global transition away from coal is also happening in South Africa, and closures of coal plants and mines are inevitable. The least sensible response would be to build more polluting coal plants to replace coal jobs lost from closing Eskom’s stations. Instead of subsidising expensive coal, we need a credible, well-communicated plan to support workers and communities when — not if — stations and mines close.

Finally, the coal IPPs would put the DoE in conflict with the Constitution, given that there are safer, cleaner, and far-cheaper energy options available. Committing to more coal-based electricity – particularly where we have excess capacity – locks us into expensive and dirty technology.

Unless the coal IPPs are excluded from the IRP, the DoE runs the risk of a court challenge. DM

Since joining the Centre in October 2011, Robyn Hugo has been responsible for its collaborative Pollution & Climate Change programme. This programme predominantly works in a collaborative project with partners groundWork, the South Durban Community Environmental Alliance, the Vaal Environmental Justice Alliance (VEJA), and the Highveld Environmental Justice Network and with partners groundWork and Earthlife Africa Johannesburg to challenge the exploitation of coal for electricity. Before moving to the Cape. She holds a BA LLB from Stellenbosch University, and an LLM in Environmental Law from the University of Cape Town

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