Thabang Audat has a key job. As chief director of electricity in the department of energy, it is his job to make sure the lights stay on. He is also the department’s point person on the new integrated resource plan (IRP2), which is intended in the coming weeks to set the energy mix for the country for the next few decades.
Audat stopped by the Mail & Guardian offices with his laptop, which contains slides, projections and dates on the process, what it aims to achieve and by when.
His key point is that the process is a break with the past. Where Eskom previously decided unilaterally on how we would make electricity and when, the IRP is intended to bring in new players and decide on the mix of technologies. It will, as such, reduce the country’s dependence on coal by diversifying into renewable energy sources.
The IRP is also used to forecast energy demand and reduce use through energy efficiency.
Moves are afoot to ring-fence the electricity-buying operations within Eskom as a short-term preparatory move to setting up a buyer independent of Eskom.
Audat acknowledges that the IRP2’s younger sibling, the IRP1, which was rushed into law at the end of last year, was not as inclusionary and transparent as it could have been. He says that the IRP1 was limited to approving projects that were at an advanced stage and would fall within the time period of the current multi-year price determination (MYPD) under consideration by the National Energy Regulator of South Africa (Nersa).
A controversial project included in the IRP1 is two diesel-operated peaker plants of a combined 1000MW capacity. The plants, which have a reputed cost of R8billion, are intended to supply capacity at peak times. The project is controversial as Eskom’s two existing peaker plants run for only 3% of the time because of high operating costs. Critics say that these costs are likely to rise with fuel costs, meaning that we are building expensive white elephants.
Audat says that the project is intended to address a shortfall in the country’s electricity supply mix. Compared to international norms, we are short of peaking capacity and in years to come we may well be thankful that we proceeded with these investments now, he says. The full cost of the project will only be available on completion.
Everybody will agree that the best energy policy is one that makes better use of what is available. The IRP1, through demand-side management, aims to save 3056MW by 2013, mostly through an ambitious roll-out of solar water heaters.
This is a big saving. Consider that Medupi, the giant coal-fired station now under construction at a cost of R125-billion, will produce 4 800MW of power.
Solar heaters are crucial to Audat’s ability to keep the lights on. The government has set a target of introducing one million solar water heaters. Audat says that R5,3-billion has been ring-fenced for this purpose by Nersa in the latest price determination.
Eskom has doubled its subsidy and will aim to bring 250 000 new heaters on to the market. The department is still finalising its programme.
Audat says that a virtual power station model is envisaged, which has worked in other countries, notably Turkey.
Eskom will collect the R5,3-billion and hand the funds over to a new implementing authority, which will contract vendors to be the sole suppliers of geysers in specified areas. The geysers will be leased by homeowners, with the vendors claiming funds based on savings made to the implementing authority.
This takes the high upfront cost out of the equation, but the proposed system appears complex and bureaucratic, requiring yet another statutory authority. It would surely be simpler and easier to send the R5.3billion to the treasury and let homeowners claim a rebate against their tax returns.
There are supporters of the Botswana-based Mmamabula project who see it as a way of limiting supply risk as it can relatively quickly — in about three years — bring base load power to the market. They believe it should be given the go-ahead urgently.
The department is emphasising that the stakeholder process is not complete and final decisions have not been made about which projects are in and which are out. The idea is that the IRP2 will not identify projects by name but rather by the type of technology and amount of power required. Vendors can then bid for what is available.
He says foreign-based projects will be covered in the IRP2 under the category of imports. Policy on electricity imports still has to be finalised and there are security of supply considerations linked to the capacity of the grid to handle imports, he says.
An aspect of his presentation reminded me of the idea of phantom power, when appliances such as televisions suck energy even while they are switched off. It struck me that Kusile, Eskom’s proposed 4800MW station, is also something of a phantom. It is an important building block of IRP1 and yet, in Eskom’s figures, faces a R180-billion funding shortfall.
Asked about Kusile, Audat says there are investors out there. “Getting the finance for Kusile is not such a huge risk. The problem with Kusile financing is, for example, that most financiers are saying we are not going in for anything less than 50%, which is a political issue for the utility.”
So the funding is not settled. If I went to the Nersa with a 1MW hydro scheme and told it that I wanted to supply hydro power even though I did not know how I was going to fund the build, would my project get the go-ahead?
And this is the problem with Audat’s edifice. It is an attempt to create a post-Eskom world in which the utility does not solely determine the what, how and when of energy policy. But the selling and buying will still happen through a single office.
If a hydro operator wants to sell power to local municipalities in the Free State, or Cape Town wants to sign a contract with wind farms on the West Coast; if Mmamabula wants to sell directly to Mick Davis’s Xstrata, or if solar farms want to supply customers directly across the sun-drenched Karoo — why should they not be able to do so without reference to a spreadsheet on Audat’s laptop?
We hear that far more vendors of renewable technologies want to supply than the IRP1 stipulates. The prices Nersa has on offer are seen to be really attractive.
If there were more buyers and competition was setting prices, we would in all probability get much more green power for the same buck.
What is currently under discussion is riddled with risk. If it all happens, Audat can pick up the Order of the Baobab or whatever award is appropriate, but it would be far better to introduce more ways to reduce risk in the entire system by making it much easier for buyers and sellers to make their own arrangements.
If Audat fails, if those spreadsheets and assumptions turn out to have been faulty, the peakers are going to be running full time.