Shale gas energises government
Shale gas will probably be part of South Africa's future energy mix. The moratorium on exploration is gone and, barring serious and irreconcilable environmental issues, it could be getting your kettle to bubble away in a decade. But by then other power sources could be so cheap that shale gas will not be able to compete.
For now, shale gas has the government excited and not just because it could add R1-trillion to the economy.
It is being seen as the next big power source, something that can give a cleaner backbone to the economy than coal and that is more reliable than green energy.
Deputy Mineral Resources Minister Godfrey Oliphant went as far as to tell a room of journalists: "We must be excited."
The calculations are based on an estimate by the United States Energy Information Administration that 485-trillion cubic feet of gas lie 4km below the surface of the Karoo. But for any planning to be done, this claim has to be tested.
"We need information, so we will allow normal exploration to proceed under the current regulatory framework [the Mineral and Petroleum Resources Act]," said Mineral Resources Minister Susan Shabangu. The exploration will fall to the five companies that applied for permits in 2010.
While this is happening, the department of mineral resources will check whether its legislation is thorough enough to ensure that fracking has no negative outcomes, Shabangu said. The department will also work with interest groups such as the Square Kilometre Array radio telescope to ensure there will be no negative impacts that cannot be managed.
If everyone is satisfied, the companies that apply for the rights may get permission to go ahead with hydraulic fracturing, making the government's dream of gas-fired power stations a reality.
"This resource has the potential to energise this country and this energy will be built into the integrated resource plan and it will form part of the country's energy mix," Shabangu said. When it first became clear that new technology could allow fracking, she said the department's first thought was about electricity generation.
In countries such as the United States, gas is used to make the transition from a carbon-intense economy with high emissions to a more sustainable one driven by green energy. Gas has much lower carbon emissions and the power stations that run on it are friendlier to the environment and much cheaper than coal power stations.
Shabangu said shale gas would help South Africa to meet its commitments under the Copenhagen Process to reduce its carbon emissions by 42% by 2025.
"Shale gas will contribute to clean energy and will come as part of our programme to mitigate our carbon emissions," she said. Although this could result in a re-evaluation of the country's energy mix in the future, it will not replace any energy production currently being planned, she said.
The message from Shell, one of the five companies that applied for exploration rights in 2010, is that it could be a game-changer for South Africa. Janine Nel, spokesperson for the company's upstream activities, said shale gas could move the country away from being a net importer of energy as well as from its reliance on coal.
"In combination with other energy sources, including renewables, gas could help to secure South Africa's energy future," she said. "But the first challenge will be to confirm the presence of sufficient gas and whether it can be extracted economically," she said. Environmental and health impact assessments will then be done to determine whether fracking can go ahead.
This process could take up to nine years. Dirk de Vos, a renewable-energy specialist, said the costs of getting the shale gas and moving it around would be considerable. "Just because there are proven resources does not mean they are commercially viable," he said.
With deep fields to be drilled and scarce skills to be imported, the cost of getting gas out of the ground could render shale gas uncompetitive, he said. "It is the downstream infrastructure which is going to cost us the most."
This will come in the form of the pipelines to move gas from the remote Karoo, or the power grids that will have to be installed if power stations are set up in the area.
Competing against fracking will be conventional gas from the fields along the Mozambique coast and possibly the Eastern Cape.
Sasol is in the final stages of constructing a 140MW gas-fired plant in Sasolburg, which will be supplied by gas from Mozambique. This will create a market and a ceiling price for gas in the region, said De Vos. And with its head start, tested technology and infrastructure, conventional gas will make it hard for shale gas to compete in terms of price.
Ferrial Adams, an energy and climate-change campaigner at Greenpeace, said shale gas has to be skipped altogether and not be seen as a transition energy between coal and renewables.
More green power
"We have enough coal and we have the means to generate power from it. So we should keep using this while we create more green power. Using shale gas will just delay the progress we need to make in making our country sustainable," she said.
Shale gas is also not the gas that is powering the gas revolution overseas, she said. That is being powered by conventional gas. "Shale gas is dirty and the process to extract it is associated with dangers to water and the environment."
Adams's solution is to accelerate and expand green energy. The renewable-power producers' programme has already had two bidding phases. Along with the last one, which has been delayed until next year, this will bring a total of 3725MW of power into the grid by 2016. The total budget of this programme is R120-billion. A further R200-billion has been earmarked for a solar park near Upington, which is nearing the final stages of approval.
Although these projects are not yet supplying power, the prices quoted in their bids provide an indication of how cheap they will be. Onshore wind generation - the big windmills that already dot the landscape of Europe - will produce electricity at 89c/kWh. Solar voltaic, a technology that still has huge space for improvement because it currently wastes a lot of the sunlight it absorbs, will cost R1.65/kWh. Given the lowering of the prices for this power in the bidding phase alone, industry participants are confident that, as the scale of local operations and expertise grows, these prices will only get lower.
National energy regulator Nersa recently calculated that the all-inclusive cost of electricity from Eskom's two new coal stations would be about 97c/kWh. When the energy price hikes started in 2010, the wholesale price of electricity was 44c/kWh.
The problems and costs associated with fracking led an August US edition of Popular Mechanics to conclude: "Although extracting the oil from US shale may be technically possible, the scale of such an enterprise, as measured in acres and natural resources, may never make it worthwhile."