Energy: Choices made in government’s IRP2010 need to be revisited

The recent difference of opinion between the national planning commission (NPC) and the department of energy raises some interesting points for discussion with regards to the energy sector in South Africa.

While the department's energy policy and planning head Ompi Aphane may feel that the NPC researchers do not have the full view of what is happening in government, they certainly do have a much broader, intersectoral approach to energy provision and management than we have seen in department of energy sponsored plans like the integrated resource plan of 2010. They also raise some very valid concerns that the department of energy should not be so hasty in brushing aside.

The first key issue is the demand forecast that the energy department has been using. The IRP2010 based its modelling for future supply options on a "wishlist" from Eskom's key industrial customers (KICs), resulting in a forecast where annual electricity demand growth projections exceeded average growth of the last decades. This so called "moderate forecast" assumes a 2.9% annual increase in electricity demand for the entire planning horizon from 2010 to 2030. The Council for Scientific and Industrial Research's (CSIR) demand a forecast model that was prepared for the IRP (on request from Eskom) was well below the chosen moderate forecast.

Many stakeholders, including the Academy of Science for South Africa (ASSA) and the Electricity Governance Initiative South Africa, have questioned the choice of the moderate forecast during the public consultation process of the IRP2010. In fact, Eskom reported in its interim results for 2012 that it had experienced a drop in electricity demand of 2.9% for the period January to September 2012 as compared to the same period of the prior year. City of Cape Town's demand is more than 15% below business as usual but with an accompanying sustained upward move of the City's economy. 

While it is too early to conclude that the current low global and national economic growth trend and with it the electricity demand growth will definitely continue in the long term, it is sufficiently different from the projection for South Africa's many expert energy modellers to consider the likely over-investment impacts should such a trend continue. Developments in the renewable energy sector as well as the emerging natural gas potential also push for an urgent review of the choices made in the IRP2010.

It would also make sense to incorporate existing national energy efficiency targets (12% in general and 15% for industries by 2015) in the forecast modelling, which has not occurred as of yet. Beyond that further efficiency gains are possible throughout all sectors with Eskom's chief executive officer Brian Dames estimating that the industry could save between 25% and 35% more power. The many existing examples from the Green Building Council of South Africa show that new and existing commercial buildings can easily reduce energy and water consumption by 60% from current use.

The second major area of concern is the "back-of-cigarette-packet" cost modelling for nuclear investment that has been going on. Cost estimates per kilowatt for the nuclear build programme have gone from R26 575 in the draft IRP of October 2010 to R55 179 (at today's exchange rate) in Eskom's multiyear price determination three of November 2012. Certainly international and local experience shows that such increases for large-scale investments in the power sector continue throughout the – often delayed – construction phase as well. These cost estimates also exclude waste management, decommissioning, fuel costs or clean-up costs in case of a nuclear accident.

With all these facts on the table it is difficult to understand why the department of energy is dragging their feet with the review of the IRP2010? 

This report will be launched on May 8.

Robert Fischer is Programme Manager: Policy and Research for Project 90×2030
Gray Maguire is Community Engagement Facilitator for Project 90×2030

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Robert Fischer
Robert Fischer works from St. Louis. #Communications/#PR pro telling the stories of local musicians with a full-time job in ad tech at @LockerDome — all while playing #rugby. Robert Fischer has over 634 followers on Twitter.
Gray Maguire
Gray Maguire works from Cape Town, South Africa.

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