South Africa's energy policy is at a crossroads with the government this week declaring a waning interest in coal, doing a possible flip on nuclear and showing a keen focus on natural gas, including shale gas, and hydropower.
The long-awaited updated Integrated Resources Plan (IRP) was released for comment this week and shows a change in thinking about energy policy, based on projections of a far lower energy demand over the next 20 years.
Coming in line with the National Development Plan, the IRP now suggests that the cost of nuclear — estimated to be more than R1-trillion — is too high and may even be abandoned in favour of using alternatives such as regional hydropower and shale gas to fulfill the country's energy requirements.
The document suggests the nuclear decision can possibly be delayed.
"The revised demand projections suggest that no new nuclear base-load capacity is required until after 2025 (and for lower demand not until at earliest 2035) and that there are alternative options [such as regional hydro from Mozambique and Zambia] that can fulfil the requirement and allow further exploration of the shale gas potential before prematurely committing to a technology that may be redundant if the electricity demand expectations do not materialise."
Despite escalating costs and delays at the coal-fired power stations, Medupi and Kusile, Coal 3 was approved by the Cabinet this year and remains in the mix of the new IRP — however, it will be significantly smaller with a generation capacity of less than one-third of Medupi and Kusile, between 1 000 megawatts and 1500MW.
But the updated plan has done little to convince critics that the department of energy finally has a clear direction on South Africa's energy mix.
In some quarters, the revised document has caused even greater confusion, given that the government recently indicated the procurement process for nuclear construction is close to being finalised.
In April, the director general of the department of energy, Nelisiwe Magubane, said the nuclear plans were not negotiable and in line with the NDP.
Then it was reported in the Russian media that a deal had been struck to build South Africa's planned nuclear power plants, although Energy Minister Ben Martins denied these claims.
But energy experts say that, without nuclear, South Africa will never meet the emission reduction targets it is committed to, and it is not yet known whether shale gas will be viable (See "Jury still out on viability of Karoo shale gas").
Given the uncertainty surrounding this, the IRP has come up with a number of scenarios.
A larger role for gas
Under the original IRP, coal was expected to account for 15% of all new electricity generation, imported gas 6%, hydropower 6%, gas turbines 14% and nuclear 23%, with the balance made up by renewables.
But the revised IRP sees a larger role for gas, especially if shale gas in the Karoo is commercially viable or not.
In two scenarios, called "Moderate Decline" and "Weathering the Storm", gas and increased renewable generation will be used mainly to manage the system and, after 2030, significant additional transmission infrastructure will be required to move the power from the port areas.
This should be in line with the normal development of the transmission grid, with an emphasis on more transmission lines in the power corridors out of the Cape, the plan says.
However, in the "Big Gas Scenario", there are significant amounts of gas generation added, with about 20 gigawatts in service by 2030, which will require a significant amount of new transmission capacity.
By 2050, the installed gas generation will have more than tripled to about 67GW. This will require significant investment in transmission infrastructure to more or less one and a half times the existing transmission infrastructure.
Eskom keen on gas
Before the revised IRP, the state had begun to show its cards on gas, with several senior government leaders, including President Jacob Zuma, Minister of Mineral Resources Susan Shabangu, Trade and Industry Minister Rob Davies and Eskom boss Brian Dames, expressing support for fracking (hydraulic fracturing) for natural gas and with some dubbing it a "game changer".
In proposed amendments to the Mineral and Petroleum Resources Development Act released in October this year, the state will seek the first 20% in any new oil or gas venture as a free carried interest — a percentage of production without contributing to any of the capital and exploration costs of the project and double the international norm, according to thesouthafrican.com — and will reserve the right to buy another 30% at market-related rates.
Eskom, the custodian of the national power grid, is keen to shift to gas.
It has two existing plants that it could adapt for gas and told the Mail & Guardian it is considering the conversion of its open cycle gas turbines to combined cycle gas turbines.
The company said it is working with the government on regional and local gas projects although it has no plans to frack.
It also said it has had exploratory discussions with several companies involved in gas supply.
"Ready and keen" to work with the government
Regarding nuclear, Eskom said it is "ready and keen" to work with the government for the procurement and construction of new nuclear power plants when it is given the go-ahead.
Jonathan Deal, chairperson of the Treasure Karoo Action Group, said it is a good sign that the government is looking at gas and hydro power instead of nuclear, and this did not necessarily mean there would be fracking, as gas is available elsewhere.
According to the department of energy's website, with natural gas available in neighbouring countries such as Mozambique and Namibia and the discovery of offshore gas reserves in South Africa, the industry is undergoing rapid expansion.
PetroSA, for example, has decided to import liquified natural gas, build a terminal off the South Coast and establish a gas distribution system.
It said the decision was not influenced by the prospects of shale gas but rather because Mossel Bay is running out of feedstock.
It has found small pockets of gas offshore that should sustain it until 2018.
Sasol already pipes gas from Mozambique and is doing seismic studies off Durban and examining geological formations for the possible presence of hydrocarbons.
Jury still out on viability of Karoo shale gas
An energy revolution is taking place in the United States on the back of an abundance of shale gas and the country is expected to go from being a net importer of natural gas to a net exporter by 2020.
But can such a boom be replicated elsewhere in the world, especially in a country like South Africa?
The first thing to consider is that hydraulic fracturing (fracking) technology may not simply be a silver bullet in extracting gas from shale formations.
In March last year, multinational oil and gas company Exxon chief executive Rex Tillerson was quoted as saying some shale formations, particularly in China and Europe, are impervious to the method used in the US: "Some of the shales don't respond as well to hydraulic fracturing … It's going to take research and time in the lab to understand that."
Jonathan Deal, chairperson of the environmental lobby group Treasure the Karoo Action Group, said that rock in China had not responded well to fracking technology, and that area was most similar, geologically, to the Karoo basin.
A report from the department of mineral resources, following an investigation of fracking in the Karoo Basin, reiterated that not all shale formations are suitable for gas extraction.
Is there any gas?
There is also a chance there isn't even any gas at all. Philip Lloyd, a professor at the Energy Institute at the Cape Peninsula University of Technology, said that the Southern Oil Exploration Corporation came across gas deposits in the Karoo in the 1970s, but lava, forming dolerite or volcanic rock, could since have moved through the shale, heating it up and possibly obliterating it.
In 2010, Sasol, Norway's Statoil and the American firm Chesapeake Energy Corporation were awarded a 12-month technical co-operation permit, covering an area of approximately 88 000km2 in the northeast of the Karoo Basin.
But Sasol chief executive David Constable said in September this year the shale is not technically viable, although "we still believe some of the acreage blocks [that] some of the other companies have are far more interesting".
As a result, Sasol didn't renew its technical co-operation permit with the department of energy when it expired in 2011. However, should the production of gas indeed be viable, other obstacles stand in the way.
Jeff Makholm, senior vice-president of NERA Consulting Economists, a Boston-based consultancy, said that the odds are stacked against fracking in most parts of the world.
"Mostly, countries don't have such competitive drilling; in very few countries do landowners own mineral rights; no countries outside the US and Canada give producers access to competitive gas markets through transparent, independent, open-access pipelines; [and] no country outside the US has any substantial working derivatives market for gas. That's why gas costs $3.50 in the US, $10.50 in Europe and $15.50 on the coast of China and in Japan," Makholm said.
But, most importantly, he said, fracking won't happen if it presents risks to state-owned gas companies or state-owned pipeline companies.
"The leaders of those companies, and their allied politicians, will kill the other initiatives upon which successful fracking depends".