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Move to renewables already here

 

 

ANALYSIS

While even the most ardent fossil fuel apologists would surely agree that South Africa has to begin a transition from its coal dependence with its associated environmental and health risks, there may be debate as to when the transition should begin in earnest.

I was then somewhat surprised by the presentation of Jesse Burton at the COP25 United Nations climate conference in Madrid late last year, which, with backing graphs, makes the case why the transition from coal has already begun. Burton is with the climate change think tank E3G in London and the Energy Systems Group at the University of Cape Town.

Burton’s modelling shows that new coal is now so uneconomic, given the fall in renewable energy prices, that each 860 megawatts of coal power will need a R23-billion subsidy from consumers. Despite this, South Africa’s Integrated Resource Plan (IRP) 2019, which guides energy provision, includes 1 500 megawatts of new coal in the 2020s.

Coal mining jobs, which peaked at 126 000 in 1980, and had fallen to 77 800 in 2015, are projected to fall to just 35 000 in a “business as usual” scenario and 24 900 in a Paris-adjustment (a climate policy) scenario.

“The transition is here, it is just happening on an unplanned basis,” says Burton. “Assuming we can continue to depend on global coal markets is risky for coal workers and communities in Mpumalanga.”

Coal is in trouble and, as we know too well, so is Eskom. It began the year with 40% of its fleet unavailable, even though the economy was still on holiday.

Eskom’s executive has been pushing the idea that we have to get used to load-shedding while it mends its old, dysfunctional power stations because the new ones are not working properly. It has yet to explain how we run an economy at the same time.

It was with this context that I drove to the Independent Power Producer Office (IPPO) in Centurion to hear a briefing on how the government plans to urgently source 3 000 megawatts of power.

The IRP put this shortfall at 2 000 megawatts. Gwede Mantashe’s department of mineral resources and energy has subsequently said the shortfall is 3 000 megawatts while Eskom’s executive says it needs a buffer of 5 000 megawatts to keep the lights on.

One analyst has put the likely capital cost of procuring the 3 000 megawatts of emergency electricity at R140-billion, so the exercise is not only urgent, but costly too.

The traffic lights near the IPPO were not working, neither was the lighting in the underground parking, suggesting load-shedding was at work.

The briefing was being held after the energy department issued a request for information (RFI) in December to secure 3 000 megawatts of electricity, specifically from suppliers who can provide electricity within three months to 12 months. The IPPO is handling the process.

It has already answered numerous queries about the RFI on its website and at the briefing many people had to stand, even though extra chairs had been brought in.

The session was led by Maduna Ngobeni, the head of the regional programmes at the IPPO, with specialist input from the office’s Pervelan Govender and Lena Mangondo.

Many in the room had participated in an earlier RFI in 2015, which was still-born. Ngobeni addressed this in a sentence: “The market and country were told between 2015 and 2017 there was no need for new power,” he said, adding that there is now a need for electricity.

Why participants wanted to know, was the 2015 information not being used now, why the need for new submissions? Others wanted prices the authorities would be prepared to pay for the various technological options available.

The IPPO, though, sees the issue the other way around. It wants market participants to indicate which technologies they can supply and at what cost. This is intended to guide not only present procurement but future bid windows too. “The RFI will inform future procurement,” Ngobeni said.

With the IRP indicating the country will need a big amount of renewable energy as Eskom’s electricity mausoleums die a natural death, there is a lot of this power coming into play.

The IPPO’s position is that vendors have made numerous informal approaches to it suggesting a range of technological offerings. The RFI process means these options can now be formally presented.

“We won’t tell you what the tariff should be,” the briefing was told. “You should come up with the terms”.

One person asked whether the submission deadline of January 31 could be moved back by two weeks or a month. The answer was that the submission period could not be changed because the IPPO wanted this part of the process complete within a month of the deadline, so that the next stage — request for proposals — can begin.

Concerns were also raised about whether the likely buyer for the electricity, Eskom, was on board, because its reluctance to buy from independent power producers in the past had hamstrung these projects. The answer suggested that discussions with Eskom, including one that morning, are ongoing and inconclusive. But potential bidders were assured that this issue would be sorted before the procurement process is formalised.

Similarly, one person asked what government guarantees would apply, pointing out that the likely buyer, Eskom, was insolvent. Where would liability sit? Will the projects get government support? The answer was that these issues would also be addressed in the finalised documents.

There were questions about how freeing up the sector through deregulation would affect the emergency programme. One vendor said he was supplying private business with electricity at below Eskom rates. All that was required was that the National Energy Regulator of South Africa (Nersa) issue licenses to allow these “shovel-ready” projects to proceed. “Let us go, let us help the grid,” he said.

Another attendee asked: “How do ministerial declarations fit in?”

Likewise, people asked when the so-called smalls programme, which one questioner said was ready from as far back as 2016-2017, would come into play. “We need a date from Eskom. What is the date?” he asked.

The IPPO’s replies to questions such as these was that the emergency programme was but one initiative by government and that others, such as those mentioned, would be proceeding independently.

Some projects, such as a 100 megawatt concentrated solar plant in the Northern Cape, are constrained by the existing power purchasing agreement (PPA), which limits the amount of power it can supply to the grid. This operator wanted to know whether he could change his PPA to increase supply. “I can supply very quickly,” he said.

The answer to this — and to all questions in general — was that all options will be considered.

Jo Dean, of the South African Renewable Energy Council, says the approach used by the IPPO means that all technological options are now on the table whereas previously renewables were limited to wind and solar. Glancing around at those who attended the briefing, she said they were in a position to bring renewables to the grid within the 12 months indicated by the RFI.

Dean sees the IPPO to be driving a new approach to electricity provision for the country, one which is likely to favour renewables because of price and speed to market, not to mention the environmental and health benefits.

Constraining issues include the fact that multiple licenses are usually needed from state agencies, including from the buyer (Eskom), civil aviation, an environmental impact assessment, Nersa and land use contracts. Dean says the problem is that multiple regulators need to be accessed and in cases they require authorisation from one before the other will proceed.

Bidders are encouraged by the IPPO in this RFI process to identify bottlenecks.

The question of urgency was also raised, with the electricity crisis being likened to a situation that needs a “war-like” response. “We haven’t got time to go through a long process,” one person said, warning that delays “could see the country’s economy go through a financial close”.

Burton is right that we are already in a transition, an unplanned one. The current dominant fossil fuel provider Eskom, fortunately for those who want a planet we can inhabit, is not up to the job, meaning that it continues to fall over, opening the way for cleaner and cheaper fuels.

Hopefully this IPPO process can help steer us from the present calamity to a more sensible and productive future.

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Kevin Davie

Kevin Davie is M&G's business editor. A journalist for more than 30 years, he has worked in senior positions at most major titles in the country. Davie is a Nieman Fellow (1995-1996) and cyberspace innovator, having co-founded SA's first online-only news portal, Woza, and the first online stockbroking operation. He is a lecturer at Wits Journalism. In his spare time he can be found riding a bicycle, usually somewhere remote.

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