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Eskom misleading SA on power costs, nuclear not needed - Eberhard

Nov 03 2016 08:59
Matthew le Cordeur

Cape Town – Eskom is misleading government and South Africa by saying renewable energy is more expensive than nuclear energy and adds to the argument that the entity should be broken up, according to energy policy expert Professor Anton Eberhard.

“Eskom is using bid 1 and 2 contracts from the renewable energy independent power producers (IPP) procurement programme, which is where they are getting power from now, and it is ignoring round 4, where we had power that was so much cheaper than Eskom,” Eberhard told Fin24.

READ: Eskom R58bn IPP snub is proof utility should be broken up - Windaba

“Eskom’s generation division needs to be spun-off from the utility precisely to avoid the situation we face now, where Eskom is being the arbiter of whether it builds the next big chunk of power or whether the private sector comes in with IPPs and renewables,” he said. “It shouldn’t be Eskom’s decision; that is a broader policy decision.”

South Africa’s electricity plan is embedded in the Integrated Resources Plan (IRP), which was tabled in 2010 with the proviso that it be updated regularly. This IRP revealed that 9.6 GW of nuclear was required.

However, a subsequent update of the IRP in 2013 revealed that if demand was lower, and nuclear costs higher, nuclear would not be needed. The Department of Energy (DoE) and Cabinet simply ignored this plan and refused to gazette it.

READ: Madonsela nails Eskom over Gupta coal tender

The latest update of the IRP is once again in the spotlight, after the DoE announced it would be released to Cabinet on September 31. It then delayed this move.

The IRP has been given input by various government departments and a couple of weeks ago was reviewed by the DoE’s Ministerial Advisory Council on Energy (Mace).

“The intention (after this process) was to send the update through to Cabinet and for public consultation,” said Eberhard.

READ: #StateCaptureReport: Eskom board should be dissolved

On Wednesday, Energy Minister Tina Joemat-Pettersson told the National Council of Provinces that the IRP and the integrated energy plan have been submitted to the Cabinet and will be released for public comment.

Minister in the Presidency Jeff Radebe is expected to announce on Thursday that the reports would be released for public comment, Business Day reported.

In another story, Business Day reported on Thursday that Mace recommended the IRP should not include building nuclear power.

"The team’s key finding is that the draft IRP under consideration imposes artificial limits on how much renewable energy capacity can be built in a year, with the result that the draft finds nuclear power is necessary and cost effective," Business Day deputy editor Carol Paton explained. "But, says the team, the IRP is obliged to find the least-cost model, which the draft does not do."

"The working group therefore recommends that the annual new-build limits imposed on solar PV and wind are removed," the Mace report, which was leaked to the paper, says.

This mirrors the views of Eberhard.

IRP provides scientific basis on energy mix

“These decisions around our future energy mix involve huge amounts of capital investment with implications of the cost of electricity and ultimately economic growth going forward,” Eberhard said. “They are far too important decisions to be made by a small group of people within Eskom only.

“The importance of the IRP is that it provides a scientific basis to decide on the optimal mix of energy to plan for and provides a basis for government to make decisions around future investment.

“It is absolutely critical that it is transparent and that there is a good debate and good consultation with the relevant stakeholders so that the best possible outcome is achieved.

“To me, it is bizarre that Eskom is pushing for nuclear so hard. They have even said that Eskom should proceed with nuclear procurement even if the IRP is not published.

“That makes absolutely no sense. It’s important that we have an IRP that is defensible and provides a rational basis for procurements going forward.”

Eberhard said that if the IRP states nuclear is not required, then there would be “grounds for legal challenge that the procurement decision was not rational”.

Calculating the IRP

Eberhard explained that the staff supporting the DoE used IT software called Plexos to formulate the IRP and said this is what many countries around the world use, including research institutions in South Africa.

“You project demand and input cost assumptions for different supply options,” he said. “The model then simulates power demand through periods of the day and the year and then picks the least cost combination.

“All these debates around poor reliability if there is wind and solar are really missing this point,” he said. “With the model, you set the reliability standard and then the supply mix it chooses is one that will meet this standard. If the model picks wind and solar as the cheapest supply options, it will also pick gas to ensure system reliability.

“What we’ve seen from the 2010 and 2013 IRP versions, and what we hear from the latest updates, is that if you run a least cost base case – where there are no other constraints – then the model picks mainly wind, solar PV and gas.

“If you then place constraints on the model – if you don’t think you can build more than a certain amount of wind or solar PV each year, and you place a cap on that, then nuclear might be picked, but only in the late 2030s.

"Modelling also shows that if you place a constraint on carbon emissions – in order to meet our climate change mitigation obligations, then you can still achieve that with solar PV, wind and gas, and without nuclear. The argument that you need nuclear to meet climate change mitigation is not accurate. There are other combinations that can do this.”

Eberhard is sceptical that nuclear will be cost-competitive or that Eskom will be able to contain costs. "Rent seeking - corruption - could drive these costs even higher," he said. "We have already seen a number of expensive contracts being awarded to consultants in preparation for the nuclear procurement, many to companies with absolutely no track record in nuclear.”

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