Transcript Document

Eskom’s MYPD2 application
Lawful? Necessary?
Peet du Plooy
WWF: Trade & Investment Advisor
(South Africa)
Key questions
1.
Is the planning basis for the investment programme
necessitating the tariff increase valid and legal?
2.
Is the assumed growth rate in electricity demand justified, if the
electricity price more than triples over only four years?
3.
What are the long-term (cost, competitveness and environmental)
risks to funding the proposed, coal-based and Eskom-driven
expansion plan?
4.
Is Eskom an “efficient producer”?
5.
Are there alternatives?
Key question 1
Is the planning basis for the investment
programme necessitating the tariff
increase valid and legal?
Planning basis
“IRP1” As gazetted on 31 Dec 2009 (after the MYPD2 application),
without further detail, public participation or incorporation of
Eskom’s build plan revisions:
Energy Act 34 of 2008
CHAPTER 2
ENERGY SUPPLY, OPTIMISATION AND UTILISATION
Provision of data and access to data sources
3. (1) The Minister must establish mechanisms to ensure—
(a) provision of any data and information reasonably required for the purposes of conducting analysis required
for energy planning from any person and the time period for the provision of such data and information, where
such data is not already made available to any other public institution: and
(b) connection to any data and information management system, or any other system within the public
administration, for the acquisition of energy data and information, in accordance with the Promotion of Access to
Information Act and the Statistics Act, 1999 (Act No. 6 of 1999) where such data or information is collected by
that public institution.
(2) The Minister may, for the purpose of ensuring optimal collection of data, subject to observation of confidentiality
of information in the possession of a particular entity, permit sharing of information with any other entity within
and outside of the boundaries of the Republic.
(3) The information provided under this Act that is not already in the public domain may only be supplied to persons
outside of the Department subject to the provisions of the Promotion of Access to Information Act.
(4) The Minister must establish mechanisms t o—
(a) collect, collate and analyse energy data and information:
(b) manage energy data and information; and
(c) avail, in a manner prescribed, energy statistics and energy information to the public.
Energy Act 34 of 2008
(5) The Minister must annually publish an analysis—
(a) reviewing energy demand and supply for previous year;
(b) forecasting energy supply and demand for no less than 20 years; and
(c) of plausible energy scenarios of how the future energy demand and supply landscape could look like under
different demand and supply assumptions.
(6) The Minister must publish—
(a) models used for data and information analysis;
(b) all the assumptions that are underpinning the models contemplated in subsection (a); and
(c) a list of categories of information or data that have been classified as confidential and the reasons thereof.
Safety, health and environment
4.
The Minister may. after consultation with the Minister of Trade and Industry, the Minister of Labour and the
Minister of Environmental Affairs and Tourism, adopt measures not contemplated in any other legislation, to
minimise the negative safety, health and environmental impacts of energy carriers.
Energy access by households
5. (1) The Minister must adopt measures that provide for the universal access to appropriate forms of energy or energy
services for all the people of the Republic at affordable prices.
(2) …
Energy Act 34 of 2008
CHAPTER 3
INTEGRATED ENERGY PLANNING
Integrated energy planning
6. (1) The Minister must develop and, on an annual basis, review and publish the Integrated Energy Plan in the
Gazette.
(2) The Integrated Energy Plan must deal with issues relating to the supply, transformation, transport, storage of
and demand for energy in a way that accounts for—
(a) security of supply;
(b) economically available energy resources:
(c) affordability;
(d) universal accessibility and free basic electricity;
(e) social equity;
(f) employment;
(g) the environment;
(h) international commitments;
(i) consumer protection; and
(j) contribution of energy supply to socio-economic development.
Energy Act 34 of 2008
(3) The Integrated Energy Plan must—
(a) take account of plans relating to transport, electricity, petroleum, water, trade, macro-economy energy
infrastructure development, housing, air quality management, greenhouse gas mitigation within the energy
sector and integrated development plans of local and provincial authorities:
(b) inform and be informed by plans from all supply, production and demand sectors whose plans impact on or
are impacted by the Integrated Energy Plan; and
(c) be based on the results of the energy analysis envisaged in sections 3(4)(a) and 3(5).
(4) The development of the Integrated Energy Plan must take into account—
(a) sustainable development;
(b) optimal use of indigenous and regional energy resources:
(c) balance between supply and demand;
(d) economic viability;
(e) environmental, health, safety and socio-economic impacts; and
(f) developmental requirements of the .Southern African region.
(5) The Integrated Energy Plan must have a planning horizon of no less than 20 years.
(6) The Integrated Energy Plan must—
(a) serve as a guide for energy infrastructure investments;
(b) take into account all viable energy supply options: and
(c) guide the selection of the appropriate technology to meet energy demand.
(7) Before finalising the Integrated Energy Plan, the Minister must—
(a) invite public comments; and
(b) duly consider such comments.
Key question 2
Is the assumed growth rate in electricity
demand justified, if the electricity price
more than triples over only four years?
Demand Assumption
The expansion plan calls for 25% more supply (10GW added to 40GW)
Mining and industry use 2/3 (68% in 2002) of electricity
>
Production in energy-intensive gold-mining is levelling out.
Will energy-intensive industry grow if electricity prices rise by 228% in four
years (25c/kWh to 82c/kWh)?
Households use 1/6 (17% in 2002) of electricity
>
1/4 of these still needs to be electrified.
Even if these consumed as much as those already electrified (very
unlikely), this would raise total demand by only 1/24 or 4%
Agriculture + commerce use 1/8 (13% in 2002) of electricity
>
How will this demand grow at three times the price?
Transport uses 1/50 (2% in 2002) of electricity
>
Vehicle electrification and road-to-rail will raise this, but by less than 10%
Key question 3
What are the long-term (cost,
competitiveness and environmental) risks
of funding (through the MYPD2) the
proposed, coal-based and Eskom-driven
expansion plan?
Long term cost risk
?
Opex R'm
MTPPP, PNCP, DOE IPP OCGT, REFIT1
160,000
Non-Eskom Generation (Coal)
140,000
Road maintenance
120,000
Other Opex
100,000
Cost_of_Cover
80,000
DSM
60,000
Maintenance
Human_Capital
40,000
Environmental_Levy
20,000
Primary Energy Gas Stations
0
FY08/9
FY09/10
FY10/11
FY11/12
FY12/13
FY13/14
FY14/15
From Eskom MYPD2 application
Primary Energy Nuclear
Primary Energy Coal Stations
SA’s energy profile
SA share of world total :
• Economy:
0.71%
• Population:
0.73%
• Energy Use:
1.14%
• GHG:
1.16%
• Electricity:
1.4%
• CO2:
1.6%
(Source: cait.wri.org +)
#2 in carbon intensity of electricity after Poland
(before new build, #1 after?)
Risk in trade
Supply-chain accountability by foreign buyers (eg. UK chain
stores) increasingly require carbon neutrality in our exports
(high-value agricultural exports already affected)
Regulatory costs for embedded carbon in exported goods
(border tax adjustments threatened by US, Germany, France)
Carbon is increasingly a consideration for hosting international
events and tourism
(World Cup will be one of the world’s most carbon-intensive events
due to 1. SA being a long-haul destination, 2. carbon-intensive fuel
and 3. carbon-intensive electricity 4. with no carbon offsetting)
Risk in trade
South Africa is accountable for CO2 emitted on behalf of countries who import
goods manufactured here. Our emissions are higher than that caused by our
own consumption (Balance of Emissions Embodied in Trade).
Missed opportunity
Funding the coal alternative also carries an opportunity cost in not
developing new…
•
technologies,
•
resources, and
•
Industries
We will be backing the slow horse…
(Coal power investment grew by 4.4% world-wide 2000-2005,
In 2008 global investment was $110bn)
…and not the fast one.
(Renewable energy investment grew by >60% 2004-2007,
In 2008 investment was $140bn)
Industrial evolution
Sustainable energy
not if, but when
(Graph source: BP)
…and who profits (most)
Unexploited wealth
Key question 4
Is Eskom an “efficient producer”?
National Energy Regulation
Act 4 of 2006
Tariff principles
16. (1) … the setting or approval of prices, charges and tariffs and the
regulation of revenues(a) must enable an efficient licensee to recover the full cost of its
licensed activities, including a reasonable margin or return;
(b) must provide for or prescribe incentives for continued
improvement of the technical and economic efficiency with which
services are to be provided;
Financial efficiency
33c/kWh covers Eskom’s additional costs for existing stations.
The other 49c/kWh (82c/kWh - 33c/kWh) goes towards Medupi and
Kusile.
This is because Eskom is not properly capitalized, making it a
financially inefficient producer.
This is further evidenced by cost creep of 50% and 67% for
Medupi (R120bn i.s.o. R79bn) and Kusile (R142bn i.s.o R85bn)
compared to the prices approved by the Eskom board in 2007.
Financial efficiency
Medupi + Kusile would be 20% of total capacity
(40GW + 10GW = 50GW)
A 20% mix of IPP-supplied clean energy (co-gen, wind, solar) costing
R1.50/kWh would raise the tariff from 33c/kWh to 58.6c/kWh – an
increase of 25.6c/kWh with rates fixed for 20 years.
Generator units would be built in many small (~100MW) installments
instead of two large 5 000MW chunks, spreading risk and
allowing for gradual financing.
Key question 5
Are there alternatives?
Spending R120bn better
Item
Specification
Number
Unit Cost
(R'000)
LTMS cost Cost
('03 R'000) (Rbn)
MW coal Jobs
Economic spinoffs
Watt per
power
(direct)
R'000
replaced
45.0
1,875
12,000 jobs in assembly and installing +
41.67
3.5x as many indirect/induced
6.0
885
3,000
jobs in installing,
147.50
demand flexibility
30.0
600
1,044
grid cost savings (coastal),
20.00
potential for local
manufacturing
(turbine
blades,
gearboxes)
5.5
100
174
potential
for technology
18.18
leadership, export, 70% local
16.0
400
696
security of supply in mining
25.00
Solar waterheaters
3,000,000
15
-
Smart meters
3,000,000
2
-
2,000
15,000
7,800
100
55,000
22,200
400
40,000
22,500
300,000
8
5
2.4
30
76,100
18
-
1.4
53
75,000
30
-
2.3
158
570
3,000
3,100
-
9.3
210
760
150
10,080
4,300
1.5
150
600
119.4
4,461
29,344
Wind turbines
(nominal MW)
30% availability factor
with salt storage for 24hr
operation
hybrid parabolic trough
Additional CSP
for electricity or heat
(MW)
each 100Wp with battery
Photovoltaic
backup @ R80/Wp
systems
Biochar/electricity Fenix stoves (50x
from invasive aliens extrapolattion on
Bushbuck Ridge project)*
CSP tower (MW)
Biogas digesters for each 3x 700W heat,
fed by 5 cattle (equiv)
cooking gas
Biogas digesters for each 70kW electricity,
fed by 500 cattle (equiv)
electricity
Landfill gas (MW)
Combined Renewable Energy and Efficiency
Nuclear 1 (MW)
PWR
Defer aluminium
smelter
Coega (example)
Supercritical PF
12.50
38.13
LPG replacement for
225,000 rural households,
methane "kicker"
3,000 agricultural incomes,
methane "kicker"
methane "kicker"
70.00
At least 20MtCO2/yr saved,
traded @R100/tCO2
= R2bn/yr carbon income
37.37
22.58
99.21
3,500
34,286
15,290
120.0
3,500
500 +1000(?) jobs in uranium mines,
70% of capital imported
29.17
1
-2,000,000
-
-2.0
1,300
-1,050 avoid R2bn Eskom infrastructure
investment, lose 4.5Mt coal
export via grid @ domestic
prices of R120/t = R0.54bn/yr
-650.00
117.4
5,761
28,294
120
4,788
Low-Carbon Development Plan
Kusile (MW)
1,050 300 000 rural homes electrified,
rural economies stimulated
9,450
cheap electricity and heat for
76 100 non-grid rural households
rural economies stimulated
4,788
25,063
9,980
*Estimates by Phambili Energy
Direct jobs estimate based on 100 units installed per employee per year for 5 years (3x as many indirect jobs)
Government/Eskom targets or estimates
Based on Agama Energy estimates
Based on UNEP/ILO central estimates, assuming similar intensity for wind and CSP
Based on latest costs quoted in the press and assuming (generously) that cost of Kusile = cost of Medupi
4,788 more CO2 than 20 least-emitting
African countries combined,
70% of capital imported
49.09
39.90
Spending R120bn better
Kusile
Pro-Poor, Low-Carbon Development
Rising fuel cost
No fuel cost
Eskom coal bill:
08/09: R19.6bn 09/10: R25.6bn
10/11: R33bn
11/12: R40bn
30Mt CO2/yr = 30 lowest-emitting African
countries combined >> economic risk
R2bn/yr in carbon revenue
(CERs or certified emissions reductions)
R120bn@10% over 30yrs
R120bn@10% over 30yrs
= R12.7bn/yr on capital
= R11.7bn/yr on capital
+ R3.3bn/yr on fuel =
– R2bn/yr from CERs + R0.54bn/yr of deferred coal export =
R16bn/yr cost
R11.24bn/yr cost
70% imported
70% local (at scale)
Difficult to finance, additional costs (eg.
Flue-Gas Desulphurization) for multilateral
finance
Cheap, preferential multilateral finance –
equity on balance sheet, not from tariff
(IPP’s)
Temporary construction jobs
Long-term manufacturing jobs x 6
On-grid consumers only
300 000 energized (electricity and heat)
Coal mine, limestone mine, ash dams
>> impact on water, air, tourism
Rural development,
tourist attractions
Published in Proceedings of Solar World Congress 2009
Affordable clean energy
From WWF report: “Cheaper Electricity with Renewable Energy”
Proposal
I.
Grant the increase necessary for Eskom to build Medupi
If consumers don’t pay for it, tax payers will have to.
We will regret it in future, but because the cart (contracting) was put
before the horses (planning), this is a horse that has already bolted.
Proposal
II. Do not grant an increase for the building of Kusile unless and
until it has been demonstrated:
* in an Integrated Energy Plan
* developed in accordance to the law
…that it is a cheaper option for the country than IPP build and/or a
combination of co-generation and large-scale solar and wind
power.
“Cheaper” should cover at least a 20 year perspective (Energy Act)
and include quantifiable externalities (Energy White Paper)
Proposal
III.
Ensure that the build plan meets or exceeds South Africa’s
targets for:
1.
universal access to basic electricity
(rural electrification)
2.
greenhouse gas mitigation
(stabilization and 34% reduction from BAU by 2020)
3.
IPP participation
(30% of all new build by value)
4.
renewable energy share
(4% / 10 000GWh / 1 320MW by 2013
9-15% by 2018 [2009 RE Summit, currently under review])