Integrated Resource Plan 2/2010Cape Town 20 October 2010

Durban 22 October 2010Polokwane 1 November 2010

Pretoria 2 November 2010

Building on the Findings of the Electricity Governance Initiative South Africa

Understanding the Integrated Resource Plan

(IRP 2010 Rev 2)

Purpose

• Review what is meant by IRP• Examine some aspects of IRP 2010 Rev 2• Present key aspects in plain language• Raise issues of interest or potential concernIdentify issues with biggest relevant impact

and focus on theseThere are looooooots of technical details… we will try not to

chase red-herrings

Some basics: electricity demand and energy supply mix

• Electricity demand and energy mix• Choosing an energy mix

– Least financial-cost model– Constraints such as GHG emissions– Policy adjustment

• Integrated Resource Plan– The Negawatt: efficiency and DSM as a resource– Economy, environment, society

World 1 World 2

World 3?

Electricity demand and energy mix

Source: Draft IRP 2010 pg 5

Electricity demand and electricity mix

Source: Draft IRP 2010 pg 8

Electricity demand and electricity mix

Source: Draft IRP 2010 pg 9

What is an IRP ?…compared with traditional planning

There is a LARGE BODY of work and experience published on IRP

Steps in the IRP process

• establish objectives [All stakeholders]• survey energy use patterns and develop demand forecasts• investigate electricity supply options• investigate demand-side management measures• prepare and evaluate supply plans• prepare and evaluate demand-side management plans• integrate supply- and demand-side plans into candidate

integrated resource plans• select the preferred plan [A broad range of stakeholders]• during implementation of the plan, monitor, evaluate, and

iterate

Integrated resource plan

• In a nutshell– Technical

• Incorporating environment • Incorporating society• Incorporating economy• Treating all energy resources equally• Includes all significant electricity system components• Treating energy efficiency and DSM equally to supply

– Process• Attaining a balance on technical issues can only be

covered in consistently transparent public process

Environment

Society

Economy

Making choices• How much electricity do we need? The DEMAND• What do we want this electricity for? GROWTH

sectors• How can we use electricity more efficiently and

wisely? EE and DSM• What other national public development

priorities should inform our decision? HEALTH, POLLUTION, JOBS, CLIMATE CHANGE, UNIVERSAL ACCESS TO ELECTRICITY

Key Issues

“Revised Balanced Scenario” IRP 2010 Rev 2

Making choices• How much electricity do we need? The DEMAND• What do we want this electricity for? GROWTH

sectors• How can we use electricity more efficiently and

wisely? EE and DSM• What other national public development

priorities should inform our decision? HEALTH, POLLUTION, JOBS, CLIMATE CHANGE, UNIVERSAL ACCESS TO ELECTRICITY

Demand forecast

Source: Draft IRP 2010 pg 31

SO estimate

CSIR estimate

Making choices• How much electricity do we need? The DEMAND• What do we want this electricity for? GROWTH

sectors• How can we use electricity more efficiently and

wisely? EE and DSM• What other national public development

priorities should inform our decision? HEALTH, POLLUTION, JOBS, CLIMATE CHANGE, UNIVERSAL ACCESS TO ELECTRICITY

Electricity demand forecast

Big metros

Mining

Industry

Industrial demand forecast

Allocation of risk for investments

• Risk in a BIG smelter project• Lead time• Public sector role

Smelter project

Private sector

Public sector

Allocating risk, balancing interests

Xstrata Given 100 Megawatts by S. African Utility for Smelter

By Carli Lourens - Oct 21, 2010 2:25 PM GMT

“In its court papers, Eskom acknowledges that in 2008 the country would probably not have been subjected to power cuts and load-shedding had electricity not been delivered to the smelters.”

Jun 10 2010 07:37 Jan de Lange

Sake24.com

“Regulatory Capture”

Regulatory capture

• occurs when a state regulatory agency created to act in the --public interest instead acts in favor of the commercial or special interests that dominate in the industry or sector it is charged with regulating

Metros’s energy demand

• How is Eskom-SO re-distributor demand forecast done?

Example of Metro electricity planning:Energy Consumption for Different Scenarios

Cape Town

Optimum Energy Future energy efficiency measures result in lower energy demand than Business as Usual without compromising energy service delivery.

Making choices• How much electricity do we need? The DEMAND• What do we want this electricity for? GROWTH

sectors• How can we use electricity more efficiently and

wisely? EE and DSM• Using realistic credible costs• What other national public development priorities

should inform our decision? HEALTH, POLLUTION, JOBS, CLIMATE CHANGE, UNIVERSAL ACCESS TO ELECTRICITY

Energy efficiency in the IRP2010 Rev 2

• Potential vs proposed plan– 3,420MW vs at least 12,933MW**** “Research conducted by Eskom indicates that this programme may

only scratch the surface of the potential market for EEDSM (which has been estimated at 12933 MW of total market potential. ”

(IRP 2010 Rev 2, page 33)

• Impacts– Costs and electricity price– Environment– The ‘needs’ and timing of the build programme

Making choices• How much electricity do we need? The DEMAND• What do we want this electricity for? GROWTH

sectors• How can we use electricity more efficiently and

wisely? EE and DSM• Using realistic credible costs• What other national public development priorities

should inform our decision? HEALTH, POLLUTION, JOBS, CLIMATE CHANGE, UNIVERSAL ACCESS TO ELECTRICITY

Cost curves without learning Cost Curves with learning

Transmission and distribution not modeled

• Important investments• Effects on EE, DSM and distributed renewable

energy generation• Assessment of INEP• Assessment of locational aspects of

generation and demand

The international context not explicitly addressed

• Globally RE electricity generation investments overtook investments in conventional (coal, gas nuclear) in 2008

• Most of South Africa’s major trading partners have significant energy efficiency and renewable energy programmes

• Ditto for large renewable energy targets• EE programmes have been implemented for

decades

Global installed wind power

Source: World Resources Institute / IEASource: World Resources Institute / IEA

The nuclear ‘renaissance’ ?

The combined effect of

• Increased energy efficiency and DSM • Lower demand• Learning curves on predicted technology costs • The higher nuclear capital costs than

predicted by EPRI• More ambitious GHG emissions reduction

targets and lower pollution• Higher renewable energy levels• Consideration of industrial development / jobs

Other issues

• The basis for assigning values in the multi criteria decision framework** is not clear or defended or the stakeholders listed– The IRP 2010 Rev document states:

“These preferences are by nature subjective, but by including numerous stakeholders in the workshops determining these preferences a broad and inclusive approach to the values can be determined.”

“This process should include a broad range of stakeholders to capture all the preferences.”

**see next slide

A Multi-Criteria Decision-Making Framework

Other issues

• Regional hydro options have potential complex challenges that are not addressed– Big Dams… Big environmental and social issues for

our partners in the region– Transmission and distribution investment is a

challenge • This is noted in the draft but not addressed

The next few years supply vs demand

IRP 2010 p5 MTRMP p7

Other issues

• There is a need for clarity on next steps in the IRP

Other issues

• Lack of consistency with what major players are saying– Eskom statements about CSP– DoE statements about solar park– DoE statements in parliament

• (esp around resources for process = “process issue”)– Budget expenditure– Technical capabilities

Alternative scenarios in SNAPP

Elec. system costs irp2 plus 5% ee

Elec system costs irp2 plus 19% ee

Reserve margin in 2030 = 40%Reserve margin 2030 = 20 %

Electricity system costs irp2 plus 5% EEDSM

Electricity system costs irp2 plus 5% EEDSM plus glimpse of real world

Reserve margin in 2030 = 20% Reserve margin in 2030 = 20%

Electricity system costs alternative irp2 business un-usual in real world

Electricity system costs irp2 business as usual in real world

Reserve margin in 2030 = 20%Reserve margin in 2030 = 20%

Overall impressions 1

• Many key issues relate to the modeling and the assumptions – not the “PLAN”– The IRP 2010 as it stands is essentially a Capacity

Expansion Plan• This is (sometimes, but inconsistently) stated• This is not adequately justified• “Lack of data” used as explanation for MOST

IMPORTANT omissions – not credible / acceptable

Overall impressions 2

• The “Revised Balanced Scenario” = the “PLAN”– The scenarios presented do not convince that all

options have been explored– Shortcomings in modeling and assumptions lead

to some problematic results• Important options therefore cannot be properly

considered

Issues of interest and potential concern

(of the PLAN, not the methodology, which is what essentially leads to the deficiencies)

• Alignment with Economic and industrial policies– The plan appears to pre-empt (some) economic policy– Does not include information on economic and environmental

impacts

• Does not include INEP– Does not address social policy– Does not include employment effects

• Does not meet UNFCCC commitments• Explanation of implementation

– Reasoning behind statements that decisions needed in early 2011

Jobs in South Africa

20/06/07Parliamentary Hearing on Nuclear Energy

Employment potential in RE sector in SASource: EPRESA report by Agama Energy for Earthlife Africa, 2003

Comparison of all generation technologies: gross direct jobs/TWh-equivalent

80 130 700 952 1341

65458733

32636

0

5000

10000

15000

20000

25000

30000

35000

nuclear gas coal RETs Biogas Bioethanol SWH Biodiesel

technology

dir

ect

job

s