Terence CreamerDr Tobias Bischof-Niemz

South Africa’s Energy TransitionA Roadmap to a Low-cost,

Decarbonised and Job-rich Future

Offical book launch, Wits Business School, Johannesburg

21 August 2018

2

What we want you to take away from the book

A power-system in South Africa that is based on renewables is

• Cheaper than all alternatives

• Cleaner than all alternatives

• Creates more jobs and localisation potential

It helps re-industrialising the country on the back of a low-cost, low-carbon electricity platform

Visit the book‘s website at

http://saenergytransition.net

3

Agenda

Global Context

South Africa’s Unique Renewables Opportunity

• Cheap: renewables are least cost

• Clean: decarbonising at least cost

• Job rich: renewables more job-intensive

New Export Opportunities Arising from Cheap Renewables

Summary

4

7

2000 20172003

9

2001

7

2002 2009

271

56

18

2016

8

30

20132004 2007

112

2005

215

20082006

31320

2015

7

39

17

39

38

2010

5441

7

98

2011

31

57

45

2012

35

40

519

70

Total South Africanpower system(approx. 45 GW)

2014

4 817

2233

63

56

71 76 73

91

120 124

154

46

Solar PV

Wind

Global annual new capacity in GW/a

Subsidies Cost competitive

>150 GW of new solar PV and wind added to the grid in 2017 globally

5

2005

4%

23%

39%

Structure of Global Electricity Generation

in TWh/a and %

10%

8%

2000

18%

2015

2%

2010 2017

15 550

18 396

21 572

24 324

16%

25 570

4%

4%

39%

17%

17%

2%

15%

40%

16%

20%

6%

7%

16%

13%

40%

22%

5%

38%

16%

11%

23%

9%

Coal

Renewables(non-hydro)

Hydro

Oil

Gas

Nuclear

Renewables share in global electricity generation increased to 9%

Source: IEA, IEA GECO2017

6

Agenda

Global Context

South Africa’s Unique Renewables Opportunity

• Cheap: renewables are least cost

• Clean: decarbonising at least cost

• Job rich: renewables more job-intensive

New Export Opportunities Arising from Cheap Renewables

Summary

7

Significant reductions in actual tariffs …

REIPPPP results: new wind/solar PV 60-80% cheaper than first projectsResults of Department of Energy’s RE IPP Procurement Programme (REIPPPP) and Coal IPP Proc. Programme

3.65

1.170.87

0.62

1.511.19

0.870.69 0.62

0

1

2

3

4

5

Nov 2011

2.18

Aug 2013

Mar 2012

Aug 2014

Nov 2015

-59%

-83%

Wind

Solar PV

Sources: http://www.energy.gov.za/files/renewable-energy-status-report/Market-Overview-and-Current-Levels-of-Renewable-Energy-Deployment-NERSA.pdf; StatsSA on CPI; http://www.saippa.org.za/Portals/24/Documents/2016/Coal%20IPP%20factsheet.pdf; http://www.ee.co.za/wp-content/uploads/2016/10/New_Power_Generators_RSA-CSIR-14Oct2016.pdf;

Actual average tariffsin R/kWh (Apr-2016 prices)

8

Significant reductions in actual tariffs from the RE IPP Procurement Programme (REIPPPP) …

Actual tariffs: new wind/solar PV 40% cheaper than new coal in RSAResults of Department of Energy’s RE IPP Procurement Programme (REIPPPP) and Coal IPP Proc. Programme

3.65

1.170.87

0.62

1.511.19

0.870.69 0.62

0

1

2

3

4

5

Nov 2011

Aug 2014

2.18

Mar 2012

Nov 2015

Aug 2013

-59%

-83%

Wind

Solar PV

0.62 0.62

1.03

Wind IPPSolar PV IPP Baseload Coal IPP

-40%

… have made new solar PV & wind power 40% cheaper than new coal in South Africa today

Actual average tariffsin R/kWh (Apr-2016 prices)

Actual average tariffsin R/kWh (Apr-2016 prices)

Sources: http://www.energy.gov.za/files/renewable-energy-status-report/Market-Overview-and-Current-Levels-of-Renewable-Energy-Deployment-NERSA.pdf; StatsSA on CPI; http://www.saippa.org.za/Portals/24/Documents/2016/Coal%20IPP%20factsheet.pdf; http://www.ee.co.za/wp-content/uploads/2016/10/New_Power_Generators_RSA-CSIR-14Oct2016.pdf;

9

Very high solar irradiation in South Africa is a competitive advantage

Yearly total of global irradiation on horizontal surface

Average for Germany

Average for South Africa

Solar irradiation in South Africa ...... as compared to Germany, where solar PV is now

close to cost competitiveness with new coal and gas

Source: Joint Research Center of the European Commission, PVGIS, BCG analysis

10

South Africa has wide areas with > 6 m/s average wind speed @ 100 mAverage wind speed at 100 meter above ground for the years from 2009-2013 for South Africa and Germany

Sources: Wind and Solar Aggregation Study, Fraunhofer and CSIR, in partnership with Eskom and SANEDI

Wind resource in South Africa ... ... as compared to Germany

11

South Africa: sufficient land for very large wind and solar deployment

16 18 20 22 24 26 28 30 32 34-36

-34

-32

-30

-28

-26

-24

-22

Johannesburg

Cape Town

Durban

Upington

Port Elizabeth

Bloemfontein

Polokwane

Johannesburg

Cape Town

Durban

Upington

Port Elizabeth

Bloemfontein

Polokwane

Longitude

Latitu

de

EIA: Onshore Wind

EIA: Solar PV

REDZ

All EIAs

(status early 2016)

Wind: 90 GW

Solar PV: 330 GW

All REDZ

(phase 1)

Wind: 535 GW

Solar PV: 1 782 GW

Sources: https://www.csir.co.za/sites/default/files/Documents/Wind_and_PV_Aggregation_study_final_presentation_REV1.pdf;

https://www.csir.co.za/sites/default/files/Documents/Wind%20and%20Solar%20PV%20Resource%20Aggregation%20Study%20for%20South%20Africa_Final%20report.pdf

12

Wind

Unit cost in R/kWhand cost structure(April 2016 prices)

Solar PV Coal CCGT (Gas)Nuclear

Fuel (and variable O&M)

Fixed O&M

Investment

0.62 0.62

1.031.09

1.15

82%Assumed utilization(capacity factor) 50%90%23% 40%

Of all available technologies for bulk electricity generation, solar PV & wind are now the cheapest new-build options in South Africa, by far

IRP assumptionsActual tariffs

But what about the variability of solar PV and wind?

13

Greenfield Power-system Planning

14

Thought experiment: Build a new power system from scratch

Base load: 8 GW

Annual: 70 TWh/a (~30% of today’s South African demand)

Questions

• Technical: Can a wind & solar PV blend, mixed with flexible dispatchable power to fill gaps supply this?

• Economical: If yes, at what cost?

Assumptions/approach

• 19 GW wind @ 62 c/kWh (average tariff in South Africa’s latest auction from Nov 2015, 2016 prices)

• 7 GW solar PV @ 62 c/kWh (average tariff in South Africa’s latest auction from Nov 2015, 2016 prices)

• 8 GW flexible power generator to fill the gaps @ 1 000 R/kW/a and 150 R/GJ (e.g. high-priced LNG, leads to 135 c/kWh if burned in gas turbines or gas engines with 40% electrical efficiency)

• 15-minute solar PV and wind data from CSIR resource study, covering the entire country (https://www.csir.co.za/csir-energy-centre-documents)

• 15-minute simulation of supply structure for three consecutive years (2010-2012)

Sources: IRP; REIPPPP outcomes

1

2

3

15

Thought experiment: assumed 8 GW of true baseload (constant load)

0

2

4

6

8

10

12

14

16

18

20

24h00

Hour of the day

GW

6h00 12h00 18h00

System Load

Sources: CSIR analysis

16

A mix of solar PV, wind and flexible power can supply this baseload demand in the same reliable manner as a base-power generator

0

2

4

6

8

10

12

14

16

18

20

12h00

Hour of the day

24h006h00

GW

0h00 18h00

Useful Wind

Residual Load (flexible power)

Excess Solar PV/Wind

Useful Solar PVExcess solar PV/wind energy curtailment

assumed (no value)

Sources: CSIR analysis

Residual load supply options: gas, biogas,

(pumped) hydro, CSP…

7 GW

19 GW

8 GW1

2

3

@ 62 c/kWh

@ 2.1 R/kWh

@ 62 c/kWh @ 1000 R/kW/a

Fuel @ 135 c/kWh

17

On the lowest-wind day the residual load is largeSimulated wind and solar PV power output for a 19 GW wind and 7 GW solar PV fleet on 21 July 2011

0

2

4

6

8

10

12

14

16

18

20

Hour of the day

GW

0h00 6h00 24h0018h0012h00

Excess Solar PV/Wind

Useful Wind

Residual Load (flexible power)

Useful Solar PV

Sources: CSIR analysis

7 GW

19 GW1

2

8 GW

3

18

On the lowest-solar-PV day the wind fleet still contributes a lotSimulated wind and solar PV power output for a 19 GW wind and 7 GW solar PV fleet on 21 June 2012

0

2

4

6

8

10

12

14

16

18

20

12h00 24h00

Hour of the day

0h00

GW

6h00 18h00

Excess Solar PV/Wind

Useful Solar PV

Residual Load (flexible power)

Useful Wind

Sources: CSIR analysis

7 GW19 GW1 2

8 GW

3

19

On a high-wind and solar day the amount of excess energy is largeSimulated wind and solar PV power output for a 19 GW wind and 7 GW solar PV fleet on 30 October 2012

0

2

4

6

8

10

12

14

16

18

20

Hour of the day

GW

0h00 12h006h00 24h0018h00

Useful Solar PV

Excess Solar PV/Wind

Residual Load (flexible power)

Useful Wind

Sources: CSIR analysis

7 GW19 GW

12

8 GW

3

20

In the least-windy week, fuel for flexible generator must be stockedSimulated 15-minute solar PV and wind power supply for the week from 18-24 July 2011

0

2

4

6

8

10

12

14

16

18

20

Wednesday

Day of the week

Friday

GW

Monday Tuesday Thursday Saturday Sunday

Excess Solar PV/Wind

Residual Load (flexible power)

Useful Wind

Useful Solar PV

Sources: CSIR analysis

7 GW

19 GW1 2

8 GW

3

21

Technical feasibility in two key dimensions

Ramping

• Maximum 15-minute ramp of residual load from 2010 to 2012: 1.2 GW/(15-min) 15% of installed flexible capacity of 8 GW per 15-min

• Minimum 15-minute ramp of residual load from 2010 to 2012: -1.2 GW/(15-min) -15% of installed flexible capacity of 8 GW per 15-min

Open-Cycle Gas Turbines can ramp up or down with 5-10% output change per minute

(Pumped) hydro plants can ramp up and down even faster

Plus, a down-ramp of the residual load can always be catered for by short curtailment of wind/PV

Fuel-storage

• The flexible power generator of 8 GW installed capacity requires a fuel-storage capacity of 11 days

Eskom currently stocks coal at power stations for more than 50 days on average

Buffer capacity of a LNG landing terminal is 4-6 weeks at the minimum

22

On average, solar PV and wind would supply 89% of the total demandAverage 15-minute solar PV and wind power supply calculated from simulation for 3 years from 2010-2012

Sources: CSIR analysis

0

2

4

6

8

10

12

14

16

18

20

18h006h00 12h00

GW

0h00 24h00

Hour of the day

Average Excess Solar PV/Wind

Average Useful Wind

Average Residual Load (flexible power)

Average Useful Solar PV

Average System Load

7 GW19 GW

12

8 GW

3

8 GW flexible power generator runs at annual average

capacity factor of 11%

23

Mix of solar PV, wind and expensive flexible power costs 93 c/kWh at the maximum – 10 c/kWh cheaper than new-build baseload coal

2

TWh/a

System Load

11

Solar PV

11(15%)

52(74%)

Wind

8(11%)

Residual Load

(flexible power)

70 13 62

Useful Wind

Excess Solar PV/Wind

Useful Solar PV

13 TWh/a x 62 c/kWh+ 62 TWh/a x 62 c/kWh

+ 8 TWh/a x 135 c/kWh+ 8 GW x 1 000 R/kW/a

_______________________

70 TWh/a

24

Mix of solar PV, wind and expensive flexible power costs 93 c/kWh at the maximum – 10 c/kWh cheaper than new-build baseload coal

2

TWh/a

System Load

11

Solar PV

11(15%)

52(74%)

Wind

8(11%)

Residual Load

(flexible power)

70 13 62

Useful Wind

Excess Solar PV/Wind

Useful Solar PV

Solar PV: R8.1 billion/aWind: + R38.4 billion/aFuel: + R10.8 billion/aCapacity: + R8.0 billion/a_______________________

70 TWh/a

Pessimistic assumptions• No economic value attached to 13 TWh/a

of excess energy (bought and “thrown away”)• Solar PV/wind costs from November 2015

(no further cost reduction assumed)• Very high fuel cost for flexible power generator

of 150 R/GJ = 135 c/kWh assumed

New-build baseload coal / nuclear:

103 / 109 c/kWh

= 93 c/kWhApril-2016 prices

25

Brownfield Power-system Planning: IRP

26

10

0

20

30

40

20302024 20382020 2034

Operational coal-fired capacity in GW

2016 2018 2022 2028 2032 2036 2040 2042 2044 2046 2048 20502026

South Africa has scheduled to decommission 28 GW of coal by 2040

Sources: Eskom, IRP

Camden

Komati

Hendrina

Grootvlei

Arnot

Kriel

Medupi

Matla

Duvha

Kendal

Tutuka

MajubaDry

Lethabo

Matimba

MajubaWet

Kusile

Scheduled decommissioning until…

… 2030: -13 GW … 2040: -28 GW … 2050: -35 GW

27

50

0

100

150

200

350

250

300

400

265

204

382

321

2040 2050

307

352

241242

225

187

2030

77

49

15

13

14

20202016

Electricityin TWh/a

13

79

Supply Gap

Wind

Gas

Solar PV

CSP

Nuclear

Hydro

Peaking

Coal

An Integrated Resources Planmodel fills the supply gap in theleast-cost manner, subject toany constraints imposed

Existing and committed power generators in South Africa (2016)

Electricity demand

Demand grows, existing fleet phases out: gap needs to be filled

Sources: CSIR

28

400

100

450

-100

-50

200

300

350

0

50

150

250

204

2020 2040

10535

2016

Total electricityproduced in TWh/a

79

53

417

-30

187

2030 2050

137

-57

139

179

49

243273

323

379

Battery Storage

Pumped Storage

Curtailed wind/PV

CoalSolar PV

Wind

Hydro

Peaking

Gas

Nuclear

CSIR Least Cost 2017ENERGY

CSIR Least Cost 2017CAPACITY

Renewables = 85%Wind/PV = 82%… of primary electricity(388 TWh in 2050)

150

50

100

200

0

250

216

37

2020

92

Total installed capacity in GW

2016 2050

8

20

188

30

2030

18

133

61

2040

57

15

165

173

827

82

7550

58

1) No new nuclear2) No new coal

Least Cost expansion path: 85% renewables energy share by 2050

Sources: CSIR

29

Several studies independently come to the same conclusion

University ofCape Town

Meridian Economics

NRELCSIR

University of Frankfurt

Common thread: No new coal, no new nuclear

Eskom

Link

Link, Link, Link

Link, Link

Link

Link

Link

30

Agenda

Global Context

South Africa’s Unique Renewables Opportunity

• Cheap: renewables are least cost

• Clean: decarbonising at least cost

• Job rich: renewables more job-intensive

New Export Opportunities Arising from Cheap Renewables

Summary

31

CSIR Least Cost 2017CO2 Emissions

CSIR Least Cost 2017Water Usage

2015 2020 2025 2030 2035 2040 2045 2050

150

200

0

50

100

250

300

Electricity sector CO2 emissionsin Mt/a

-74%

2015 2020 2025 2030 2035 2040 2045 20500

50

100

150

200

250

300

350

Electricity sector water usagein billion litres/a

-97%

South Africa’s commitment

Least CostLeast Cost

Least Cost: Both CO2 emissions and water usage go down dramatically

Sources: CSIR

32

Agenda

Global Context

South Africa’s Unique Renewables Opportunity

• Cheap: renewables are least cost

• Clean: decarbonising at least cost

• Job rich: renewables more job-intensive

New Export Opportunities Arising from Cheap Renewables

Summary

33

Power Plant / Coal Mine Construction

Direct job-years

Supplier job-years

Inputs Economic Activity Output

New power station (new GW installed)

Power Plant / Coal MineOperation

Direct job-years

Supplier job-years

Inputs Economic Activity Output

Electricity (TWh produced)

Capex-related

Jobs

Opex-related

Jobs

Jobs related to power generation

34

6 401

36 992

413

28 182

8 724

6 000

12 373

4 9004 500

5 350

497

2 8004 917

200

2 500

1 300

900

3 400

PermanentDirect and

Supplier Jobs

Opex-relatedCapex-related

12 450

Capex-relatedOpex-related

15 782

TOTALCoal

TOTALSolar PV/Wind

24 542

12 400

+31%

Supplier Coal power station

Direct

Solar PV

Wind Coal mine

Solar PV: 1 GW/a 25 GW50 TWh/a

Wind: 1 GW/a 20 GW50 TWh/a

2 GW/a 100 TWh/a

Coal: 0.5 GW/a 14 GW100 TWh/a

0.5 GW/a 100 TWh/a

An energy-equivalent fleet of solar PV and wind produces 30% morejobs than a coal fleet – without the jobs in the firm capacity (gas)

Sources: Based on data from Department of Energy in context of IEP, http://www.energy.gov.za/files/IEP/2016/IEP-AnnexureB-Macroeconomic-Assumptions.pdf, pages 23 onwards

35

Agenda

Global Context

South Africa’s Unique Renewables Opportunity

• Cheap: renewables are least cost

• Clean: decarbonising at least cost

• Job rich: renewables more job-intensive

New Export Opportunities Arising from Cheap Renewables

Summary

36

Inputs Conversion Power FuelsFuel Production

ElectricityH2 Hydrogen (H2)

Water

Air (N2 and O2) N2

Air Separation

Plant

Electrolyser

CO2

Hydrocarbons• Methane (CH4)• Methanol (CH3OH)• Diesel/Petrol/

Kerosene (CnHm)

Syngas (H2, CO)Existing CO2 streamsBiogas (CH4 and CO2)

Fischer-Tropsch Reactor

Reverse Water-Gas

Shift Reactor

Ammonia (NH3)Haber-Bosch

Reactor

H2O

H2

H2

South Africa exhibits key ingredients for cost-competitive power fuels

37

Electricity-based fuels and chemicals (“power fuels”, “e-fuels”) provide a huge potential export opportunity for South Africa

South African renewable electricity will always be cheaper than in most other countries in the world

• Combined solar, wind and land resources better than in most other parts of the world

• Cheapest renewable electricity is a competitive advantage that will never go away

In addition, South Africa has vast experience in the creation of synthetic liquid fuels

• The country gets roughly 1/3 of its liquid fuel demand from Coal-to-Liquid

• Sasol is one of the largest Coal-to-Liquid producers globally

This combination provides a huge opportunity for South Africa to commercialise renewable-electricity-based, carbon-neutral synthetic fuels and chemicals from Power-to-Liquid/-Gas processes

The EU has started to create the market for such fuels via its mandatory biofuels blending requirements

• Aviation fuel demand alone: 60 billion litres/a

Global initiative started to connect off-takers with suppliers

38

PrimaryEnergy

Intermediary Energy Carrier

End UseConversion

E

T

H

Today: South Africa‘s energy flows are domestic coal and imported oil

39

PrimaryEnergy

End UseMultiple Conversion Steps on the Basis of Electricity and Hydrogen

E

T

H

Domestic Coal: 54 PJ

Imported Oil: 134 PJ

Domestic Wind: 1 270 PJ

Domestic Solar: 1 270 PJ

Natural Gas: 200 PJ

Domestic Biomass: 761 PJ(today + biogenic municipal waste)

Domestic Ambient Heat: 251 PJ Heat Pumps: 376 PJ

Biomass Boilers & Fireplaces: 661 PJ

Resistive Boilers & Heaters: 376 PJ

Seawater Desalination Plants: 126 PJ Fresh Water: 10 trillion litres

Power Plants: 2 840 PJ(120 GW wind, 180 GW solar PV, others)

Electricity: 2 680 PJ(~740 TWh)

Electrolysers: 1 314 PJ(~70 GW)

Hydrogen: 1 052 PJ(~7.4 million tonnes)

Liquefaction Plants: 336 PJ

Fertiliser Plants: 140 PJ

Hydrocarbons: 440 PJ

Chemicals: 188 PJExport PtL: 188 PJ (~5 billion litres)Export Fertiliser: 140 PJ (~3 million tonnes)

Airplanes: 72 PJ End-use Transport: 238 PJ

Losses: 953 PJ

End-use Electricity: 481 PJ

End-use Heat: 1 634 PJ

FCEVs: 183 PJ

BEVs: 138 PJ

Steel Furnaces: 200 PJ

Boilers: 193 PJ

Future: South Africa‘s energy flows based on solar, wind & hydrogen?

Export of power fuels: R50-60 billion/a; fertilizer/ammonia: R20-30 billion/a; 10 trillion litres/a fresh-water production

40

Agenda

Global Context

South Africa’s Unique Renewables Opportunity

• Cheap: renewables are least cost

• Clean: decarbonising at least cost

• Job rich: renewables more job-intensive

New Export Opportunities Arising from Cheap Renewables

Summary

41

Summary: South Africa has a unique opportunity to re-position its energy system

It is cost-optimal to aim for 85% renewable electricity share by 2050

• Solar PV, wind and flexible power generators (e.g. gas, CSP, hydro, biogas, demand response, batteries, fuel cells) are the cheapest new-build mix for the South African power system

• From a pure cost perspective no new coal, no new nuclear, a deviation from that would be a subsidy

Proposed next steps

• Strategic direction: give a clear commitment to a new-build mix of solar PV, wind and flexibility (IRP)

• Implementation:

– Introduce a spatial component into the implementation to ensure new power generators are closer to where existing power generators will phase out, take over jobs from coal to renewables

– Separate Eskom generation from Eskom grid in order for Eskom grid to be able to facilitate the transition better

– “Sweat” Eskom’s coal fleet and gradually ramp it down while ensuring re-training of staff and deployment in RE

– Open up generation and retail electricity business for competition, keep control over infrastructure assets (grid)

– Create 2-3 national champions on the renewables generation side

• Export preparation: engage globally on export potential for renewable-electricity-based products

42

Thank you

Re a leboga

SiyathokozaEnkosi

Siyabonga

Re a leboha

Ro livhuha

Ha Khensa

Dankie

Note: „Thank you“ in all official languages of the Republic of South Africa