by David Lipschitz, Energy Expert

Energy future on a knife-edge

In 2015, Eskom was load shedding its customers. Eskom didn’t have enough electricity, so instead of allowing a grid meltdown, where the whole grid went down, Eskom did something they called “load shedding.” This means that for between two and four hours at a time, Eskom switched off parts of the national electricity grid, thus saving themselves major problems. They kept their power stations running as best they could and they simply switched off their clients.

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The problems were caused by electricity growth exceeding supply of new power stations; by failures in the system; and by bad long term implementation plans.

this being switched off led Eskom’s clients to look for alternatives. Many of us remember the last time there were power failures, back in 2008 / 2009.

The initial plan was to buy a generator. Generators are loud, smelly things, and they require maintenance, and most people have up to eight hours of fuel reserves. What if we had more than the expected downtime? We would run out of fuel. Our businesses wouldn’t be able to operate. We’d have major problems.

The secondary plan was to look at alternatives. Could one make electricity on site? How much would it cost? When would I break even? Did it make sense? Should I wait it out? At what point would we be at Grid Parity? And could I look at being more efficient thus not needing as much electricity as before? Energy Efficiency became the order of the day.

Negawatts, i.e. Negative Watts, the cheapest form of needing less electricity. Many of us found that we could save up to 30% of our electricity costs relatively painlessly and big business learnt how to move their peak demand around to save even more money.

If one did research to discover if Eskom knew about this problem before it happened, one came across the following graph:

This graph comes from the White Paper on Renewable Energy, created in 2003. A “White Paper” is a government strategy document, setting out a government’s long term strategy in an area.

One can see that by 2003, everyone knew that Eskom and the South African government would run out of electricity by 2008.

And one can also see that without new build we would start losing electricity in the 2020’s as old power stations are switched off.

Eskom’s approach was to start planning to build the world’s biggest coal fired power stations, instead of building smaller power stations, which would be easier to roll out, and scalable. Build one. Learn. Build the next one at reduced cost and increased speed. Etc. One should note that Eskom’s culture has always been to build the biggest, which might not always be the best!

Jump forward to 2017

We have a different kind of crisis. Eskom tell us that we have too much electricity, because Medupi and Kusile coal power stations are coming on line. And the crisis is for Eskom, and government, as Eskom is an SOA, a State-Owned-Entity, and the crisis is for the people of South Africa, especially as Eskom embarks on “Coal3” and “9.6 GW of Nuclear Power”.

They talk of “stranded assets”. Only a public utility can have a “stranded asset”. A mere mortal like me just has sunk costs. If I make a bad decision in business, or I invest in something that makes me money for a while and at some point, it isn’t making money anymore, then I may need to write it off and lose my investment.

But governments and utilities don’t write off power stations, even if there are better alternatives. They call them “stranded”. And they try to get their customers to pay for these stranded assets for years after they have reached the end of their useful lives.

However, even with Medupi and Kusile bringing South Africa’s electricity grid up to speed, we still have the cliff that will start happening in the 2020’s, when existing power stations will start being switched off. If we add 10 GW now, and we switch off 10 GW in the 2020’s, then we aren’t better off, electricity wise.

At the same time as this, why does Eskom have all this excess electricity? The reason is mainly because the new power stations are so late that their clients have gone elsewhere.

The smelters, big factories, and others, have moved to other countries, with more reliable and cheaper, electricity systems. And the rest of us have learnt how to make more with less, which is something that has been happening in the electricity world and in the marginal cost[1] reduction would for centuries.

Those of us who looked at “grid parity” years ago noticed that by 2012 we would be at grid parity as home owners; by 2015, businesses would be at grid parity; and perhaps as early as 2017, homeowners would start being at grid parity including batteries.

“Grid parity” happens when one can make one’s own electricity cheaper than one can buy it. The following graph shows the latest version of my grid parity graph. The green line is the decreasing cost of grid tie photovoltaic systems, without batteries. The red line is the electricity price in the City of Cape Town. The lower lines are what the City should be charging and what Eskom charge the City. If the City put up their prices by the NERSA agreed increases, then we would be paying the maroon line’s pricing, but the City has a stepped increase tariff, so that the poor don’t need to pay for electricity and therefore those paying for electricity’s prices go up faster than the NERSA agreed price increases.

Coupled with this, in 2017, we have another energy crisis. In parts of South Africa, and especially for me, as I live in Cape Town, we have a water energy crisis. We have a shortage of water. This has been mainly caused by major population growth, without an associated increase in dams, and without the City and Province implementing alternatives.

The City and Province have looked at alternatives, for example pumping water from major rives into dams during winter months, and desalination plants, but nothing has been done about this. Proposals go back as far as 2011[2] for the pumping solution. One can read about the Berg and Breede River pumping schemes. Interestingly it seems that the additional income that the City of Cape Town has made with its expensive Water Restriction tariffs, would cover the cost of this “augmentation scheme”. In 2011, News24 said that all the City’s water supply would be fully utilised by between 2017 and 2019![3]

And proposals go back even further than that for using Table Mountain spring water.

The City is still trying to get its users to save 11% of water use, yet 15% of water is wasted in our water reticulation system. And what happens when new water plants are online and the City’s clients have found alternatives?

It seems that we have enough water in Cape Town and the Western Cape. But that it just isn’t being managed effectively. We know that people have taken responsibility for their own electricity provision.

And we now see that people are taking responsibility for their own water provision?

So, we need to ask the questions: what if people stop buying centrally provided electricity and water? Will Eskom and the Municipalities be able to legally keep putting up prices to keep their incomes where they are now?

And then there is a yet another energy crisis: a crisis of massive unemployment, which means a huge potential for a new way of working and thinking.

Perhaps we need to step out of our myopic view of the world and see where we are headed, because once we do that, we can step in and see if there is an alternative approach to solving our problems.

Tony Seba, a thought leader, says that by 2030, we’ll be driving electric vehicles (EV’s), parking garages will start becoming obsolete because the electric cars will drive themselves, and so we won’t need parking garages, and we won’t need to own the electric cars because we will only use them when we need them. At the same time as this, it is expected that battery prices will have come down dramatically, whilst at the same time energy densities will have increased. The battery packs in our EV’s will be a part of our energy system.

Robots are doing more and more of our jobs, including automatic vehicle production, automatic mining, automatic warehousing.

The associated labour loss is enormous.

The need for centralised power stations will disappear!

What happens when this kind of disruption occurs? What happens to jobs? What happens to our livelihood? What happens to our energy grids? What happens to our electricity grid and our water grid and our food grid and all our supply chains?

They will surely change. Perhaps not as fast a Tony Seba says, but he does show slides in a YouTube presentation[4] showing New York with 99% horse drawn carts in 1900 and 99% cars 13 years later!

Do I have the answers? I have questions. I have ideas, especially around how our education system needs to change and around how the latent knowledge in our people needs to be utilized, in an ancient system brought up to date with modern ways of doing things, with an abundance of locally produced and cheap electricity, water, food, etc, and with our economy trundling along creating environmentally friendly jobs along the way.

David Lipschitz, Energy Expert

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