South Africa’s proposed energy mix for 2030

In October 2010, the Department of Energy made public the draft Integrated Electricity Resource Plan (IRP) for South Africa 2010–2030.

It intends to provide an indication of South Africa’s electricity demand; how this demand will be supplied; and how much electricity will cost.

Hatch Africa associate and president of the South African Coal Processing Society, Gerrit Lok, says the 20-year electricity capacity plan is crucial toward determining South Africa’s long-term electricity demand, as well as how this demand should be met in terms of generating capacity, type, timing and cost.

Based on an average 4.6% annual gross domestic product growth trajectory over the next 20 years, the government has investigated three primary options, namely: the Low Cost Scenario, the Revised Balance Scenario, and the Low Carbon Scenario.

The scenario evaluation process confirmed that the Revised Balanced Scenario represents the best trade-off between least-investment cost, climate change mitigation, diversity of supply, localisation and regional development.

The Revised Balanced Scenario proposes that, by 2030, South Africa’s generation mix should include the following: 48% coal, 14% nuclear, 16% renewables and 9% peaking open-cycle gas turbine.

Lok notes that each one of these energy sources has a cost allocated to it – both from a capital investment cost perspective and from an operating cost perspective.

The IRP states that South Africa would require an estimated R850-billion investment, which will see a 250% increase in the cost of power.

At a rate of 100 US cents per kilowatt-hour by 2020, South Africa would be placed in the top quartile of countries that are its main competitors in the beneficiation of minerals – namely India and China.

It is important to draw attention to the fact that the IRP inherently contains significant energy efficiency savings, which are accounted for in the demand forecasts.

An energy-efficiency improvement of 35% is built into the IRP, based on the reducing energy intensities that are used to determine the future energy demand.

The IRP assumes that over the next 15 years, most of the reduction in energy intensity will be derived from improved energy efficiency, driven by increased electricity prices. As a result, the energy-efficiency field will become hugely influential and far-reaching.

“From Hatch’s perspective, we have already built energy-efficiency programmes into our projects and design philosophies, allowing our clients to make their projects more energy-efficient,” explains Lok.

Nuclear – a necessity

Although nuclear is included in the energy mix only from 2023 in the IRP, a decision must be finalised as soon as possible to allow the procurement process to begin.

Early in 2007, the board of state power utility Eskom approved a plan to double generating capacity to 80 gigawatt electric (GWe) by 2025. This included the construction of 20GWe of new nuclear capacity so that the nuclear contribution to power would rise from 5% to more than 25%; while coal’s contribution would fall from 87% to below 70%.

The nuclear groups, Areva and Westinghouse, offered to build the full 20GWe, with a further 10 large EPR units by 2025.

However, in December 2008, Eskom announced that it would not proceed with either of the bids due to a lack of finance.

“If this had gone ahead in December 2008, South Africa would have been ‘ahead of the pack’. However, the situation now is that South Africa is going to be in the middle of the competitive bidding processes by trying to lock in suppliers of nuclear technology,” notes Lok.

He points out that although the IRP includes six new 1 600-MWe reactor units coming online in 18-month intervals from 2023, Eskom has said it would be looking for lower cost options than the earlier proposals and would consider Generation ll designs from China or South Korea.

Lok further points out that this could result in the capital cost per MWe almost being halved.

“An important consideration is the time it would take to reach the 4.6% GDP growth rate, as well as the necessary 10- to 12-year horizon from when investigations begin to when the project would be complete.

“Considering this timeline, South Africa would need to make a decision – with regard to nuclear – within the next year to meet the 2023 target,” he explains.

Uranium – demand to outweigh supply?

The need for nuclear energy as part of the energy mix is essential if South Africa is to meet baseload requirements for the future, says Lok.

“We do, however, need to look at the operating costs of these nuclear units – specifically with regard to the input requirement of uranium and the cost thereof.”

In addition to the capital required to build a nuclear power station, one also needs to consider the operating cost.

While it is commonly stated that the operating cost of nuclear power stations is cheaper than coal-fired power stations, this is not necessarily true for the future.

Globally, over the next 10 years, there will be an additional 91 reactors coming online. “The problem herein lies with the total demand currently, in that there is 180 million pounds a year of uranium u308 being consumed globally, while production is only sitting at 140 million pounds a year,” says Lok. “The shortfall is sourced from secondary sources, such as the nuclear arms programmes under treaties between the US and Russian governments.

“With the growth in the number of nuclear stations, we can quite possibly expect a significant hike in uranium prices, which will make the operating costs of nuclear power stations much more expensive.”

In the interim, emerging nations such as China and India are following a very similar approach to the IRP, which is to reduce coal as a percentage of the energy mix. Importantly, this does not mean less coal will be used – instead, coal as a percentage of the energy mix will come down.

“Many countries are trying to minimise coal as an input into primary energy, but it is not possible to eliminate it. It will actually more than likely grow with regard to the physical tonnage used,” Lok points out.

He adds, however, that South Africa should not lose sight of the fact that coal is by far the cheapest way to secure economic growth. “For a developing nation like South Africa, it is very important that we don’t lose sight of this because if we get this plan wrong, then we won’t be competitive as a nation,” stresses Lok.

Article supplied by Hatch Africa