Good news, not-so-good news and mixed messages

After months of ‘radio silence’ from the Department of Energy (DoE), the final Integrated Resource Plan 2 (IRP2) was approved by Cabinet in March this year. Last you heard from us, the plan – although approved – had not been released to the public. Now that it has been released, we have taken a look at the implications for South Africa. (The approved plan is available for download from the official Department of Energy IRP website: www.doe-irp.co.za.)

The IRP 2010 – good news

There were huge numbers of submissions to the draft plan, made by civil society, companies and individuals (5 000 written comments in total). There is clear indication that the DoE has taken to heart the input from the public.

It is noted in the IRP 2010 document that the public consultation process provided useful feedback, additional information and alternative views – resulting in additional modelling and, ultimately, the Policy-Adjusted IRP.

There are a number of encouraging changes within the final (Policy-Adjusted) IRP. Total renewable energy provision has been increased, renewable energy learning curves have been accounted for, and more up-to-date pricing for renewable energy used in the modelling. Solar photovoltaic is included in the plan as an obvious choice.

A shift has taken place, away from minimising cost (as the only factor of importance) and toward a more balanced approach. For example, greenhouse gas emissions are taken into account more seriously than in previous drafts. It is encouraging that additional factors have received more consideration.

The cost of nuclear has been increased by 40%, getting closer to a realistic reflection of the true costs associated with nuclear. Commitment to a ‘no-nukes’ scenario was made at the public hearings last year. The IRP states that it was not necessary to model this separately, as the cost-optimal option excludes nuclear power.

The new IRP includes a research agenda for the next plan, which includes much-needed investigation into the following key areas:

• Distributed generation, smart grids and off-grid generation;

• Carbon capture and storage options, and underground coal gasification options;

• Better understanding of the risks and uncertainties toward better decision-making;

• Integration with the long-term vision for emissions and the energy industry, such as developing a ”Vision for 2050”;

• Analysis on price sensitivity of demand and the possibility of gas as a substitute for electricity;

• Decommissioning as well as waste management; and

• Other technology options such as small hydro, storage, biomass, and energy efficiency and demand side management (EEDSM).

In the concluding statements of the plan, the department recommends accelerated rollout of renewable energy options in order to derive the benefits of localisation of these technologies.

There is suggested support for net metering (which allows for consumers to feed energy they produce into the grid and offset this energy against consumed energy), and a recommendation to investigate the impact of such a policy.

The IRP should not limit ‘activities behind the meter’ such as energy efficiency and own generation by consumers.

In addition, the department has promised a socio-economic impact study, which it said would be completed in April 2011.

The not-so-good news, and the mixed messages

The IRP2 is still premised on a major increase in demand, largely through industrial growth based on aluminium and ferrochrome smelters. In other words, the IRP is making economic growth policy choices: The public should be given a choice between energy-intensive industries that create few jobs, and the low energy-intensive industry choices that create many jobs – such as through many renewable energy technologies.

Coal targets are much the same, but the coal new-build has been brought forward (originally expected only after 2026), and there is allowance for imported coal options (with the promise that we will count the emissions toward South Africa’s total).

It is not clear what the reasons are for bringing forward the coal new-build. A major concern is that this further entrenches the status quo and makes it more difficult to gear up in a different direction. In addition, this choice will accelerate the use of a dwindling resource.

Are we trying to get as much ‘cheap’ electricity as possible out of the remaining coal reserves, before carbon taxation kicks in?

The approved plan contains the same conservative target for energy-efficiency initiatives as the draft, despite South Africa’s budget this year of R66 million for an energy-efficiency research and development institute.

The department has agreed that saving energy is the cheapest option, and that an estimated 30% overall saving is achievable.

There was a verbal commitment to intensifying the energy-efficiency strategy, yet no such strategy is outlined in the final plan.

The department has not set a limit to energy efficiency, but it is not an option that is being pursued ambitiously.

A commitment to a full fleet of nuclear power stations is in the approved plan. This is particularly disturbing in the wake of Fukushima in Japan.

Peak oil considerations have been cited as one of the reasons that nuclear has become government policy. Nuclear, however, is also a non-renewable energy source, and going nuclear instead of more renewable energy is not only very expensive – it will also cost South African jobs.

Commitment to nuclear is based on government policy and ‘reduced risk’. Yet, it is unclear how the risks associated with price and safety have been factored into the risk assessment scenarios.

Gas options and targets have been increased. The stated reasons include improving security of supply by providing back-up to the renewable energy rollout. This foretells an increased demand for gas and may, to some extent, account for the exploration of extraction methods such as fracking.

Minister in the Presidency Collins Chabane said that the IRP 2010 was aligned to the objectives set in the long-term mitigation scenarios and the commitments made to climate change imperatives, particularly the Copenhagen Accord.

Yet, says the DoE, South Africa “cannot afford” the Copenhagen emissions targets.

Emission targets in the IRP have been retained over the 20-year period, but because new coal has been brought forward in the plan, it is clear that the emissions are due to increase rapidly in the short- and medium term.

Where are the guarantees that we will achieve the necessary reductions in time? Given the uncertainties around a climate change ‘tipping point’, can we really afford to gamble with emissions?

Another question is whether or not we should rather be delaying coal options until such a time as truly ‘clean’ coal and storage technologies have been developed. To begin with, the carbon emissions cuts in the climate change commitments are from a business-as-usual level, not a required-by-science approach. So, the IRP is haggling over differentials in figures that are all well over the ‘safe’ limit.

It is noted in the plan that “additional coal options would be undermined by a carbon tax regime, which would render South African industries less competitive and put economic value, jobs and country growth at risk”. One may reasonably ask: Why then, oh why, are we speeding up our new coal build?

The document warns that further demand forecast reductions or more rapid energy-intensity reductions will result in “unacceptable planning uncertainty and economic growth risk”.

The new plan claims to indicate a balance between different government objectives, specifically economic growth, job creation, security of supply and sustainable development. Yet, it is clear that security of supply for a rapid-growth (read: smelter) economy has been given priority.

The new IRP is along a similar price path to the previous draft. We feel that this is a disappointment, as there is much opportunity for savings through the pursuit of EEDSM and disqualification of expensive nuclear, for example.

What now?

The IRP will be revised in 2012. There are numerous unanswered questions, such as the role of an IRP in the broader context of an Integrated Energy Plan for South Africa.

We will keep a close eye on the process and hope for further improvements to public participation (particularly to include rural and marginalised communities), as well as a far more sustainable electricity plan.

Project 90 continues to call for cost-optimal, employment-intensive, clean, safe and sustainable choices for our electricity future!

 Candice Pelser