South African Electricity

Supply Industry –

overview and recent

developments

21CPP Webcast

Barry MacColl

General Manager

South Africa’s Energy Challenges

• Keeping the lights on – powering the economy

• Security of supply for a growing economy – since 1994 the economy has grown by 79% and the power capacity by <17%

• Reduction of Carbon footprint

• Energy Poverty and access – 3.5m gap

• Affordability and competitiveness – and protection of the poor

• Local environmental impacts – land, water, air quality

• System stability

• Financing and entry of new players (IPPs)

• Delivering on the Integrated Resource Plan (IRP)2015-03-18 2

3

Revised

Balanced

Scenario (RBS)

Integrated Resource Plan 2010 Consultation process and policy considerations

Before second round of

consultation process

( October 2010)

Second round of

consultation process (90

days for comments,

hearings in Nov, Dec)

After

consultation process

(February 2011)

Scenarios tested

• "Base Case"

• "Emission Limit"

• "Carbon Tax"

• "Regional Development"

• "Enhanced DSM"

Emission Limit 2.0 to

be pursued further

Main changes

• Increased

nuclear costs

by 40%

• Included

learning rates

(mainly affects

PV, CSP, wind)

• Disaggregated

solar

technologies

Scenarios tested

• "Adjusted Emission" (based on Emission Limit 2.0)

• "High Efficiency"

• "Low Growth"

• "Risk Averse"

• "Peak Oil"

• "Earlier Coal"

Policy-Adjusted

IRP

Multi-criteria deci-

sion makingPolicy choices

3

First round of

consultation process (30

days for comments,

hearings in Jun)

Parameters

• Inputs on

demand-side

(forecasts,

energy

efficiency)

• Inputs on

supply side

(generation

options,

committed

programmes)

• Economic

variables

South African Integrated Resource Plan (IRP 2010)

2015-03-18 4

South Africa Electricity Capacity in 2030

5

Existing 35515

Committed 10133

Decomm. (10902)

New 6250

Existing 1800

New 9600

Committed 1125

New 17800

South African Renewable Energy Independent Power Producer Program (REIPP)

• The names of the 17 preferred bidders out of a total of 93 submissions in round three of the Renewable Energy Independent Power Producer Procurement (REIPPP) programme were announced earlier this year. This brings the total number of utility-scale renewable energy projects in progress to 64 with many window one projects in advanced stages of construction and a handful already feeding into the grid.

• The total megawatt value of bids submitted in window three amounted to 6 023 MW whilst the available allocation for this window was 1 473 MW. The round also saw aggressive price decreases across all the technologies with an average of 74 c/kWh achieved for wind down from 1.14 R/kWh in window one, 99 c/kWh for solar photovoltaic (PV) down from 2.75 R/kWh in window one and 1.64 R/kWh for concentrated solar power (CSP), down from 2.69 R/kWh in window one.

• Window three saw the addition of biomass (16 MW) and landfill gas (18 MW) projects to the REIPPP mix with the provinces of kwaZulu-Natal and Gauteng now boasting their entry into the REIPPP programme. Linear Fresnel CSP technology also makes its debut in the South African context. 6

Impressive Progress on REIPPP

7

http://www.energy.org.za/reipppp/78-reippp-window-three

Access to GCCA report

Renewable Prices Dropping Fast (1USD = 12,4 ZAR)

9

http://www.ee.co.za/wp-content/uploads/legacy/Energize_2013/03_iDn_summary-of-reippp.pdf

10

Policy Adjusted

IRP

Updated

IRP

2010 Rooftop PV

Solar Park

The Update process

11-3000

-2000

-1000

0

1000

2000

3000

4000

5000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Other renewables

Solar

Wind

Peaking - Pumped Storage

Peaking - OCGT

Mid-merit Gas

Import hydro

Nuclear

Coal

-3000

-2000

-1000

0

1000

2000

3000

4000

5000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Wind

Peaking - Pumped Storage

Peaking - OCGT

Mid-merit Gas

Import hydro

Import coal

FBC Coal

Nuclear

PF Coal

Balanced Scenario

EM2.0

Revised Balance

12

IRP Update Demand Projections

0

100

200

300

400

500

600

700

20052007200920112013201520172019202120232025202720292031203320352037203920412043204520472049

An

nu

al e

lect

rici

ty n

et

sen

t-o

ut

(TW

h)

SO IRP 2010 Moderate (Original)

SO IRP 2010 Low (Original)

SO IRP 2010 (Update) Moderate

CSIR - Green Shoots

SO IRP 2010 (Update) Low

CSIR - Weathering the Storm

2,8%4,5%

Economic

Growth

(CAGR)

Electricity

Demand

Growth

(CAGR)

2,8%5,4%

Net

sent-out

(TWh)

454

425

1,8%2,9%348

2,7%5,4%409

2,4%5,4%622

1,9%3,7%522

1,3%2,3%414

New SO Moderate

New SO Low

Weathering the Storm (New)

Green Shoots (New Base Case)

IRP 2010 Moderate

13

Update Technology Cost Assumptions

PF Coal(with FGD)

FBC Coal(with FGD)

IGCC Nuclear OCGT CCGT WindCSP

(Parabolic, 9hrs)

PVcrystalline(fixed tilt)

Inflation 2,655 2,234 3,682 5,554 590 863 2,156 7,599 3,106

IRP 2010 17785 14965 24670 37205 3955 5780 14445 50910 20805

IRP Update 21572 21440 29282 45074 4357 6406 15394 61176 19250

0

10000

20000

30000

40000

50000

60000

70000

Ov

ern

igh

t cap

ital

co

sts

(R

/kW

)

14

Costs: Technology choices

0

500

1000

1500

2000

2500

0%

2%

4%

6%

8%

10

%

12

%

14

%

16

%

18

%

20

%

22

%

24

%

26

%

28

%

30

%

32

%

34

%

36

%

38

%

40

%

42

%

44

%

46

%

48

%

50

%

52

%

54

%

56

%

58

%

60

%

62

%

64

%

66

%

68

%

70

%

72

%

74

%

76

%

78

%

80

%

82

%

84

%

86

%

88

%

90

%

92

%

94

%

96

%

98

%

10

0%

Pulverised coal, with FGD Pulverised coal, with CCS

Fluidised bed combustion (coal) with FGD Fluidised bed combustion (coal) with CCS

Nuclear OCGT

CCGT (R92/GJ) CCGT (R70/GJ)

Wind CSP, Parabolic trough, 3 hrs

CSP, Parabolic trough, 6 hrs CSP, Parabolic trough, 9 hrs

CSP, Central receiver, 9 hrs CSP, Central receiver, 3 hrs

CSP, Central receiver, 6 hrs PV, crystalline silicon, Fixed Tilt

PV, crystalline silicon, Tracking Pumped Storage

Biomass, Forestry residue

PV Fixed 2020

PV Fixed 2030

PV Fixed 2012

PV Tracking 2012

PV Tracking 2020

PV Tracking 2030

CSP Centr Receiver 2012

CSP Centr Receiver 2030

CSP Centr Receiver 2020

Wind 2012 Wind 2020 Wind 2030

15

Peak demand paths indicating incremental large

investment requirements

2015-03-18 15

H C

G

C G

G C C

C C

C

C

C

C

C

C

C C

C

C

C

C

C

C

C

C

C

N N N

N

N N

G G

N

N

N

N

N

N

N

N

N

C

G

H

N

G

Nuclear capacity (± 1000 MW)

Gas CCGT capacity (±1000 MW)

Coal capacity (±1000 MW)

Hydro capacity (±1000 MW)

C

C

C

G

G G

N

N N

N

N

N

N

N

16

Wind and PV under different scenarios

2015-03-18 16

Total wind capacity per scenario

Total PV capacity per scenario

• Continue with the current renewable bid programme with additional annual

rounds (of 1000 MW PV capacity; 1000 MW wind capacity and 200 MW CSP

capacity)

• Pursue small hydro and land-fill gas at competitive rates

Recent Developments

The Government uses the term and establishes their own…

19

The War Room mandate has been established as a response to

the current electricity challenges faced by the country

Mandate

Background

The War Room has a mandate to work with government in order to assist Eskom to overcome its

operational challenges through the Cabinet-approved five-point plan. The elements of the five-point

plan are as follows:

• Eskom emergency measures – 30 days

• Cogeneration

• Gas imports

• Coal independent power producers (IPPs)

• Demand-side management

• On 10 December 2014, Cabinet approved a five-point plan to address the current electricity challenge.

• Eskom welcomes government support in dealing with the constrained power system challenges.

• Eskom was tasked with focusing on the following, subject to finances and governance processes:

Expediting the recovery programme at Majuba and Duvha and other repair work and reducing partial load losses

Improving the quality and effectiveness of maintenance

Expediting bringing the Medupi and Kusile units online

Improving the quality of coal to produce electricity

Securing funding to enable the use of the OCGTs during the remainder of the MYPD3 period, on the understanding

that the OCGTs are used as a last resort to avoid load shedding

A plan to identify potential savings in the procurement of diesel

Renewal of the existing cogeneration contracts

Obtaining additional cogeneration capacity

Renewal of the existing demand market participation contracts

Pursuing additional demand-reduction mechanisms, including power buy-backs

1

20

Five-point action plan

The five-point action plan approved by Cabinet (December 2014) is as

follows:

1. Immediate measures (improve maintenance and

operational practices)

2. Cogeneration

3. Gas for power generation and additional sources of

supply

4. Other independent power producers (IPPs)

5. Demand-side management

Other focus areas include financial and procurement issues, skills

development, regulatory issues, long-term issues with short-term

implications (for example, energy mix), and communications.

212015-02-16 21

Government’s War Room structures

Deputy President

Cabinet

Interministerial

(Monthly)

Deputy President Advisory

Panel

Composition:

Eskom: CE, FD, Government: Energy, Public

Enterprises, Treasury, Trade and Industry,

Economic Development, Cooperative

Governance and Traditional Affairs, Water and

Sanitation

Composition:

Deputy President

Eskom: CE, FD

Government: Ministers

Composition:

Eskom: Marion Hughes, Louis Maleka

Government:

Dr Sean Phillips: DG Office of the Presidency

Ompie Aphane: DDG Dept. of Energy

Gcina Hlabisa: Dept. of Public Enterprises

Malcolm Simpson: National Treasury

(Programme Management)

Ashraf : Office of the Presidency

War Room Secretariat

(Weekly - Thursday)

Technical War Room

(Weekly - Friday)

22

Shortfall in supply to meet demandWe are at war – little wriggle room and system under threat

1 Medupi 6

2 Dedisa DoE Peaker

3 Ingula 3

4 Avon DoE Peaker

5 Ingula 4

6 Ingula 27 Ingula 1

South African Government – Seeking Solutions

• Objective of the RFI

• The objective of this RFI is to gather information on the potential for more and innovative demand reduction/shifting and/or supply initiatives. The immediate focus is on rapid implementation of “demand response” capabilities. The national medium to longer term objective is to have available a range of supply/demand options that will ensure a “more economic grid” and consequently assist in containing electricity prices whilst ensuring security of supply.

• This RFI is a stand-alone information-gathering and market-testing exercise to solicit information from providers of demand response and/or distributed generation solutions (the “Respondent”) and is intended to inform and assist the IPP Office with further deliberation and development of a national demand response strategy.

23

Small Scale Renewable Integration is coming!

24

http://www.nersa.org.za/Admin/Document/Editor/file/Consultation%20Paper%20on%20Small%20Scale%20Embedded%20Generation.pdf

25

THANK YOU

Barry MacColl

General Manager – Research, Testing & Development

Eskom

Email barry.maccoll@eskom.co.za