Coal and Innovation in Eskom - rising to the global

challenge

Greg Tosen 7 November 2007

Outline

South African Electricity SituationCurrent Supply and Demand ProjectsMeeting the Climate Change and energy security challenges

South African Electricity Situation

Electricity demand and supply – key challenges

• South Africa has reached the end of its surplus generation capacity

• 1st challenge: Avoiding mismatch between demand and supply – Excess capacity - stranded resources– Capacity shortage - constrained economic growth

• 2nd challenge: Correct choice of capacity to be constructed from an array of available options that differ dramatically in terms of:– Cost (construction and operating)– Lead time to construction– Environmental impact– Operating characteristics

National + Foreign long term forecasts plus Position line

30000

40000

50000

60000

70000

80000

90000

100000

110000

120000

130000

2005 2010 2015 2020 2025

MW

Electricity growth - 6%Position - 4%High forecast - 3.2%Moderate forecast - 2.3%

Long Term Demand forecast

Eskom position based on 4% electricity growth

supporting 6% economic growth

Current Supply and Demand Projects

Capacity Funnel ProjectsResearch

PBMR

UCG

ConcentratingSolar

Cogeneration

Hydro

Nuclear

Gas

Coal

Solar

Transmission

Renewables* Red outer circle indicates – out of Borders project

OpportunityIdentification

New Coal Supply

Oscar Yanke e

Discard Coal November

Victor

Gas 2

Zulu

Mike

Hwange

Coal 1 Hydro 1CBM

Coal 2 Non EskomGeneration 1 Hydro 2 Whiskey

26 125 MW

Pre-feasibility

TangoSierra

Co-Gen 1

Foxtrot

HVDC 1

Golf

Nuclear n

22 650 MW

4500

35001600

1200 1775

1200

1006000

500

400

500 1000

0

2000 350

1000500

165

350

100

11501600

900

4500

0

4500

10000

Feasibility, Business Case, ContractConcluding

IndiaLima

Papa Nuclear 1

EchoQuebec

Delta

Juliett

Kilo

Bravo

6001500

2400 3000

10001050

2400

600

1300

4500

18 350 MW

Build

Renewable1

IngulaKomati

Camden Grootvlei

MedupiArnot

P1&P2

Gas 1 Ankerlig

400kV 765kV

11 941 MW

100 1332 961

1520 1128

4500300

1050 600 450

Gourikwa

Capacity additions underway (Various stages of implementation)

Return to ServiceReturn to Service3600 MW3600 MW

Coal Coal 9000 MW 9000 MW

Wind Wind 100 MW100 MW

Energy Efficiency Energy Efficiency 3000 MW3000 MW

Transmission Transmission ~3000 km~3000 km

Open Cycle Gas Open Cycle Gas Turbines Turbines 2100 MW2100 MW

R150bn planned – 2007 – 2011 alone!

NuclearNuclear3000 MW3000 MW

Pumped storagePumped storage1330 MW1330 MW

Meeting the Climate Change and Energy Security

Challenges

Climate Change Response Strategy

• Key Elements– Diversification of supply side mix– Energy Efficiency– Technological Innovation– Carbon market– Policy advocacy– Adaptation

Diversification of Supply Side mix

13Diversify primary energy mix

Coal OCGTNuclear Renewable EnergyImports Pumped Storage

Existing Mix by 2025

Energy Efficiency

15Energy Efficiency

• Demand-side management and energy efficiency to achieve 8000 MW by 2025

• 3000MW by 2013 (R10bn)

• Billion kWh programme internally

Wal-Mart

Natural Lighting and coolingNatural Lighting and cooling

SmartSmartrefrigerationrefrigeration

LEDLEDLightingLighting

TechnologicalInnovation

Technology opportunities under development

Carbon Capture and Storage HVDC

Transmission

OceanCurrentEnergy

Solar Thermal

AdvancedLighting

RegionalHydroPower

AdvancedNuclear

UndergroundCoal gasification

BiomassCogeneration

An Efficient Future…

EPRI 2006

CarbonMarket

Investment Decision Making• Eskom’s approach to Investment decision making

includes consideration of:-– Indirect costs – transmission benefits, CO2 cost and

benefit, diversification benefits – Direct costs – capital, Operating & Maintenance, Fuel– Project risk– Strategic business alignment– Safety, health and environment– Macro and socio economic impact

• Investment decisions must ensure long term energy security whilst reducing CO2 emissions

• CO2 value essential to level the playing field

Carbon Market Mechanisms

• Clean Development Mechanism• Shadow Carbon value used in

investment decision making (50% of EU emissions trading scheme value)

• Future widespread and mature market essential

• Applicable to all technologies and practices

Comparative Costs in 2020-2025

30

40

50

60

70

80

90

100

0 10 20 30 40 50Cost of CO2 , $/metric ton

Levelized Cost of Electricity, $/MWh

Nuclear

Wind

Biomass

Natural GasCombined Cycle

An Extraordinary Opportunity to Develop a Low-carbon Portfolio

Integrated GasificationCombined Cyclewith capture

Coal withcapture

Source - EPRI

Adaptation

Adaptation• Negative impacts of climate change will be experienced no

matter what mitigation options are taken:-– Variable weather patterns – more droughts and floods,

hotter summers, colder winters– Land use change– Changing population patterns– Changing customer base – impacts on agriculture and

vulnerable industries.• Eskom adaptation actions

– More robust water supply infrastructure– Low water consumption technology choices– Robust transmission infrastructure– Contingencies – eg spare towers– Integrated system – flexibility in delivery– Redundancy in the system

Key Enablers

Key EnablersStrategically aligned regulatory environment A national energy efficiency ethicEfficient and timeous approvals – especially environmentalUnlocking the value of Carbon – CDM and global Carbon valueGreen power market mechanismsStrategic alignment on Primary energies – coal, uranium, importsAvailability of skillsMaximisation of local benefits – fleet strategies, ASGISA leverage. SA Inc approachAvailability of global manufacturing and contracting capacityIncreased investments in RD&D and technology transfer

Thank you!Thank you!Thank you!