[NGW Magazine] Coal not Fuel of Choice for RSA: Report
South Africa should focus on renewables and gas and halt all future coal-fired power projects, a report from an influential Cape Town research unit urges. Gas could be the substitute, with a governmental masterplan now not far off.
South African governmental plans to support two new coal-fired electricity plants have been condemned by a new research report which argues there is too much coal-fired capacity, and the new projects would be too expensive. The report was released in May by the influential Energy Research Centre at the University of Cape Town.
Entitled ‘An assessment of new coal plants in South Africa’s electricity future’ and co-authored by Gregory Ireland and Jesse Burton, it addresses the cost, emissions, and supply security implications of the coal IPP programme. Ireland is a recent electrical engineering graduate who worked for two years inside Eskom, the state’s giant utility power generator, while Burton is an economist.
The new coal capacity is due to be provided under South Africa’s coal baseload independent power producer (IPP) procurement programme, which follows a successful IPP programme for renewables.
The coal programme was launched in 2014, the report notes, but the energy outlook has substantially changed since then, with more support for gas and renewables. The report argues that as a result, the two new coal projects are “not necessary to meet demand and ensure security of supply of electricity, (will) provide more costly electricity, and (will) increase greenhouse gas emissions.
“Under the coal IPP programme, preferred bidder status has been awarded to two projects: the Thabametsi and Khanyisa coal-fired power plants. Despite opposition from environmental groups, the minister of environmental affairs has stated that, at least in the case of Thabametsi, the environmental authorisation for the station should be upheld.”
The report notes how units of the large, over-budget Eskom coal-fired complexes at Medupi and Kusile are still being added to the grid. Construction of both has been marred by years of delays. “A key finding of the study is that in all scenarios, neither new coal nor new nuclear is required to meet demand at lowest cost,” the study finds. “The result of the assessment of new coal IPPs has shown that these plants are not necessary to meet demand, and, further, that their inclusion in South Africa’s electricity system will substantially raise costs in the electricity sector, and substantially increase GHG [greenhouse gas] emissions over their lifetimes. “We find that even with pessimistic renewable energy cost projections and high gas costs, the coal IPPs still increase the system costs in the electricity sector compared to an optimised electricity build plan.”
The report goes further: “The implications of these findings are clear. South Africa is currently facing a large surplus in generation capacity, in particular inflexible base supply capacity. Eskom is facing a financial crisis and rising electricity prices will drive consumers away from the utility. Investments that unnecessarily increase costs in the electricity sector should be avoided.”
The study includes a graphic (below) about the optimal energy mix, which shows that - while gas will remain a small component of South Africa’s total energy mix – it will nonetheless continue to grow as a proportion of overall capacity. The study factored in an average future $12.50/mn Btu price for imported LNG for its base reference, but $10/mn Btu for the ‘worst case for coal IPPs’ and $15/mn Btu for its ‘best case for coal IPPs’ scenarios.
Power Sector Average Annual Energy Generation per Source Least-cost Projected Build Plan (2015-2050)
Reference Scenario: Annual Electricity Generation by Source (2015-2050) (Credit: ERC, Ireland/Burton)
“This coal IPP study somewhat echoes others – around there being no need for new coal plants and that costs and GHGs would increase,” said Niall Kramer, CEO of the South African Oil and Gas Alliance (Saoga). “From a Saoga stance we welcome data-led discussion like this that can be interrogated against scenarios for SA’s energy mix.
“What is broadly accepted is the role of gas in supporting renewables, mitigating GHG, and assisting cost containment," added Kramer.
“Along similar lines, last year a major Council for Scientific and Industrial Research (CSIR) study, led by its then head of energy Dr Tobias Bischof-Niemz was widely discussed and reviewed. That indicated the energy mix objective should be least-cost, least-regret, and it should be unconstrained. It said that flexible solar PV and wind is the optimal new-build mix for South Africa and gas could complement for intermittency.
“Effectively trading cost against cutting CO2 emissions is not the focus any more. So, the role for gas in a new (energy mix) is clear. Currently Mozambique is enjoying billions of dollars of investment in gas projects and serves as an example - and potential partner - for what South Africa could be enjoying. We need to make South African policy attractive to investors,” said Kramer.
University of Cape Town professor Anton Eberhard, who has written extensively about IPPs in Africa and co-authored a seminal 2016 World Bank report on the subject, tweeted about the graphic: “Based on the relative costs of new energy sources, this is what South Africa's power system will look like in the future. If storage costs continue to fall, gas will probably also drop out the mix. We're on the cusp of an energy revolution.”
Minister Backs Gas Role Too
South Africa’s energy minister Jeff Radebe gave a strong commitment to gas in the country’s energy mix, stating: “It is important to note that the imported LNG as well as natural gas-to-power programmes are still a very high priority. As we have indicated before, we are not only looking at gas-to-power, but gas as part of the energy mix in South Africa.”
Radebe pointed to the huge gas reserves offshore Mozambique and Tanzania, and also to South Africa, Zimbabwe and Botswana’s onshore coalbed methane (CBM) potential: “Furthermore, South Africa has potential shale gas.”
Energy and water ministers from the Southern African Development Community (SADC) are to hold a one-day workshop on regional gas development, he said: “This, we hope, is the beginning of a decisive trajectory that provides sufficient focus on the utilisation of gas in the region.”
Radebe also said he plans to visit Mozambique “very soon” to bend its ear on the possibilities of a regional approach for developing gas. South Africa-listed Sasol already produces gas in southern Mozambique, but the country’s firms are absent from the partnerships - led by US firms Anadarko and supermajor ExxonMobil, plus Italian major Eni - that are putting together LNG projects based on northern Mozambique’s offshore reserves (NGW Magazine, Vol.3/10, pp10-12).
South Africa's energy minister Jeff Radebe (Credit: John Fraser)
Ministerial discussions with Mozambique might lead to new pipeline infrastructure to move gas from northern Mozambique to South Africa. However, US and Italian developers of Mozambique’s LNG projects are suspicious of Pretoria’s plans to bolt on pipeline schemes to their projects, when Pretoria has stalled for two years any substantive development of its own LNG import strategy.
The ports of Coega and Richards Bay were chosen late 2016 for gas-to-power projects: LNG was to be imported and regasified at floating terminals, with much of the gas used in newbuild power plants. But the government did not advance the strategy – until Radebe’s words of support this May.
Radebe, named energy minister in February 2018 by the country’s new president Cyril Ramaphosa, has promised a ‘gas masterplan’ in the coming months, as he fast-tracks consultation on the new energy mix. South Africa is poised to start issuing exploration licences for shale gas in the Karoo region, in the face of extensive opposition from environmental groups.
At present, most of the country’s natural gas comes by pipeline from Mozambique, with some also manufactured from coal by Sasol. State-owned PetroSA also has a near-depleted offshore gas field at Mossel Bay offshore South Africa’s southern coast, linked to an onshore gas-to-liquids unit now being converted so that it is less reliant on gas as a feedstock, in the wake of corruption and mismanagement scandals. More detail on the gas strategy is expected to emerge in the next few months, as long-delayed decisions on the country’s future energy mix are finalised.
John Fraser