Draft energy plan says nuclear decision can be delayed in light of demand slump

POWERING DOWN Update anticipates that 6 600 MW less capacity will be required by 2030

POWERING DOWN Update anticipates that 6 600 MW less capacity will be required by 2030

Photo by Duane Daws

13th December 2013

By: Terence Creamer

Creamer Media Editor


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The Department of Energy (DoE) has called for public comment on an updated version of the Integrated Resource Plan (IRP) 2010–2030, in which a materially lower demand outlook is projected over the 20-year horizon. In fact, the update anticipates that 6 600 MW less capacity will be required by 2030, which, in turn, could enable government to delay its decision on a new nuclear build programme.

The comment period closes on February 7 and the DoE says the responses will be used to inform a final draft to be submitted to Cabinet by March 2014. Following Cabinet endorsement, the approved document will then be promulgated and published in the Government Gazette.

The 114-page report updates the IRP 2010–3013 promulgated in March 2011 by taking account of changes to South Africa’s economic growth, as well as the electricity market.

A demand projection of between 345 TWh and 416 TWh by 2030 is made, which is con-siderably lower than the 454 TWh anticipated in the current version. “From a peak demand perspective, this means a reduction from 67 800 MW to 61 200 MW (on the upper end of the range), with the consequence that at least 6 600 MW less capacity is required.”

In addition, the update still uses the National Development Plan’s aspirational economic growth target of 5.4%, against which the economy is currently underperforming. Should the economy’s recovery towards such growth levels fail to materialise, though, the update’s demand projections could be reduced even further.

The update indicates that the nuclear decision should possibly be delayed, owing to the fact that revised demand projections suggest that no new nuclear baseload capacity is required until after 2025.

It suggests that the country should not “prematurely” commit to a technology that may become “redundant” if electricity demand expectations do not materialise. Under low demand growth conditions, the update does not foresee a need for nuclear baseload until after 2035.

The University of Cape Town Graduate School of Business’s Professor Anton Eberhard says it is “sensible” to delay the nuclear deci-sion in light of the lower demand projections. “In fact if demand is lower, the model says no further nuclear power is required.”

The current version of the IRP indicates 11 400 MW of nuclear capacity (including Koeberg) by 2030, with the first 1 600 MW of a larger 9 600 MW fleet being integrated from 2023. But the ‘base case’ outlined in the update, envisages 6 660 MW by 2030, with the first capacity being introduced in 2025.

It also highlights ongoing uncertainty over nuclear-build costs, noting that these ranged from $3 800/kW to $7 000/kW, while the update makes the assumption of $5 800/kW overnight costs, in 2012 dollar terms.

Eberhard notes that the latest commercial contract for nuclear is Hinkly Point, in the UK, where the costs are $7 900/kW. “At a minimum, the update cautions us around a rushed, ill-considered nuclear decision.”

Another close energy industry observer who asked not to be named tells Engineering News that the analysis basically concludes that South Africa “needs less nuclear, later”. The delay, he argues, will offer additional time to improve the decision-making processes around what would be a significant financial commitment.

Eberhard adds that, apart from less nuclear, the update also includes less coal, hydropower and wind, but more gas, solar photovoltaic (PV) and concentrated solar power (CSP).

New coal is reduced from 6 250 MW to 2 450 MW, while the update’s projection for closed-cycle gas turbine and open-cycle gas turbine capacity is increased to 3 550 MW (from 2 370 MW) and 7 680 MW (from 7 330 MW) respectively. Hydropower imports are projected at 3 000 MW (4 109 MW), while solar PV and CSP are increased to 9 770 MW (8 400 MW) and 3 300 MW (1 200 MW) respectively. The allocation for wind falls from 9 200 MW in the current IRP to only 4 360 MW.

No Mega Coal?
The document also favours a model whereby the so-called ‘Coal 3’ initiative is pursued as a procurement programme for several plants, rather than as a megascale facility such as Medupi or Kusile.

The suggestion is unlikely to sit easy with either Eskom, or the Presidential Infra-structure Coordinating Commission, which reportedly envisages Eskom building Coal 3 following the completion of Medupi and Kusile. Instead, the update argues that a procurement programme should be launched for between 1 000 MW and 1 500 MW of fluidised bed com-bustion coal plants, based on discard coal.

The document is supportive, however, of South Africa facilitating regional hydropower, gas and coal projects, which it claims could have positive spin-offs for unleashing other potential in the region. It also argues that there should be “stepped up” exploration for shale gas in South Africa.

Increased regional uptake would require a different mindset with regard to dollar-denominated contracting, though, as the gas options in particular would be prejudiced “unless the current aversion to dollar-denomi-nated contracts is dropped”.

Also endorsed is a continuation of the current renewables programme with addi-tional yearly bidding rounds for 1 000 MW photovoltaic capacity, 1 000 MW of wind capacity and 200 MW of CSP capacity.

Further, the update proposes that a “standard offer approach” is developed by the department in which an agency similar to Eskom’s Single Buyer Office purchases energy from embedded generators at a set price, so as to render municipalities indifferent between their Eskom supply and embedded generators and thus support small-scale distributed generation.

Work is also recommended on the potential of extending the life of Eskom’s existing fleet and interrogating alternatives to such life extensions, such as the building of new, more efficient coal-fired generation.

Funding should be secured for energy effi-ciency demand-side management programmes and a national entity should be given the neces-sary authority to facilitate these programmes.

The document also recommends more regu- lar updating of the IRP to take account of changes in consumption and technology costs. Also emphasised is the desirability for flexible decision-making in favour of “decisions of least regret”, which means avoiding “commitments to long-range, large-scale investment decisions”.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor




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