Thoughts on the optimal electricity-generation mix for South Africa

May 17th, 2018, Published in Articles: EE Publishers, Articles: Energize, Featured: Energize

.
A keynote presentation by Chris Yelland, EE Publishers, at the annual conference of the National Nuclear Regulator of South Africa in Johannesburg on 16 May 2018

I have been asked recently if I have changed my views on nuclear, coal and renewable energy. The answer is: Yes, my views have indeed changed. The world has changed, and change is always with us, but at an ever increasing pace. It would therefore be surprising if my views did not change too.

Chris Yelland

Nuclear power in South Africa was constructed in the 1980s, and has served South Africa well for the last 30 years. Only a decade ago, nuclear power used to be the cheapest non-CO2 emitting generation technology.

But no more. Today the levelised cost of electricity from new nuclear power, which takes into account the full capital cost, together with all fixed and variable operating and maintenance costs, its high load factor and its 60-year lifespan, is among the most expensive technologies per kWh of electricity delivered, compared to that from new coal, gas, wind and solar PV.

Going forward, we can now look to a blend of distributed wind, solar PV, gas and energy storage capacity to provide clean, reliable, despatchable, flexible and baseload generation capacity at least cost. This was not possible a decade ago.

The decisions required in the new Integrated Resource Plan (IRP) for the electricity generation mix of the future, will be based on current and future technology costs and demand projections, and not on the past. Our decisions need to be forward thinking and not backward looking.

The real issues that the nuclear sector needs to face

I am not against nuclear technology per se. I believe nuclear technology is indeed clean, safe and non-CO2 emitting, and is well suited to coastal areas in South Africa where cooling water is abundant. If nuclear power was not safe, I know the National Nuclear Regulator would shut Koeberg down forthwith.

I too dream of cheap, safe, abundant, clean and flexible nuclear power, where the cost to the economy of nuclear energy is so low that it does not even need to be metered. This was the dream at the dawn of the nuclear age, and indeed it is still just a dream.

But if the nuclear industry wants to be taken seriously, it needs to turn its mind to the real “elephants in the room”, and face them openly and honestly, instead of simply trying to distract attention away from them, or act like an ostrich with its head in the sand, pretending the elephants out there simply do not exist.

Civil society, its NGOs, judges of high courts, the media and citizens of South Africa are not stupid. They can distinguish rational argument from propaganda, and can recognise correct and due process following the constitution and the law, as well as a lack of due process, maladministration, malfeasance and corruption.

In my view, the biggest nuclear elephant in the room is not the technology but the business case, including:

  • The uncertainty of grid electricity demand in the years ahead.
  • The large, complex, concentrated, mega-projects associated with nuclear power.
  • The high financial and operational risks of nuclear power.
  • The inflexibility of a nuclear construction programme.
  • The long construction times, with high cost and time overruns.
  • The very high upfront capital cost before the first kWh is produced (i.e. high overnight cost plus high interest during construction).
  • The financing and funding difficulties – both public and private sector funding.
  • The operational inflexibility of nuclear reactors, and the need to run nuclear reactors continuously at full load to achieve financial viability and to recover the high capex and finance costs.
  • The long technology commitment required for nuclear power in an uncertain world with disruptive technologies emerging (wind, solar PV, energy storage, electric vehicles, distributed generation, smart grid).
  • The need to procure a nuclear fleet, with a 100-year long commitment to a particular technology, vendor country, vendor and design, in order to get the price anywhere near sensible, and to achieve reasonable localisation.
  • The vulnerability resulting from placing the country’s energy future in the hands of a foreign country/technology partner for a long time.
  • The political interference and corruption prevalent with nuclear procurement, due to geo-political and national security considerations, with associated secrecy and lack of transparency.

The above contrasts sharply with the needs of South Africa and its economy in an uncertain world, namely:

  • The need for short construction times to provide construction flexibility and quick wins to meet uncertain demand.
  • The need for multiple smaller, simpler projects, with multiple technologies and a variety of suppliers to mitigate risk.
  • The need for cost and construction time certainty, without cost and time overruns.
  • The need for private sector funding and financing to relieve the fiscus of this burden.
  • The need for flexible generation capacity (such as gas-to-power and energy storage) to meet demand peaks and to compliment and provide back-up to low-cost variable generation (wind, solar PV).
  • The need to be able to access both public and private sector funding.
  • The need for low carbon emission generation technologies that enable South Africa to meet its carbon emission reduction commitments.
  • The need for clean, low water use generation technologies that avoid ground, water and air pollution, and that meet South Africa’s environmental compliance regulations.
  • The need for high job creation. 

Lessons the nuclear sector should have learned

I hope that the nuclear sector in South Africa will have learned from bitter experience that it needs to choose its bed-fellows and fellow-travelers a lot more carefully.

Having standard bearers such Zuma, Brown, Mahlobo, Ngubane, Molefe, Singh and Koko has severely damaged the credibility and reputation of the nuclear sector in South Africa, and has created the perception (if not the reality) that the nuclear sector is deeply embroiled in the sorry saga of state capture, the Guptas, Shiva Uranium and more.

Because of the nature of nuclear technology, its geo-political and national security implications, the nuclear sector, like the arms industry, is indeed prone to large mega-projects being negotiated behind closed doors, out of the public eye, making it particularly vulnerable to political manipulation and corruption.

The nuclear power sector in South Africa, and its foreign principals, need to take transparency, due process and participatory democracy seriously. This country, with its constitution, democratic institutions and processes under the rule of law is not Russia, China or the Middle East. Since 1994, South Africans have had a taste of participatory democracy, and they like it.

The nuclear power sector needs to take the concerns of South African civil society and NGOs more seriously, and should try to actually listen to what they are saying.

On a shoestring budget, with minimalist resources, a couple of underfunded NGOs have given the combined might of government, the DoE, Eskom and the nuclear industry in South Africa a bloody nose, and stopped the nuclear procurement process in its tracks. And the unprepared and complacent nuclear sector did not even see it coming.

The nuclear sector and the National Nuclear Regulator (NNR) should surely know that with nuclear power there is only one way to do things, namely the right way, with no shortcuts – no flouting parliamentary and public participatory processes, no embarking on a nuclear procurement without an up-to-date IRP in place, no asking for exemptions to bypass certain requirements of the Public Finance Management Act (PFMA), etc.

The need for a transition away from the overdependence of coal in the electricity mix

Most of Eskom’s coal-fired power stations are not environmentally compliant with South Africa’s environmental legislation and regulations, and only operate through temporary postponements by the Department of Environmental Affairs in applying the country’s environmental regulations to Eskom. In addition, at least six Eskom coal-fired power stations are past or close to their end-of-life.

Eskom says it would require some R400-billion to extend the life of its old coal-fired power stations and to ensure its coal fleet is environmentally compliant in meeting South Africa’s air pollution regulations. Eskom has made it quite clear that it simply cannot afford this cost.

In addition, South Africa cannot meet its international carbon emission reduction commitments if Eskom does not significantly move to decommission its old, end-of-life coal power plants, and shift its energy mix away from coal. Government has to decide if takes its international climate change and carbon emission reduction commitments seriously.

Eskom’s old coal-fired power plants, and the coal mines that feed them, are dirty, thirsty, inefficient, unhealthy, non-compliant killers that cause some 2500 premature deaths per annum.

The power utility makes a big thing in its annual financial reports of about ten deaths per year at Eskom, but is silent about the pollution, acid mine drainage, health impacts and premature deaths resulting from coal mining operations that feed its coal-fired power plants, as well as the burning of coal by Eskom at its power plants.

If it were non-compliant nuclear power causing 2500 premature deaths a year, there would be a local and international outcry, and the NNR would shut down the affected reactors immediately.

In short, the status quo at Eskom is financially and environmentally unsustainable. In order to clean up its act, and meet the country’s environmental regulations and international carbon emission reduction commitments, there needs to be a phased, just transition away from the old non-compliant coal-fired power plants, to clean technologies, with no new coal power added to the mix going forward.

The right energy mix

The big question of course is: What is the optimal electricity energy mix for South Africa, in terms of the new-build requirement to meet the uncertain demand for grid electricity in the years to 2050?

The reality however is that in this uncertain world we do not really have a clue about the future demand for grid electricity in South Africa, and our planning needs to take this uncertainty into account.

But there are indeed some things that we do know about South Africa’s current energy mix, namely:

  • There is too much inflexible base-load power in the mix at present.
  • There is far too much (about 85%) coal-fired power in the mix at present.
  • The renewable energy (wind and solar) capacity in the mix is very low at present, and the grid can accommodate much higher levels of renewable energy penetration.
  • There is not enough flexible generation capacity in the mix, with no gas-to-power to speak of at present.
  • The diesel driven open-cycle gas turbines in the mix at present need to be converted to gas fuel.

In this environment, a big question is whether NEW nuclear is really appropriate for the energy mix of South Africa going forward.

The new Integrated Resource Plan for electricity

The optimal electricity mix for South Africa in the years ahead will be determined by the long-awaited new Integrated Resource Plan for electricity.

An Integrated Resource Plan for Electricity is a rational, mechanistic, techno-economic planning process that determines the optimal mix of generation technologies and capacities, at least cost to the economy, to meet the projected demand for electricity in the years ahead, while also meeting government policy and socio-economic requirements and constraints.

Such constraints may include: meeting carbon emission reduction commitments; the minimisation of water usage; the maximisation of job creation, etc.

In an uncertain world where electricity demand cannot be accurately predicted in the years ahead, and where disruptive new technologies are emerging, the IRP is also about enabling flexible planning decisions of least regret.

In my view, the new IRP is likely to mirror the work done by Eskom, CSIR, ERC, NPC and other studies, but with some policy adjustment by government.

The above work has shown that there is no longer any conflict between the requirement for least cost on the one hand, and meeting carbon emission reduction commitments, maximising job creation and minimising water usage, on the other.

As such, I would expect that the new generation technologies and capacities proposed in the IRP for the years ahead to 2050 will be dominated by a blend of distributed wind, solar PV and flexible gas-to-power capacity, with little or no new nuclear power.

We now await the new IRP, which according to the Department of Energy is currently being reworked, and is expected to be approved by the Cabinet in mid-August 2018 after further public consultation.

Send your comments to energize@ee.co.za