Future Foundations - South Africa

Our readers are au fait with many, if not all, aspects of the National Integrated Resource Planning (NIRP) documents so African Energy Journal provides not only an overview of NIRP1 and 2 but also a preview of how the NIRP 3 will address the weak points of the previous documents. The NIRP 3 is still in the planning stages and in draft form.
Hence this article examines the strategic energy plans advanced by the National Electricity Regulator of South Africa (Nersa) in the documents. Unfortunately, Eskom's equivalent, the Integrated Strategic Electricity Plan (ISEP), is not available for consideration by the public.
The planning regime
It is generally accepted that the supply of base-load energy will need to be increased substantially in order to keep pace with economic demand. Estimates vary and are heavily reliant on the sustainable long-term growth of the economy. Eskom's installed base-load capacity is approximately 40 000 MW and it is believed that this needs to double to approximately 80 000 MW by 2025.
However, as capacity requirements are demand-driven, a comprehensive planning regime is needed.
NIRP was developed to provide an independent information source to stakeholders and decision-makers to ensure security of electricity supply. NIRP 1 was published in March 2002 and NIRP 2 in April 2005. NIRP 3 is in the planning stages and is still in draft form.
The purpose of NIRP is to provide a long-term least-cost plan that meets electricity demand which is consistent with reliable electricity supply, and environmental, social and economic policies.
Insufficient diversification
The conclusions of the NIRP 2 raised important issues for example, diversification options were insufficient to address all the predicted demand for electricity in the forecast period. The plan also stressed the need to continue using coal-fired options and recognised the imperative to comply with emission standards.
The NIRP 2 considered a number of demand and supply-side sector-specific options. Demand-side options included residential, commercial, industrial and mining energy efficiency, and residential, industrial and mining load management. The demand-side options analysis assessed whether or not the different sectors used other ways of saving electricity or of sustaining themselves. In the residential sector, the NIRP 2 was confident that the options put in place were efficient to address any issues resultant in the sector. NIRP2 raised the concern that the other sectors needed an upgrade and diversification of options.
Overview of the base-load solutions
The supply-side options included in NIRP 2, which formed part of the study, are pulverised fuel coal-fired stations, new gas-fired plants, new pumped storage schemes, greenfield fluidised bed combustion, nuclear and renewable energy. An interesting point is that the plan explicitly supported the installation of coal-fired stations as the primary source of electricity generation, despite climate change concerns. The plan boldly stated this option had the most reasonable maintenance and efficiency costs. The open cycle gas turbines (OCGT) and combined cycle gas turbines (CCGT) options received secondary recommendation as viable supply-side options. NIRP 2 recommended the establishment of an advanced light-water nuclear reactor, which would consist of two 900 MW units to be built near Cape Town. Further the development of wind energy and solar-thermal power stations, and imported hydro and pebble-bed modular reactors (PBMRs), were among the proposed options for development. The return-to-service (RTS) of three mothballed coal-fired power stations Camden, Grootvlei and Komati was advanced and this is anticipated to generate an additional 3600 MW.
Justifying greenhouse gases
On the environmental front, NIRP 2 justified the increased emissions of greenhouse gases by saying that penalties levied in respect of failure to comply would be less expensive than the costs incurred to maintain renewables. The cost of coal-fired power versus other forms of power (especially renewables) is an area where we will probably see significant developments in the future. None of the indirect environmental benefits of renewables are being taken into account although this is starting to happen, particularly in developed countries. It is also interesting to note that government is considering the introduction of a carbon tax, which would play a significant role in this equation (see the review of the 2009 budget below).
Different scheme for NIRP 3
A different scheme of analysis and forecast is being adopted for NIRP 3 and aims to address some of the weaknesses of NIRP 2. The major problem with NIRP 2 was that the forecast was sector-specific commercial companies or industries and it did not assess the overall demand and supply-side options of electricity. Additionally, the NIRP 2 was published prior to the White Paper on Renewable Energy published by the Department of Minerals and Energy (DME) in 2003 so it merely recommended that government considers the potential of renewable energy.
Four-stage development process
The NIRP 3 is broad in its scope and is subdivided into different stages. Each stage of the NIRP 3 development process would be guided by Nersa. Stage 1 would involve analysis of the energy policies in place. Stage 2 would measure population growth and forecast of electricity demand for each province over a 20-year period from 2005 to 2025.
Stage 3 would assess the optimal electricity reserve margin for the country and pegs the reserve margin at 14%. The revised scope of work document sets a strategy for the Stage 4 report, which will provide a forecast on alternative demand and supply-side options. Once completed, NIRP 3 should provide a comprehensive energy plan for South Africa until 2025.
NIRP 3 stresses the need to build a 720 MW OCGT plant for commissioning and commercial service by 2009, and to ensure that the Ingula (previously Braamhoek) Pumped Storage Scheme (PSS) remains on track for commercial service in 2012.
NIRP 3 plans to examine other supply side resources, including:
pulverised fuel coal-fired power plants with emission controls, such as flue gas desulphurisation;
coal-fired plants with fluidised bed combustion;
OCGTs fired by two fuel types diesel type 2 and kerosene (at separate locations);
CCGTs operating on liquid natural gas (LNG);
PSS: Ingula, Steelpoort and new a PSS;
nuclear conventional advanced light water reactor and PBMRs;
renewable energy options: wind and solar thermal;
cogeneration plant one plant representing the collective capacity of the cogeneration options; and
forecasts for fuel prices for all existing and new supply-side resources (including, but not limited to, coal, LNG, kerosene, fuel oil, and nuclear fuel) Nersa will provide from sources of its choice.
The bigger picture
The DME has entered the fray with its Energy Security Master Plan Electricity 2007 to 2025 (DME Master Plan). The DME's remit on energy matters is wider than that of Nersa and, accordingly, the DME Master Plan deals with the wider regulatory policy framework, electricity generation, transmission and distribution. The DME Master Plan aims to set security of supply standards for generation and transmission. Interventions are proposed in order to achieve these measures in accordance with demand-growth projections. Other interventions proposed by the DME Master Plan include demand-side management (DSM), the acceleration of RTS of mothballed coal-fired power stations, transmission expansion, universal access to electricity (for households, schools and clinics), the establishment of regional electricity distributors (REDs) and independent power producers (IPPs). The DME suggests that the DME Master Plan should be reviewed at least every three years.
This review is vital as energy demand is driven by economic growth. While South Africa has experienced sustained economic growth over the past 10 years, it appears that the economy will not grow at such a rapid rate in the short to medium-term.
Something old and something new
The National Energy Act 34 of 2008 should provide a strategic long-term solution to these energy issues. The National Energy Act aims to provide resources for the broad planning of energy security and supply (including environmental, social and economic issues).
In terms of the National Energy Act, the Minister of Minerals and Energy must develop, review and publish the Integrated Energy Plan in the Government Gazette. In order to do so, the National Energy Act creates the South African National Energy Development Institute (SANEDI).
SANEDI is a mix of old and new it will subsume the old Central Energy Fund, National Energy Efficiency Agency and South African National Energy Research Institute and, in order to comply with its statutory obligations in terms of the National Energy Act regarding strategic energy planning, it will also necessarily require some new resources. The National Energy Act was assented to on 17 November 2008 but will only commence on a date still to be proclaimed by the president.
The National Energy Act seems to be a very positive step towards integrated energy planning in South Africa, and its implementation and the formation of SANEDI are eagerly awaited.
ABOUT THE AUTHOR: Adam Gunn & Lerato Matshe
Adam Gunn is a partner at Routledge Modise in association with Eversheds and heads up the firms environmental law department. He specialises in all aspects of environmental law and successfully lobbied government to amend the taxation treatment of environmental expenditure (section 48 of the Revenue Laws Amendment Act, 2007; new section 37B of the Income Tax Act, 1962). Adam is a non-executive director of Watermark Global Plc.
Lerato Matshe is a candidate attorney at Routledge Modise in association with Eversheds.