INTEGRATED RESOURCE PLAN 2018

The Integrated Resource Plan (IRP) is the long-term plan about the energy mix and associated electricity generation capacity required to meet demand. The IRP entails predicting how much power South Africa will need and how this should be produced. It assesses power generation technologies – coal, nuclear, gas, hydro, wind, biogas and solar power. It applies scenario modelling with input parameters sourced from Eskom System Operator and other areas such as economic indicators and policy considerations and sets out a base plan from the least-cost power generation options. This plan is produced by the Department of Energy, in consultation Eskom, industry players and research houses.

The IRP 2018 is South Africa’s energy blueprint for the next 20 years. As citizens who have foot the bill for corruption through astronomical electricity prices it is important for you to have your say on which energy supply SA should invest in. OUTA believes that SA should move away from coal towards renewable energy. However, this move should be done cautiously without compromising electricity supply.

Read our submission to the Portfolio Committee on Energy and the Department of Energy here: https://www.outa.co.za/wp-content/uploads/2018/10/OUTA-Submission-to-Parliament-IRP-Public-Hearintgs-19-Oct-2018-Final.pdf

BACKGROUND

What is the IRP?

The Integrated Resource Plan (IRP) is the long-term plan about the energy mix and associated electricity generation capacity required to meet demand. The IRP entails predicting how much power South Africa will need and how this should be produced. It assesses power generation technologies – coal, nuclear, gas, hydro, wind, biogas and solar power. It applies scenario modelling with input parameters sourced from Eskom System Operator and other areas such as economic indicators and policy considerations and sets out a base plan from the least-cost power generation options. This plan is produced by the Department of Energy, in consultation Eskom, industry players and research houses.

Where are the IRP documents?

IRP 2018 is on the Department of Energy website at www.energy.gov.za

The additional documents are here.

IRP 2016 and related documents, including costing documents, are here.

What is the IEP?

The Integrated Energy Plan (IEP) guides the overall energy planning legal framework. It deals with the broader energy value chain from planning to forecasting demand and supply side factors for all different sectors, such as electricity, petrol, diesel, jet fuel, paraffin and gas. It clarifies the role of energy in the broader economy, implying that one can view it as the energy sector roadmap. The IRP is thus a sub-plan of the IEP. Ideally, the IEP should be developed and used to set the scene for the development of an IRP, however, it is still in the pipeline. This is also issued by the Department of Energy.

Where are the IRP documents?

IRP 2018 is on the Department of Energy website at www.energy.gov.za

The additional documents are here.

IRP 2016 and related documents, including costing documents, are here.

What is the IEP?

The Integrated Energy Plan (IEP) guides the overall energy planning legal framework. It deals with the broader energy value chain from planning to forecasting demand and supply side factors for all different sectors, such as electricity, petrol, diesel, jet fuel, paraffin and gas. It clarifies the role of energy in the broader economy, implying that one can view it as the energy sector roadmap. The IRP is thus a sub-plan of the IEP. Ideally, the IEP should be developed and used to set the scene for the development of an IRP, however, it is still in the pipeline. This is also issued by the Department of Energy.

WHY SHOULD YOU CARE ABOUT THE IRP?

It should help predict how much electricity will cost when new power stations are added to the grid.

If this plan is successful, your home and South Africa’s economy will have reliable electricity supply up to 2030. Given South Africa’s obligation to meet international climate change commitments (as a signatory to the Paris Agreement), the IRP will have a direct impact on how our future electricity is produced and from what sources – this will ultimately have a negative effect on jobs at coal mines and coal-fired stations. However, the potential job losses would be mitigated by new jobs from renewable energy plants.

The IRP timeline

• March 2011 – IRP 2010-30 became policy. IRP 2018 will be the new plan replacing this outdated plan.

• 2013 – First draft of an updated IRP was issued but nothing further happened.

• October 2016 – Draft IRP 2016 released for public comment.

• March 2017 – Comments on Draft IRP 2016 closed. This document was never finalised.

• 27 August 2018 – Draft IRP 2018 (the update of the Draft IRP 2016) released for public comment.

• 26 October 2018 – Deadline for public comment on Draft IRP 2018.

HOW SHOULD CITIZENS GO ABOUT ENGAGING ON THE FUTURE OF ENERGY IN SA?

Minister of Energy Jeff Radebe released the Draft IRP 2018 on 27 August 2018 for public comment. There is 60 days for comment (until 26 October). OUTA is compiling an extensive document to submit to the Department of Energy and would like to invite citizens and industry players to add their comments and views. The final submission will be shared with all OUTA supporters.

INTEGRATED RESOURCE PLAN 2018

The Integrated Resource Plan (IRP) is the long-term plan about the energy mix and associated electricity generation capacity required to meet demand. The IRP entails predicting how much power South Africa will need and how this should be produced. It assesses power generation technologies – coal, nuclear, gas, hydro, wind, biogas and solar power. It applies scenario modelling with input parameters sourced from Eskom System Operator and other areas such as economic indicators and policy considerations and sets out a base plan from the least-cost power generation options. This plan is produced by the Department of Energy, in consultation Eskom, industry players and research houses.

The IRP 2018 is South Africa’s energy blueprint for the next 20 years. As citizens who have foot the bill for corruption through astronomical electricity prices it is important for you to have your say on which energy supply SA should invest in. OUTA believes that SA should move away from coal towards renewable energy. However, this move should be done cautiously without compromising electricity supply.

Read our submission to the Portfolio Committee on Energy and the Department of Energy here: https://www.outa.co.za/wp-content/uploads/2018/10/OUTA-Submission-to-Parliament-IRP-Public-Hearintgs-19-Oct-2018-Final.pdf

BACKGROUND

What is the IRP?

The Integrated Resource Plan (IRP) is the long-term plan about the energy mix and associated electricity generation capacity required to meet demand. The IRP entails predicting how much power South Africa will need and how this should be produced. It assesses power generation technologies – coal, nuclear, gas, hydro, wind, biogas and solar power. It applies scenario modelling with input parameters sourced from Eskom System Operator and other areas such as economic indicators and policy considerations and sets out a base plan from the least-cost power generation options. This plan is produced by the Department of Energy, in consultation Eskom, industry players and research houses.

Where are the IRP documents?

IRP 2018 is on the Department of Energy website at www.energy.gov.za

The additional documents are here.

IRP 2016 and related documents, including costing documents, are here.

What is the IEP?

The Integrated Energy Plan (IEP) guides the overall energy planning legal framework. It deals with the broader energy value chain from planning to forecasting demand and supply side factors for all different sectors, such as electricity, petrol, diesel, jet fuel, paraffin and gas. It clarifies the role of energy in the broader economy, implying that one can view it as the energy sector roadmap. The IRP is thus a sub-plan of the IEP. Ideally, the IEP should be developed and used to set the scene for the development of an IRP, however, it is still in the pipeline. This is also issued by the Department of Energy.

WHY SHOULD YOU CARE ABOUT THE IRP?

It should help predict how much electricity will cost when new power stations are added to the grid.

If this plan is successful, your home and South Africa’s economy will have reliable electricity supply up to 2030. Given South Africa’s obligation to meet international climate change commitments (as a signatory to the Paris Agreement), the IRP will have a direct impact on how our future electricity is produced and from what sources – this will ultimately have a negative effect on jobs at coal mines and coal-fired stations. However, the potential job losses would be mitigated by new jobs from renewable energy plants.

The IRP timeline

March 2011 – IRP 2010-30 became policy. IRP 2018 will be the new plan replacing this outdated plan.

2013 – First draft of an updated IRP was issued but nothing further happened.

October 2016 – Draft IRP 2016 released for public comment.

March 2017 – Comments on Draft IRP 2016 closed. This document was never finalised.

27 August 2018 – Draft IRP 2018 (the update of the Draft IRP 2016) released for public comment.

26 October 2018 – Deadline for public comment on Draft IRP 2018.

HOW SHOULD CITIZENS GO ABOUT ENGAGING ON THE FUTURE OF ENERGY IN SA?

Minister of Energy Jeff Radebe released the Draft IRP 2018 on 27 August 2018 for public comment. There is 60 days for comment (until 26 October). OUTA is compiling an extensive document to submit to the Department of Energy and would like to invite citizens and industry players to add their comments and views. The final submission will be shared with all OUTA supporters.

What’s in IRP 2018?

South Africa currently has about 52 000MW of generation capacity, about 92% owned by Eskom. The plan focuses on the next 12 years, estimating that about 75 000MW will be needed by 2030.

The scenarios:

Four main scenarios are modelled, with combinations of three base scenarios of low, median (middle) or high electricity demand, as outlined below:

• IRP 1: Assumes median growth in electricity demand, plus no limit on building renewable energy generation. This is the least-cost option to 2030 and is punted as the strongest option.

• IRP 2: A base scenario, assuming high growth in electricity demand (average annual growth of 3.18% in GDP and 2.0% in electricity demand).

• IRP 3: A base scenario, assuming median growth (4.26% GDP and 1.8% electricity demand).

• IRP 4: A base scenario, assuming low growth (1.33% GDP with 1.21% electricity demand).

• IRP 5: Assumes a market-linked gas price (potentially higher than all other options which assume gas prices are inflation-based increases); assumes median growth.

• IRP 6: The carbon-budget option, to reduce greenhouse gases; with median demand growth.

• IRP 7: Assumes both carbon-budget and market-linked gas price; with median demand growth.

What will happen to the price of electricity?

The favoured option (IRP1) will take the cost of producing electricity to about R1.15/kWh by 2030. Eskom’s average cost of producing electricity in 2017/18 was about 64c/kWh; at the time, it sold electricity at an average price of about 89c/kWh. That’s an 81% increase in the cost of production by 2030. Assuming a similar increase in the price, that could mean an average price of about R1.61/kWh in 2030.

What will happen to Eskom?

It’s not clear what Eskom will build or whether it will become primarily a purchaser of electricity from IPPs and only the grid operator. Government will have to clarify the position as part of the electricity supply industry reform agenda.

Eskom currently supply about 92% of the power generated; the rest comes from IPPs. The plan envisages that by 2030, Eskom will have decommissioned 12 600MW of coal generation (about 30% of its current coal generation capacity).

There’s no indication in the plan that Eskom will take on any new plant construction after completing finishing Kusile and Medupi stations. Eskom’s future is further affected by the chaotic management of recent years and the difficulty of cleaning out the embedded corruption.

YES or NO: Should Eskom plan to build more coal plants?

YES or NO: Should Eskom build renewables?

YES or NO: Should Eskom remain the main supplier of electricity?

YES or NO: Should IPPs be allowed to sell power directly to customers?

Will this IRP also be abandoned?

The IRP is supposed to be a living document, updated every few years. The last plan was issued in March 2011 and never updated, so key assumptions became irrelevant as renewable technology advanced and electricity sales predictions failed. IRP 2018 was delayed for years with no clear explanation.

YES or NO: Should the responsibility for the development and review of the IRP remain with the Department of Energy? If not, where should it go?

Should SA plan to buy DRC power?

The plan envisages accessing 2 500MW of hydro generation power from the Inga 3 scheme on the Congo River in the DRC by 2030. This hasn’t been built yet as the project effectively collapsed after the World Bank pulled out two years ago, citing an unacceptably increased risk of state capture in the project. Former President Jacob Zuma signed the treaty with the DRC on this in October 2013.

The Inga costs are included in the plan but there is no mention of a costing study or how this was calculated.

YES or NO: Should this project be removed from the IRP?

Where will the gas come from?

IRP1 envisages about 10 940MW or 16% of generating power by 2030 will be gas-driven turbines.

“The risk associated with increasing gas volumes to support renewable energy is real unless gas becomes available locally. Exposure to currency fluctuations and the impact of that on electricity prices must be assessed and understood prior to any commitment. The importation of gas and the impact of that on the balance of payments must also be assessed.”

The plan expects most of the gas will be imported, noting the risks of price increases and the need to find local sources of gas. The plan doesn’t specify sources, but Minister of Energy Jeff Radebe referred to imports from Mozambique and offshore, and fracking the Karoo as possibilities.

YES or NO: Should shale gas from the Karoo be included in the energy mix?

YES or NO: Does the plan place too much reliance on gas?

What about nuclear power?

This plan does not envisage any new nuclear build until after 2030.

Koeberg is due for decommissioning from about 2045.

The plan says it “acknowledges the role of nuclear in the energy mix and calls for a thorough investigation of the implications of nuclear energy, including its costs; financing options; institutional arrangements; safety; environmental costs and benefits; localisation and employment opportunities; and uranium-enrichment and fuel-fabrication possibilities”.

YES or NO: Should nuclear be part of the mix after 2030?

What does it cost to build a power station?

The costs are based on the overnight capital cost (assumes instant construction and excludes interest costs) in rand per MW of generation capacity.

The exchange rate used is US$1 to R13.57, the average rate for January 2017.

Nuclear: about R70 million per MW (about R336bn for a 4 800MW power station).

Coal: R40m to R48m/MW (about R192bn to R230bn for 4 800MW).

Inga hydro: R42m/MW (about R105bn for the planned 2 500MW).

Wind: R18m/MW.

Solar photovoltaic: R15m to R18m/MW.

Gas turbines: R10m/MW.

In May 2018, Eskom told NERSA that Medupi and Kusile (the coal power stations still underway, about 4 800MW each) were within international standard costs, with Medupi up to US$2900/kW and Kusile up to $2974/kW. At January 2017 exchange rates, that’s about R189bn for Medupi and R194bn for Kusile.

What’s the effect on job creation?

There’s nothing about the effect of building any of these generation methods on job creation.

YES or NO: Should the IRP include job creation calculations?