W Cape Energy Strategy – options for sustainability

1. W Cape Energy Strategy – options for sustainability Presentation to Western Cape Sustainable Development Conference June 2005

2. SA Energy Flows

4. Changes in global energy market • Concern re limits on fossil fuels reserves • Risks to fossil fuels market because of emissions • Increasing pressure to reduce impact on climate change • International Energy Agency estimates a 15-20% of total energy supply contribution from renewable energy by 2010, up from 10% in 1999 • Scenario analyses by Shell show renewables meeting around 40% of world energy needs by 2050

5. Changes to SA electricity market • New generation capacity will push prices towards LRMC • Supply shortages from 2007 will put upward pressure on prices • Potential SA emission reduction commitment from 2012 will penalise coal based power • Emerging market for IPPs • CDM credits and subsidies for renewables

6. Electricity sales forecast – national & foreign

7. Eskom generation capacity

8. Some problems with coal • Polluting - in 1995, stations generated 600 millions tons of carbon dioxide, 1.3 million tons of SO2 (includes other sulphur compounds) and 150 thousand tons of NOX • located at the coal fields in the northern interior of South Africa • power has to be transmitted long distances to coastal centres causing problems with the quality of electricity • conventional cooling towers use between 1.8 and 2.0 litres of water for every kilowatt-hour of electricity generated

9. New generation options • Coal-fired plant with Flue Gas Desulphurisation & Fluidised Bed Boiler Technologies • Importing Hydro electricity from SADC • Combined cycle gas turbines using natural gas • Open cycle gas turbines using diesel (peaking plant) • New nuclear technologies e.g. Pebble Bed Modular Reactor • Renewable technologies – hydro, biomass, landfill gas, wind and solar

10. SA Renewables Target • 10 000 GWh contribution to final energy consumption by 2013, to be produced mainly from biomass, wind, solar and small-scale hydro • To be utilised for power generation and non-electric technologies such as solar water heating and bio-fuels • This is approximately 4% (1667 MW) of the projected electricity demand for 2013 • Equivalent to replacing two units of Eskom's combined coal fired power stations

11. Renewables supply curve

12. SA cost data for technologies making up 10 000 GWh target CaBEERE 2004

13. Barriers to renewables • Technologies expensive • Significant initial investment needed • Relatively long periods before reaching profitability • Lack of consumer awareness re renewable energy • SA energy market based on centralised development around conventional sources • Lack of non-discriminatory open access to national electricity grid • Market power of utilities • Financial, legal, regulatory and organisational barriers

14. Creating market for renewables • Currently Eskom pays 10 – 11c/kWh for energy from IPPs onto grid • Long run marginal cost of energy from new coal fired plant is now estimated at 25c/kWh • Additional social costs from pollution and climate change mean that full economic cost is 30c/kWh • Historical investment by SA in generation capacity allows Eskom to subsidise its tariffs to consumers • New renewable generation capacity should be allowed to sell onto grid at full economic cost of new coal fired plant • Renewable energy targets should be set for REDs

15. SA Integrated Energy Plan • Energy supply will remain reliant on coal for next two decades • Diversify supply through natural gas, new and renewable energies • Continue investigations into nuclear as a future energy source • Promote energy efficiency management and technologies • Maximise load factors on generation plant to lower lifecycle costs • Lessen reliance on imported fuels by developing oil / gas deposits • Increase oil refineries capacity rather than greenfields development • Continue with synfuel plants, supplement with gas as feedstock • New electricity generation to be coal based with potential for hydro, gas and nuclear • Ensure environmental considerations in energy supply and end use • Promote universal access to clean and affordable energy • Policy and legislation for renewables and energy efficiency

16. Some issues for W Cape • Distance from main generation capacity • Risk of electricity price increases and pollution penalties • Vulnerability to climate change • Deteriorating urban air quality • Major industrial expansion in metro and Saldanha • First mover advantage with RED 1 • Considerable local renewable resources

22. RED 1 • Launch on 1st July • 600 000 customers in current metro • Need to manage risk of changes in energy market by diversifying capacity • Advantage of first mover at scale – can tap available low cost renewables • Test market by offering retail option based initially on TRECs

23. Solar water heating • Energy savings and technology tested in Kuyasa and Lwandle • Net saving on household energy bills • Technically and financially feasible to integrate into all low income housing • Significant available subsidies and carbon finance • N2 Gateway project should offer these benefits to households

24. Key interventions for W Cape • Adoption of provincial integrated energy strategy • Integrating renewable energy into first Regional Electricity Distributor • Promote energy efficiency in public buildings and through procurement • Including energy efficiency in settlement planning, and installing SWHs in new housing developments • Regulatory support for new investments in renewable energy