Ciaran Ryan, Moneyweb
5 minute read
11 Oct 2019
12:34 pm

Eskom treads carefully with renewables

Ciaran Ryan, Moneyweb

Acting CEO Jabu Mabuza has outlined a turnaround plan to stabilise Eskom that requires a 'just transition' towards a cleaner energy mix.

Koeberg nuclear plant. Picture: Gallo Images

Coal will remain an integral part of SA’s energy mix for the next few decades, Eskom acting CEO Jabu Mabuza told the Joburg Mining Indaba last week.

The transition from conventional to renewable energy must be navigated with caution to avoid “dire consequences” for the power system.

The utility spent R26.7 billion on renewable energy over the last financial year, paying an average 235 cents per kilowatt hour (kWh), almost triple the average Eskom tariff of just under 90c.

That means the electricity consumer is subsidising renewable energy to the tune of 145 cents per kWh.

Mabuza outlined a turnaround plan to stabilise Eskom that requires a “just transition” towards a cleaner energy mix.

He was applauded by the miners in attendance when he raised the issue of the high cost of renewables. There has been angry debate between the greens and coal miners about the best way forward for SA and Eskom.

“Given the socio-economic challenges facing the country, we support an energy mix based on providing reliable energy to the consumer at a reasonable price,” he said. “We believe that this should be a practical energy mix, able to meet the energy demands of the country while balancing the grid.”

Mabuza proposes an industry-wide collaboration to resolve the country’s future energy needs.

“The various energy sources should not be viewed as competition, but as complementary,” he said.

“There is an unfortunate tendency to compare the cost of renewable technology with the cost of conventional technology on a simplistic basis of units of energy generated.”

Comparing the prices of different energy sources ignores other services provided by Eskom, often resulting in the conclusion that renewable energy is significantly cheaper than other technology, such as coal-fired generation. This is fundamentally flawed, said Mabuza.

Total mix for accurate picture

A comparison should instead be made on a total mix of services that are required for constant, reliable electricity supply to consumers that is sufficient to meet their peak demand. Inappropriate comparisons will lead to incorrect conclusions being drawn and the benefits of other services provided may be gradually neglected, resulting in an inherently unreliable and unstable power system.

Energy expert Des Muller says it is clear that some realism has entered SA’s future energy debate.

“What is now being factored into the debate about renewables is the high cost of managing its intermittency and grid connections, which is either passed through to the consumer or absorbed by Eskom.

“Eskom has to fire up extremely expensive diesel turbine generators and shut down and restart coal power plants to stabilise the country’s baseline power needs. Countries that have switched aggressively over to renewables, such as South Australia and Denmark, have not had a good experience with grid stability, compounded by high energy costs.”

‘Conspicuous silence’ from coal sector

Mosa Mabuza, CEO of the Council for Geoscience, said there was a conspicuous silence from the coal sector when it came to securing their own businesses.

“Maybe we should ask coal producers to stop production for three days,” he said. “Then people would understand what impact it would have on the economy.”

He added: “Either we have a serious conversation about this or just stop talking. This transition [to renewables] should not be away from coal, but should include coal.”

Subsidy recipients

Mxolisi Mgojo, CEO of Exxaro Resources and president of Minerals Council SA, argued that renewable energy suppliers are the recipients of subsidies. “There is a view that coal burning is always dirty. We need to transition [away from coal] over time, and we need to do it responsibly.”

Government should get out of the business of producing electricity altogether and let the private sector run Eskom’s power plants, said Claude Baissac, CEO of consulting firm Eunomix. “If Eskom is too big to fail, the government is saying that SA is not too big to fail. Eskom is a national emergency. Maybe it’s time to let it go.”

Long-term contracts

Eskom plans to revert to long-term coal contracts with a preference for coal delivered by conveyor belt, due to the lower associated transport costs. This was the successful formula adopted two decades ago when Eskom produced some of the cheapest electricity in the world. The reversion to long-term contracts will enable Eskom to achieve optimal coal costs while ensuring security of coal supply, said Mabuza.

The utility also plans to source 1.3 billion tons of uncontracted coal to cover the life of all coal-fired power stations.

“My special appeal to our partners in the coal mining sector is that the higher cost of coal should not be among Eskom’s challenges,” said Mabuza.

“It is important that we put the interests of South Africa first.”

Eskom has signed contracts with 93 independent power producers (IPPs), which this year accounted for an installed capacity of 4 900 megawatts (MW). Of this, 1 980 MW was wind, 1 474 MW solar panels, 1 005 MW gas turbines and 500 MW concentrate solar power. These IPPs produced 11 344 gigawatt hours (GWh) of energy during the past financial year.

Eskom operates 30 power stations comprising coal, nuclear, pumped storage, hydro, wind, and diesel power generation with a total nominal capacity of 47 474 MW, producing 220 000 GWh, which includes units at Medupi and Kusile that are not yet fully operational.

Mabuza says the utility is committed to 78% generation availability over the next five years, allowing for the shutdown of 5 500 MW for planned maintenance during the summer months and 8 500 MW for unplanned maintenance.

SA’s cheapest source of power still comes from the Koeberg nuclear plant at about 30c per kWh. Nuclear advocates point to the compelling business case for making greater use of nuclear in the energy mix to stabilise power supply and meet the country’s sustainability objectives in the coming decades.

Brought to you by Moneyweb

For more news your way, download The Citizen’s app for iOS and Android.