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Fin24.com | MATSHELA KOKO: SA must still have capacity to pay 'school fees' for renewables

Fin24.com | MATSHELA KOKO: SA must still have capacity to pay 'school fees' for renewables
Fin24.com | MATSHELA KOKO: SA must still have capacity to pay 'school fees' for renewables

The draft Integrated Resource Plan recently released was hailed by many pundits as a win for President Cyril Ramophosa.

This is because the energy policy was one of the main political battlegrounds in the build-up to the 2017 Elective Conference of the African National Congress (ANC).

The refusal by Eskom to sign the Renewable Energy Independent Power Producers (REIPP) Agreement to protect its liquidity position, and the chronic delays in updating the IRP, were seen by many as an attempt by former President Jacob Zuma’s administration to force nuclear into the energy mix for the benefit of the Russians.

The draft IRP is therefore regarded as a win for President Cyril Ramophosa because it excludes nuclear technology in the energy mix in favour of renewable energy technologies, at least up until 2030.

This outcome is apparently based on "science and international best practice, rather than the rent-seeking that drove the energy policy" under the Zuma administration.

A closer look at the policy-adjusted draft IRP points to politics having played a bigger role in the compilation of this draft plan than "science and international best practice". One thousand megawatts from two independent coal power producers were forced into the policy-adjusted plan. These two projects do not appear in the least-cost plan. The least-cost scenario only contains photovoltaic, wind and gas to power projects.

Policy certainty at all costs?

This forced inclusion in the adjusted plan has nothing to do with "science and international best practice". It is an attempt to appease the independent power producers, apparently to provide policy certainty in the energy space at all costs.

Government made another interesting political decision: that generating capacity that is already committed, including the 27 projects that were signed on April 4, 2018, will go ahead as planned, and will provide more than enough capacity to cover the projected demand to approximately 2025.

To make this political decision work – and to create the space for the 27 renewable energy projects that were signed in April – 12 000 megawatts of Eskom coal plants must be decommissioned, because, as it is explained, these plants were designed and built for 50-year life, which falls within the 2050 study period of the IRP update.

Age is just a number

The science of decommissioning power plants at 50 years is fuzzy. Power plants are designed for at least 2 000 cold start-ups, and their economic life can easily exceed 50 years. When the economic life of a power plant exceeds 25 years, the critical components are assessed for the remaining lifespan.

If the results are acceptable within the maintenance code of practice, the economic life is extended for a period of at least 10 years, subject to a prescribed maintenance regime. In principle, the plant can operate indefinitely, if the plant is operated within its operating and technical specifications.

Based on the above, the Eskom board changed the economic life for Eskom plants from 25 years to 35 years in the year 2000. The board deemed it prudent to again change the economic life for Eskom plants from 35 years to 50 years in 2007. In 2015, the board moved to extend the economic life of some of the plants from 50 years to 60 years, and moved away from an age-based decommissioning strategy to a fleet renewal strategy based on economic viability.

It is technically incorrect for government and the current board of Eskom to suggest that Eskom plants "were designed and built for 50-year life" and must therefore be decommissioned to make way for the 27 renewable energy projects that were signed on April 4, 2018.  

·         READ: Matshela Koko: Radebe's path will undermine Eskom, lead to job losses

It is critical to accept that the least-cost plan only contains photovoltaic, wind and gas to power projects, and that we are now in the policy adjustment phase. The policy adjustment phase must not be frustrated by the interests of independent power producers.

In 2010, policy adjustment was used to develop the current renewable energy programme. At that stage, the renewable energy technologies were far less affordable than coal and nuclear. Eskom's Deon Joubert, in a 2017 opinion piece, indicated that the cumulative "school fees" required to make renewable technologies competitive would approach R100bn in 2021. This cost is passed through to the consumer.

We must implement policy adjustments to the least-cost plan to develop flexible baseload technologies and battery storage capability that will partner the renewable projects and be ready to pay these "school fees" if needs be.

Through this IRP, South Africa must set a target to operate a 100MW to 210MW high-temperature gas-cooled reactor and 16 Gigawatt-hours of storage capacity by 2030. These technologies will then set the country up for a just and equitable energy transition.

It is encouraging that the pace and scale of new capacity needed up to 2030 will be curtailed compared to that in the IRP 2010–2030. This means bid window 5, which was designed to procure 1 800 megawatts of renewable energy from independent power producers, will be deferred, more manageably, in line with the 2025 timeline.

* Matshela Koko is former Acting Eskom Group Chief Executive. Views expressed are his own.  

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