SIGNIFICANCE OF THE SOLAR ROADMAP FOR POLICY AND DECISION-MAKING

18 June 2012

Slide 1

PRESENTATION OUTLINE

• Introduction• Energy Policy & Legislative Framework• The Integrated Resource Plan 2010-2030• RE IPP Procurement Process• Solar Technology Resource and Options

– PV – CSP

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– Solar Water Heating• Solar Energy Technology Roadmap• Conclusion

UNDERLYING POLICY AND LEGISLATIVE FRAMEWORK

• White Paper on Energy Policy of the Republic of Sou th Africa December 1998 – “EWP” o Ensuring the implementation of economic feasible technologies and

applications.o Ensuring that an equitable level of national resources is invested in

renewable technologies, given their potential and compared to investments in other energy supply options.

o Addressing constraints on the development of the renewable industry.

• White Paper on Renewable Energy Policy of the Repub lic of

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• White Paper on Renewable Energy Policy of the Repub lic of South Africa of November 2003 – “REWP” o Provides for a target of 10 000 GWh of renewable energy to contribute

to final energy consumption by 2013; to be produced mainly from biomass, wind, solar and small-scale hydro energy systems.

UNDERLYING POLICY AND LEGISLATIVE FRAMEWORK

Energy Act, Act No. 34 of 2008• This Act seeks to ensure that diverse energy resources are available,

in sustainable quantities and at affordable prices, to the South African economy in support of economic growth and poverty alleviation, taking into account environmental management requirements and interactions amongst economic sectors, in order to provide for energy planning, increased generation and consumption of renewable energ ies

• A Bill to establish an Independent System Market Operator is under consideration at Cabinet level

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INTEGRATED RESOURCE PLAN 2010-2030(IRP)

Focus on Electricity

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INTEGRATED RESOURCE PLAN 2010-2030

Integrated Resource Plan (IRP) 2010-2030• This is a “living” plan , which will be updated on an ongoing basis to reflect the

changing needs of South Africa and to learn from the inevitable changes in our economical, social and technological environment.

• Its primary objective is to determine long-term electricity demand and detail how this should be met in terms of the types of sources for generation, timing and cost.

• Government directed that the IRP must seek to find a balance between these key objectives:

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key objectives:

� Affordability

� Reducing carbon emissions ( Towards a Green Economy )

� Water conservation

� Localisation

� Regional development

� The IRP must balance economic, social and environmental objectives.

� It should provide affordable energy:

� while ensuring security of supply;

� While providing opportunities for

IRP 2010-2030: BALANCING THE TENSIONS BETWEEN OBJECTIVES

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� While providing opportunities for the creation of local industry clusters;

� and helping to achieve the emission targets committed to in Copenhagen.

WISE COMPROMISES REQUIRED

IRP MUST CONSIDER REGIONAL DEVELOPMENT POTENTIAL ENERGY FUTURE – 2030

GABON

KENYA

TANZANIA

ANGOLA

DR CONGO

GEO-THERMAL

ZAMBIA

BOTSWANA

NAMIBIA

SWAZILANDSWAZILANDSWAZILANDSWAZILAND

CSPPV

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DECREASING COSTS OF RENEWABLES ALLOW FOR A HIGHER RENEWABLES SHARE AT THE SAME TOTAL SYSTEM COSTRevised Balanced Scenario and Policy-Adjusted IRP in comparison

Total additional new capacity (not committed) until 2030 in GW

20

15

10

Solar PV8,4

9,6

17,8

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Total additional new capacity (not committed) until 2030 in GW

9,6

20

15

10

11,4

25

Before consultation process:Revised Balanced Scenario (RBS)

After consultation process:Policy-Adjusted IRP

Subject to later revision

16% 25% 9% 5% 15% 30% 15% 23% 6% 6% 9% 42%Share of total new GW

5

10

0

Wind

CSP1,0

Peak -OCGT

Coal

3,9

9,6

6,3

3,0

8,4

Renew-ables

Nuclear Gas -CCGT

2,42,6

6,6

Hydro

1,93,35

Nuclear

9,6

Coal

6,3

Gas -CCGT

Hydro

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0Renew-ables

Peak -OCGT

5,8

5,0

1,3Own build Binding

10,1 0,0 0,05 0,0 1,0 1,0 10,1 0,0 0,05 0,0 1,0 1,0Committednew builds

35,5 1,8 2,1 0,0 2,4 0,0Existing fleet (2010)

35,5 1,8 2,1 0,0 2,4 0,0

Import

Import

65% 20% 5% 1% < 0,1% 9%65,5% 20% 6% 0,8% 0,2% 7,5%

90% 5% 5% 0% < 0,1% 0% 90% 5% 5% 0% < 0,1% 0%Energy share

in 2010

in 2030

ΣΣΣΣ = 260TWh

ΣΣΣΣ = 454TWh

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CARBON INTENSITY REDUCED BY ~34% WHILE COAL AND NUCLEAR ARE STILL THE BACKBONE OF ENERGY SUPPLY How the Policy-adjusted IRP would affect the mix of power generation by 2030

100

Hydro

Wind

CSP

PV

Capacity installed EoY in GW1

80

Sources of energy supply Energy mix

400

500Electric energy supplied in TWh p.a.

Nuclear

Hydro

Wind

CSP

PVCarbon free TWh'sin 2030(34%)

RE TWh's in 2030(14%)

40

20

0

Coal

CCGT

OCGT

Nuclear

Hydro60

20302025202020152010

0

100

200

300

Coal

CCGT/OCGT

Nuclear

20302025202020152010

912 g/kWh 600 g/kWh

-34%

CO2intensity

(34%)

1. Pumped storage capacity of 1,4 GW in 2010 and 2,7 GW in 2030 is not included since it is a net energy user

AFFORDABILITY & COMPETITIVENESS MUST NOT BE COMPROMISED

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70

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90

95

100

105

110

115

120

c/k

Wh

(2

00

9 R

ea

l)

Eskom ave prices (2009 REAL)

Area of Prices for

Energy Intensive Industries in

China and India

Area of Prices for

IP 2010

11

15

20

25

30

35

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20

30

c/k

Wh

(2

00

9 R

ea

l)

- China & India Prices by Frost & Sullivan

- RSA Historice Price Path - Eskom

- IRP Prices by DoE IRP TTT

CO2 emissions

280

300

320

340

360

380

400

CO

2 E

mis

sio

ns

(Mt/

an

nu

m)

CO

2 em

issi

ons

in M

t p.a

.BOTH RBS AND POLICY-ADJUSTED IRP REACH EMISSION TARGET

3

12

200

220

240

260

20

10

20

11

20

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20

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15

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Copenhagen -Low Copenhagen - Range Base Case Revised Balanced Policy-adjusted IRP

CO

2 em

issi

ons

in M

t p.a

.

TOTAL WATER USAGE IS DECREASING UNTIL 2030, AND WATER-USAGE INTENSITY IS REDUCED BY ~60%Development of water usage and water-usage intensity

300

350

400

Water consumption in billion litres p.a.

4

13

200

250

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Base Case

Revised Balanced Scenario

Policy-Adjusted IRP

1,3 l/kWh 0,52 l/kWh0,94 l/kWh

-60%

Water-usage intensity of Policy-Adjusted IRP

LONG LEAD TIMES FOR POWER GENERATORS & RELATED INFRASTRUCTURE REQUIRE TIMELY FIRM COMMITMENTS

New build optionsCoal

(PF, FBC, imports, own

build)

Nuclear Import hydro Gas – CCGT Peak – OCGT Wind CSP Solar PV

MW MW MW MW MW MW MW MW2010 0 0 0 0 0 0 0 02011 0 0 0 0 0 0 0 02012 0 0 0 0 0 0 0 3002013 0 0 0 0 0 0 0 3002014 5001 0 0 0 0 400 0 3002015 5001 0 0 0 0 400 0 3002016 0 0 0 0 0 400 100 3002017 0 0 0 0 0 400 100 3002018 0 0 0 0 0 4004 1004 30042018 0 0 0 0 0 4004 1004 3004

2019 250 0 0 2373 0 4004 1004 3004

2020 250 0 0 2373 0 400 100 3002021 250 0 0 2373 0 400 100 3002022 250 0 1 1432 0 805 400 100 3002023 250 1 600 1 1832 0 805 400 100 3002024 250 1 600 2832 0 0 800 100 3002025 250 1 600 0 0 805 1 600 100 1 0002026 1 000 1 600 0 0 0 400 0 5002027 250 0 0 0 0 1 600 0 5002028 1 000 1 600 0 474 690 0 0 5002029 250 1 600 0 237 805 0 0 1 0002030 1 000 0 0 948 0 0 0 1 000Total 6 250 9 600 2 609 2 370 3 910 8 400 1 000 8 400

Firm commitment necessary now

Final commitment in IRP 2012

1. Built, owned & operated by IPPs 2. Commitment necessary due to required high-voltage infrastructure, which has long lead time 3. Commitment necessary due to required gas infrastructure, which has long lead time 4. Possibly required grid upgradehas long lead time and thus makes commitment to power capacity necessary

FROM IRP TO IMPLEMENTATION: SOUTH AFRICA INTRODUCES A RENEWABLE ENERGY INDEPENDENT

POWER PRODUCER (IPP) BIDDING PROCESS IN AUGUST 2011

TARGET: 3 725 MW BY 2016

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Procurement documents

• Part A: General Requirements and Rules• Part B: Qualification Criteria• Part C: Economic Development

Request for Proposals

• Wind PPA• Solar PPAPower Purchase

PROCUREMENT PROCESS

• Solar PPA• Small hydro• CSP PPA

Power Purchase Agreement

• Contract between the IPP and the Department• Obligation for IPP to deliver on economic development• In buyer default – Department to pay the IPP

Implementation Agreement

RFP KEY EVALUATION CRITERIA

Economic Development Elements Weighting

Job Creation 25%

Local Content 25%

Ownership 15%

Management Control 5%

•The request for proposals (RFP) provides for a 70/30 split on price and economic development as per the exemption from the Preferential Procurement Policy Frameworks Act (PPFA).•Breakdown of the 30% weighting on economic development is as indicated below

Management Control 5%

Preferential Procurement 10%

Development 5%

Socio-Economic Development 15%

Total 100%

Total points 30 points

CONTRACTUAL ARRANGEMENT

IPP

GovernmentEskom

Government Framework Support Agreement

PREFERRED BIDDERS SALIENT TERMSSOLAR PHOTOVOLTAIC

Bid Window 2 Bid Window 1Price: Fully Indexed (Average Rand per MWh)

R 1 645 R 2 758

MW allocation 417 MW 632 MW

Total Project Cost (R’million) R12 048 R21 937

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Local Content Value (R’million) R5 727 R6 261

Local Content % 47.5% 28.5%

Job Creation : Construction (People) 4 557 10 386

Job Creation : Operations (People) 194 221

PREFERRED BIDDER SALIENT TERMSCONCENTRATED SOLAR POWER

Bid Window 2 Bid Window 1Price: Fully Indexed (Average Rand per MWh)

R 2 512 R 2 686

MW allocation 50 MW 150 MW

Total Project Cost (R’million) R 4 483 R 11 365

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Local Content Value (R’million) R 1 638 R 2 391

Local Content % 36.5% 21.0%

Job Creation : Construction (People) 662 1 165

Job Creation : Operations (People) 50 70

PREFERRED BIDDERS GEOGRAPHIC DISTRIBUTION

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SOLAR RESOURCE POTENTIAL AND DEPLOYMENT

SOUTH AFRICA RATES AMONG THE BEST IN THE WORLD

2323

OPTIONS FOR SOUTH AFRICA (1)

• IRP 2010-2030 allows for more than 50% of the current

renewable energy (RE) allocation for electricity generation to

solar technology (PV + CSP = 9 400MW).

• Parallel to the above, the Department is investigating the

feasibility of establishing a 5 GW solar corridor from the

Northern Cape.

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Northern Cape.

• Due to the magnitude of the project, it was decided that the

project wouldbe rolled out in different phases andit will be

technology neutral.

ENERGY OPTIONS FOR SOUTH AFRICA (2)

• The Eskom site for a 100 MW concentrated solar power(CSP) demonstration plant is situated alongside the sitewhere the first phase of the 1 000 MW plant will beestablished.

• This demonstration plant will be based on Central Receivertechnology with molten salt storage, and will be suitable forbase load application.

• Eskom’s expansion requires large-scale diversification intolower carbon technologies and this diversification will bebased on the lessons learned from this demonstration project.

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SOLAR ENERGY OPTIONS FOR SOUTH AFRICA (3)

• Installation of solar water heating (SWH) systems with a targetof 1 million by 2014 is underway. Government has allocatedR4,7 billion from the 2012/13 -2014/15 financial years towardsthe realisation of this target.

• The national SWH programme has both electricity demandside management andsocio-economic objectives as it seeksto –• reduce energy consumption by installing quality solar water

heating systems in residential, commercial and industrial

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heating systems in residential, commercial and industrialareas;

• defer building of further power stations (other than theplanned ones);

• contribute towards SA’s RE 2013 target;• contribute towards government’s socio-economic imperatives

(e.g. job creation, improved livelihoods, service delivery, etc.)• provide easy access to hot water services to marginalised

communities.

SOLAR TECHNOLOGY ROADMAP TO ALIGN WITH EXISTING POLICIES AND PLANS

• Various key stakeholders within and outside government have been advocating for very concrete, time-bound implementation plans for the IRP on renewables, which have been partially addressed by the current IRP procurement process.

• Furthermore, the New Growth Path targets 300 000 additional direct jobs by 2020 from Green Industries; of these, 80 000 are to be direct jobs by 2020 from Green Industries; of these, 80 000 are to be in manufacturing and the rest in construction, operations andmaintenance.

• Job creation is expected to rise to well over 400 000 by 2030.

• The IDC has set aside R22,4 billion for investment in green projects over the coming five years.

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SOLAR TECHNOLOGY ROADMAP TO ALIGN WITH EXISTING POLICIES AND PLANS

• The IRP 2010-2030 has set the Research Agenda for the 2012 review to be led by DST as follows:

• An Outlook up to 2050 – implications of further greenhouse-gas reduction in Distributed Generation (DG) and off-grid generation (island grids).

• primary energy mix for all sectors on the power sector.• Grid integration of RE including smart grids and storage.• Technology roadmaps identify a growth path for each

technology, identify milestones for technology development, financing, policy and public engagement that need to be achieved to realise the technology’s full potential - IEA.

• Roadmap therefore complements the IRP within the period 2010-2030 without dwelling too much on specifics of each technology save for accommodating learning rates.

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CONCLUSION

Given the above context, we believe that the solar technology roadmap can support policy goals and existing plans by –

o identifying and addressing technology-specific barriers;

o highlighting policies and incentives that would be necessary to

accelerate deployment;

o paving the way for localisation efforts so as to enable government to

achieve the New Growth Path aspirations;

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achieve the New Growth Path aspirations;

o directing increased Research, Development and Demonstration funding for new technologies;

o highlighting key challenges, recommending appropriate actions, setting priorities and proposing optimum levels of intervention.

THANK YOU FOR YOUR ATTENTION

http://www.energy.gov.zahttp://www.ipp-renewables.co.za