SOUTH AFRICA’S ENERGY

TRANSITION: A STORY UNFOLDING

Faaiqa Hartley

(Faaiqa.Hartley@uct.ac.za)WIDER Development

Conference

13-15 September 2018

Helsinki, Finland

ENERGY HISTORICALLY COAL BASED

Coal accounts for 73% of primary energy usage in South Africa

Coal power stations account for 74% of total electricity capacity and 82% of total generation

Smaller shares are used by industry and the liquid fuels sector

0200

2016 2020 2030 2040 2050

Coal Nuclear Peaking Gas Hydro+pump Wind Solar PV Other RE Other

EXPECTATIONS FOR ENERGY TO REMAIN FOSSIL FUEL INTENSIVEIntegrated Resource Plan, 2010 (GW) Integrated Resource Plan, 2016 (GW)

Source: Department of Energy, South Africa

South Africa has sufficient capacity to meet demand to 2025 – electricity demand

expected to increase by ~2.7% pa

71%46%

13%

10%

9%

0

20

40

60

80

100

2020 2030

68% 45%

13%

9%

0

20

40

60

80

100

2020 2030

1.5

0.6

3.7

0.6

1 (Nov. 2011) 2 (Mar. 2012) 3 (Aug. 2013) 4 & additional(Aug. 2014)

4e (Nov.2015)

Avera

ge t

ariff

(R

/kW

h)

Bid Window

Wind

Solar PV

SolarPV

Wind CoalIPP

CoalEskom

Nuclear Gas(CCGT)

Coal

Variable Baseload Mid-merit

Actual new-buildtariffs

Estimated new build cost

Lifetim

e c

ost (R

/kW

h)

• REIPPPP programme to ensure inclusion of RE → YTD 6 bid windows = 6.8GW (3.8 operational)

• solar PV: 2.3; wind: 3.3

• Inclusion of RE however capped (solar PV: 1GWpa; wind: 1.8GWpa)

• Despite limited inclusion prices have decreased >50%

• Local manufacturing industry stimulated through local requirements

Source: Arndt et al. 2018

LIMITED INCLUSION OF VRE, PRICE DECLINES HAVE BEEN LARGE

AND WILL CONTINUE TO FALL

Source: Ireland and Burton, 2018

Conservative Optimistic

Solar PV 35% 58%

Wind 18% 37%

Price declines to 2050

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2015 2020 2025 2030 2035 2040 2045 2050

Levelis

ed

Cost

of

Energ

y -

LCO

E: (2

01

6 R

/kW

h)

SOLAR PV WIND

LARGE, COMPLEMENTARY, RESOURCES

Source: Solar GIS, 2017; CSIR & Fraunhofer, 2016

SOLAR WIND

LARGE, COMPLEMENTARY, RESOURCES

Source: IEA, 2016

0

20

40

60

80

100

120

140

160

180

200

SATIM-LC-2030 CSIR-LC-2030 NREL-2030 SATIM-LC-2050 CSIR-LC-2050 NREL-2050

GW

Installed Capacity Comparisons with Other Studies

Other Coal Gas/Oil Nuclear PumpStorage CSP Battery PV Wind

LEAST COST PLANNING - LARGER ROLE FOR VRE

Recent least cost studies

• Wright et al. (2017)• Merven et al. (2018)• Reber et al. (2018)

Wright/Reber: extensive adequacy testing at very high temporal resolution, only electricity; Merven: full energy system

No new capacity needed over medium term

Capacity thereafter → 4GW wind; 3GW solar pa to 2040

Solar PV and wind capacity reaches 20% and 16% of total capacity in 2030

(IRP 2016: 9%;13%)Source: Merven et al., 2018

VRE = 68% OF GENERATION BY 2050

0

50

100

150

200

250

300

350

400

450

500

2015 2020 2025 2030 2035 2040 2045 2050

TWh

Production Mix

Biomass Coal Gas Hydro Imports

Nuclear Oil PumpStorage CSP Battery_Cent

Battery_Dist PV_Cent PV_Dist Wind

5%

9% 8%

30%

38%

61%

68% 68%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2015 2020 2025 2030 2035 2040 2045 2050V

aria

ble

Re

ne

wab

le E

ne

rgy

Pe

rce

nta

geSh

are

of

Ele

ctri

city

(%

)

Projected Annual Percentage Shares of Electricity Provided by VRE (%)

SATIM-LC CSIR-LC NREL

Source: Merven et al., 2018

BUT COULD BE AS HIGH AS 80%(lower costs, endogenous plant retirement)

LOWER LONG-TERM ELECTRICITY PRICES

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2016

2018

2020

2022

2024

2026

2028

2030

2031

2033

2035

2037

2039

2041

2043

2045

2047

2049

2050

Elec

tric

ity

Pri

ce C

om

po

nen

ts (

R/k

Wh

)

Fuel:Gas/Oil

Fuel:Coal

O&M

Capital.Repayments

SATIM-LC

Constr.RE

Source: Merven et al., 2018

LINKED ENERGY-ECONOMIC MODEL

SATIM eSAGE

Technology Mix

Electricity priceElectricity production functionExpenditure on expansion plan

Production function of all activities (energy)Consumption function of households (energy)

GDPWelfareEmployment

GDPHousehold incomeEnergy/climate

policy •Developed by ERC, UNU-WIDER

and RSA National Treasury

•Combines ERC’s bottom-up SATIM

model (full energy model) with

RSA National Treasury’s eSAGE

model (dynamic CGE)

•Combined model addresses the

limitations of each model in

energy analysis while maintaining

its strengths

•Allows for a consistent framework

for assessing the economic

implications of changes in energy

systems and energy usage in

South Africa

•Useful for emissions analysis

Source: Arndt et al., 2016

INCREASED VRE CAN LEAD TO HIGHER GROWTH AND EMPLOYMENT

Lower electricity investment and electricity

price

Positive impacts extend across economy

• electricity and services experience the

largest gains

Coal mining declines

• Losses likely regardless due to changes in

global demand, prices and domestic

capacity constraints

Higher overall welfare

• Similar gains experienced in poor and

non-poor households

Impacts are however dependent on the

availability of labour resources, primarily

grade 12 and above

Source: Hartley et al., 2018

-500

0

500

1000

1500

2000

2500

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2020 2025 2030 2035 2040 2045 2050d

iffe

ren

ce in

em

plo

ymen

t ('

00

0s)

% d

iffe

ren

ce in

rea

l GD

P

GDP (conservative)

GDP (optimistic)

Employment (conservative)

Employment (optimistic)

POWER SECTOR EMISSIONS DECLINE

0%

10%

20%

30%

40%

50%

60%

70%

0

50

100

150

200

250

300

350

400

450

500

2015 2020 2025 2030 2035 2040 2045 2050

Pow

er S

ecto

r Sh

are

of E

ner

gy C

O2e

q

CO

2eq

Em

issi

on

s (G

ton

)

CO2_Energy (SATIM) CO2_Power (SATIM)

CO2_Power (CSIR-LC) Power Sector Share (SATIM)

Source: Merven et al., 2018

ASSIST IN MEETING GLOBAL COMMITMENTS

0

100000

200000

300000

400000

500000

600000

700000

2020 2025 2030 2035 2040 2045 2050

Electricity generation Liquid fuels and hydrogen production

Energy use Agriculture Energy use Commerce

Industry Energy use and IPPU Energy use Residential

Energy use transport Other fugitive emissions

AFOLU Waste Source: ERC and EScience Associates, 2018

2018 INTEGRATED RESOURCE PLAN

0

20

40

60

80

100

120

140

160

180

200

GW

Installed Capacity

Biomass Coal Gas Hydro Imports

Nuclear Oil PumpStorage CSP Battery_Cent

Battery_Dist PV_Cent PV_Dist Wind

KEY MESSAGES

Large amounts of renewable energy can be included in the South African electricity generation mix, decreasing emissions, without negatively affecting overall economic growth and employment.

Coal mining communities however will be negatively impacted by the decline in coal demand and a transition plan is needed to mitigate the impact on these communities.

While the 2018 Integrated Resource Plan continues to constrain annual build limits in solar PV and wind to 2030 it acknowledges the importance of renewable energy in electricity mix and the potential role it could play in reducing electricity investments and prices.

Thank you

Postgraduate studies at the Energy Research Centre available in 2019• MSc (Eng) specialising in Sustainable Energy Engineering by Coursework & Dissertation

• MPhil specialising in Energy & Development Studies by Coursework & Dissertation

Visit www.erc.uct.ac.za/education