SOUTH AFRICAS ENERGY TRANSITION: A STORY UNFOLDING Faaiqa Hartley - PowerPoint PPT Presentation

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

EXPECTATIONS FOR ENERGY TO REMAIN FOSSIL FUEL INTENSIVE Integrated Resource Plan, 2010 (GW) Integrated Resource Plan, 2016 (GW) 100 100 9% 80 80 9% 10% 13% 60 60 13% 40 40 71% 68% 46% 20 20 45% 200 0 0 0 2016 2020 2030 2020 2040 2050 2030 2020 2030 Coal Nuclear Peaking Gas Hydro+pump Wind Solar PV Other RE Other 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

LIMITED INCLUSION OF VRE, PRICE DECLINES HAVE BEEN LARGE • 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 3.7 Wind Lifetime cost (R/kWh) Solar PV Average tariff (R/kWh) 1.5 0.6 Solar Wind Coal Coal Nuclear Gas Coal PV IPP Eskom (CCGT) 0.6 Variable Baseload Mid-merit 1 (Nov. 2011) 2 (Mar. 2012) 3 (Aug. 2013) 4 & additional 4e (Nov. Actual new-build Estimated new build cost (Aug. 2014) 2015) tariffs Bid Window Source: Arndt et al. 2018

AND WILL CONTINUE TO FALL Price declines to 2050 Conservative Optimistic Solar PV 35% 58% 0.7 Wind 18% 37% Levelised Cost of Energy - LCOE: (2016 R/kWh) 0.6 0.5 0.4 0.3 0.2 SOLAR PV WIND 0.1 0.0 2015 2020 2025 2030 2035 2040 2045 2050 Source: Ireland and Burton, 2018

LARGE, COMPLEMENTARY, RESOURCES WIND SOLAR Source: Solar GIS, 2017; CSIR & Fraunhofer , 2016

LARGE, COMPLEMENTARY, RESOURCES Source: IEA, 2016

LEAST COST PLANNING - LARGER ROLE FOR VRE Recent least cost studies • Wright et al. (2017) Installed Capacity Comparisons with Other Studies • Merven et al. (2018) 200 • Reber et al. (2018) 180 Wright/Reber: extensive adequacy 160 testing at very high temporal 140 resolution, only electricity; Merven: full energy system 120 GW 100 No new capacity needed over medium term 80 60 Capacity thereafter → 4GW wind; 3GW solar pa to 2040 40 20 Solar PV and wind capacity 0 reaches 20% and 16% of total SATIM-LC-2030 CSIR-LC-2030 NREL-2030 SATIM-LC-2050 CSIR-LC-2050 NREL-2050 capacity in 2030 Other Coal Gas/Oil Nuclear PumpStorage CSP Battery PV Wind (IRP 2016: 9%;13%) Source: Merven et al., 2018

VRE = 68% OF GENERATION BY 2050 Production Mix Projected Annual Percentage Shares of Electricity Provided by VRE (%) 500 450 80% 400 70% Variable Renewable Energy Percentage 350 68% 68% 60% 61% 300 Share of Electricity (%) 50% TWh 250 40% 200 38% 150 30% 30% 100 20% 50 10% 0 9% 8% 2015 2020 2025 2030 2035 2040 2045 2050 0% 5% 2015 2020 2025 2030 2035 2040 2045 2050 Biomass Coal Gas Hydro Imports Nuclear Oil PumpStorage CSP Battery_Cent SATIM-LC CSIR-LC NREL Battery_Dist PV_Cent PV_Dist Wind Source: Merven et al., 2018 BUT COULD BE AS HIGH AS 80% (lower costs, endogenous plant retirement)

LOWER LONG-TERM ELECTRICITY PRICES 1.4 1.2 Electricity Price Components (R/kWh) 1 Fuel:Gas/Oil 0.8 Fuel:Coal O&M Capital.Repayments 0.6 SATIM-LC Constr.RE 0.4 0.2 0 2016 2018 2020 2022 2024 2026 2028 2030 2031 2033 2035 2037 2039 2041 2043 2045 2047 2049 2050 Source: Merven et al., 2018

LINKED ENERGY-ECONOMIC MODEL GDP Household income Energy/climate • Developed by ERC, UNU-WIDER policy and RSA National Treasury • Combines ERC’s bottom -up SATIM model (full energy model) with SATIM eSAGE RSA National Treasury’s eSAGE model (dynamic CGE) GDP • Combined model addresses the Welfare Employment limitations of each model in Technology Mix Electricity price energy analysis while maintaining Electricity production function its strengths Expenditure on expansion plan Production function of all activities (energy) Consumption function of households (energy) • 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 6.0 2500 GDP (conservative) Positive impacts extend across economy GDP (optimistic) difference in employment ('000s) 5.0 2000 • electricity and services experience the Employment (conservative) % difference in real GDP largest gains Employment (optimistic) 4.0 1500 Coal mining declines • Losses likely regardless due to changes in 3.0 1000 global demand, prices and domestic 2.0 500 capacity constraints Higher overall welfare 1.0 0 • Similar gains experienced in poor and non-poor households 0.0 -500 2020 2025 2030 2035 2040 2045 2050 Impacts are however dependent on the availability of labour resources, primarily grade 12 and above Source: Hartley et al., 2018

POWER SECTOR EMISSIONS DECLINE 500 70% Power Sector Share of Energy CO2eq 450 60% CO2eq Emissions (Gton) 400 50% 350 300 40% 250 30% 200 150 20% 100 10% 50 0 0% 2015 2020 2025 2030 2035 2040 2045 2050 CO2_Energy (SATIM) CO2_Power (SATIM) CO2_Power (CSIR-LC) Power Sector Share (SATIM) Source: Merven et al., 2018

ASSIST IN MEETING GLOBAL COMMITMENTS 700000 600000 500000 400000 300000 200000 100000 0 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 Installed Capacity 200 180 160 140 120 GW 100 80 60 40 20 0 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