Eskom and Climate Change

Transcription

1 Eskom and Climate Change including Independent Power Producers and Renewables Link to Industrial Policy Action Plan aspirations Climate policy going forward 11 August 2010

2 CONTENTS OF THIS PRESENTATION Drivers, Leadership and Mandates National Policy development and the LTMS Eskom s Climate Change Commitment Independent Power Producers (IPPs) and ReFit Industrial Policy Action Plan (IPAP) aspirations in comparison to Eskom s plans Way Forward 2

3 Drivers, Leadership and Mandates

4 What are our drivers? What do we need to balance? Global increase in demand for energy International Climate Policy process and the DEA s Long Term Mitigation Scenario Process (LTMS) Future policy and penalties Funders requirements Eskom has made climate change a key priority Long term nature of the electricity business combined with our sustainability aspirations Diversification strategy - competitiveness of South Africa, Energy security Necessity for research and development into new technologies local conditions Carbon financing provides opportunities Adaptation is a necessity CHINA ASIA 14% 10% OECD LATIN AMERICA 51% 4% MIDDLE EAST 4% AFRICA 3% FORMER USSR 11% NON-OECD EUROPE 3% Stability of supply Low Cost Security of Supply Efficiency Robustness Low Prices Environment Climate Change Pollution Conservation 4

5 Mandate and Leadership Mandate Climate Change is a strategic priority for Eskom Acknowledgement that we need to operate and build in a carbon constrained environment. Not an environmental issue but an issue relevant to the sustainability of our business and the SA economy Leadership in troubled times Advocacy and communication with government, NGOs and business The support we require and how far we are prepared to go pegs in the ground Planning in the midst of uncertainty being confident about the probabilities around our uncertainties 5

6 Performance Year * CO 2 emissions (Mt) *2005 represents the 15 month time period when Eskom changed its calendar year period 6

7 ESKOM S CLIMATE CHANGE STRATEGY

8 Eskom s 6 point plan on climate change Diversification of the generation mix to lower carbon emitting technologies Energy efficiency measures to reduce demand and greenhouse gas and other emissions Innovation through research, demonstration and development Reactor Recuperator Compressor Turbine Gearbox Generator Intercooler Investment through carbon market mechanisms CCS CBCS Adaptation to the negative impacts of climate change Progress through advocacy, partnerships and collaboration 8

9 POINT 1 - DIVERSIFICATION Planning In 2009 Eskom made significant strides in ensuring that the planning process takes into account a low carbon future and prioritising energy efficiency within and outside of Eskom. This included modelling a cap on emissions based on the LTMS. Determining planning for meeting the Copenhagen announcement by SA Assessing the impact of a carbon tax on electricity pricing Existing energy mix Clean coal technologies Development of a clean coal technology roadmap and involvement in the SA process. Significant strides in terms of clean coal technologies supercritical technology for Medupi and Kusile, Underground coal gasification pilot Development of a Carbon capture and storage strategy and involvement in developing an atlas for SA Coal OCGT Nuclear Renewable Energy Imports Pumped Storage Renewables Policy interventions with DoE and NERSA Successfully obtained funding to build 100 MW wind and CSP via World Bank process Investigation into co-firing with biomass SWH programme established through DSM doubling of subsidy Nuclear Funding requirements and policy interventions 2025 energy mix Other Gas and Hydro imports: On going assessment of potential 9

10 Some longer term thinking 700 Mt CO2 per annum Energy Efficiency Thermal Efficiency Renewables Imports Nuclear CCS Remaining emissions CURRENT EMISSIONS LEVELS Years Our intent is to reduce our relative CO2 footprint until 2025 and thereafter 10 continually reduce absolute emissions in support of national and global targets.

11 POINT 2 - ENERGY EFFICIENCY Internal Energy Efficiency Saving a billion kwh within Eskom. (Imagine boiling 500 million typical kettles for one hour). Contributing to the National Energy Efficiency Strategy (NEES) target for the power generation sector (15% reduction in parasitic electrical usage by 2015) Eskom's energy efficiency and demand management programme The plan is TO SAVE 5500 MW in 10 years (13.4 TWhrs) 11

12 POINT 3 - ADAPTATION Increasing the robustness of infrastructure designs and long-term investments Less water dry cooling policy Temperature changes and extreme weather events, siting of power stations Eskom Adaptation Strategy Risk: looking into Insurance & Reinsurance Reversing trends that increase vulnerability Relooking siting of generation plant (not all in one area, smaller capacities, more dispersion (e.g UCG) Develop load centres closer to primary energy resources Improving employee / societal awareness and preparedness for future climate change Increasing employee awareness about climate change realities and myths 12

13 POINT 4 - INNOVATION Development of technology roadmaps coal, nuclear, renewables. Underground coal gasification pilot which can improve efficiency, reduce environmental impacts and possible provide a mechanism for the sequestration of CO2, 100 MW Solar Thermal plant which may overcome the barrier of intermittency and generate a local industry Research into Smart Grid applications Research into innovative technologies for load management such as the utility load manager 13

14 POINT 5 - INVESTMENT CDM (Clean Development Mechanism) Projects continually assessed for CDM potential through the investment process and through workshops with Project Managers. Carbon Price A shadow price for carbon has been determined for the evaluation of investments based on a future value for carbon. Green financing lower cost green money International funds are being explored to look for grant money Partners are being identified to share risk and in some cases take equity investments. 14

15 POINT 6 - PROGRESS THROUGH COMMUNICATION, ADVOCACY Continued internal and external communication Participation on government delegation to the climate change negotiations, national government and business initiatives DEA DPE DoE DST NBI Various international business and government initiatives WBCSD World Economic Forum UN Secretary General s advisory committee International Chamber of Commerce 15

16 Introduction of Independent Power Producers (IPPs) with specific reference to the Renewable Energy Feed-in Tariff (REFIT) programme

17 Introduction and background Introduction of private sector generation has multiple benefits: Diversification of supply and nature of energy production Introduction of new skills and capital Reduction of funding burden on Government Benchmarking of performance and pricing Reduction of borrowing requirement of Eskom Eskom is committed to facilitate the entry of independent power producers and will collaborate with Government, NERSA and developers of projects to ensure this happens. Government is working on the enabling environment for IPPs using the Inter-ministerial Committee on Energy process. Eskom has already signed agreements with some IPPs in the last 6 months and will continue to do so within the framework of the Integrated Resources Plan (IRP) and the tariff determination for MYPD2 (multi-year pricing determination). 17

18 Current IPP programme status There are the following options available to South Africa in the next 5 years in terms of Independent Power Producer options: Medium Term Power Purchase programme (MTPPP) and further cogeneration opportunities. Renewable Energy Feed-in Tariff programme. Department of Energy Open Cycle Gas Turbine programme. Regional import options. Municipal generation. Multi-site base load IPP programme. The Integrated Resource Plan (IRP1) makes provision for about 400MW from the MTPP programme, about 1025 MW from the REFIT programme and just over 1000 MW from the DoE OCGT (open cycle Gas Turbine) programme by The MYPD2 determination provides Eskom with revenue to recover costs from PPAs (Power Purchase Agreements) associated with the MTPP programme and the REFIT programme. 2010/08/12 18

19 MTPPP and Co-generation programmes Medium term power purchase programme (MTPPP): 6 projects with 5 IPPs. This amounts to approximately 400MW. 4 contracts are finalised. All 4 PPAs have been approved by NERSA. 2 contracts has been sent to the IPPs for their final approval after negotiations have been completed and we are awaiting responses. At least 215 MW has been commissioned by July 2010 and we are hoping that up to 400MW will be operational by March This is dependant on the necessary approvals from the IPPs. Future co-generation opportunities: Business and Eskom s assessment is that the potential for more co-generation projects is there. Possibly 1000 to 3000MW based on various studies. Some of this appears to be self-generation options rather than co-generation. The current price trajectory and possible energy conservation measures already provide an incentive for businesses to consider this. NERT (National Electricity Response Team) working groups have also suggest a cogeneration feed-in tariff mechanism. 2010/08/12 19

20 Renewable Energy Feed-In Tariff Programme National Energy Regulator of South Africa (NERSA) has approved tariffs for various technologies for phase 1 and phase 2 of the programme. NERSA has issued draft power purchase agreements for comment and proposed selection criteria for phase 1 of the programme. NERSA has held public hearings on the PPAs and selection criteria. The System Operations & Planning Division s Single Buyer office has established a project team to execute the programme and is finalising the appointment of advisors for the process. What is still required: NERSA to finalise the PPAs to be used. NERSA to issue the final selection criteria to be used by the Single Buyer office. NERSA has indicated that this could happen by the middle to end of August 2010 Eskom will commence the procurement process once the PPA and selection criteria is issued. 2010/08/12 20

21 Other IPP opportunities DoE OCGT IPP programme The Department of Energy is engaged in a process to achieve financial closure with the preferred bidder. Regional imports There are options that could be commissioned in the next 5 years. They could act as a back up to the current build programme or play a role as the next base load capacity option in Integrated Resource Plan (IRP) 2010 Revision 2. Municipal generation The current Integrated Resource Plan (IRP) assumes a certain level of municipal generation. The availability of these generators in the next 3 years is important for security of supply. Eskom is engaging with the certain municipalities to understand the current constraints and to determine if there are innovative ways to ensure that their generators can operate in the next 3 years. Multi-site base load IPP programme Currently on hold pending the finalisation of the Integrated Resource Plan (IRP 2010) Revision 2 process. Continuation of the programme depends on capacity requirements and policy choices on technology and who should build. 2010/08/12 21

22 REFIT IRP2010 Rev. 1 programme size As per the Integrated Resource Plan (IRP2010 Revision 1), the associated costs of the REFIT programme is summarised below Capital cost: Technology Overnight costs Installed capacity Total capital cost R/kW MW R million Wind 14, ,667 Solar (CSP trough + 6 hrs storage) 33, ,654 Biomass (forest residue) 43, ,339 Small hydro 22, ,117 Landfill gas 19, ,460 22,237 Power purchase cost: Technology Assumed load factor Installed capacity REFIT rate Energy per annum REFIT cost per annum % MW R/kWh GWh R million Wind ,419 1,774 Solar (CSP trough + 6 hrs storage) ,472 Biomass (forest residue) Small hydro Landfill gas ,751 Notes: 1. Indicative installed capacities for 1,025 MW as per IRP1 2. Capital costs as per IRP2010 parameters 3. Investment cost as per NERSA 4. Assumes all plants operational by Real 2010 ZAR 22

23 Industrial Policy Action Plan (IPAP) Aspirations and Action Plans in comparison to Eskom s plans

24 (From IPAP 2 presentation to the media) Appendix A: Green Industries and energy efficiency IPAP: Environmental and climate change concerns have become a commercial reality Eskom has factored these concerns into its planning processes planning for a low carbon future but also highlighting the need for integrated policies at a national level, including infrastructure development, natural resource availability and funding. IPAP: Increasing energy costs will be a major threat to manufacturing The trade-offs between cheap energy now and increasing penalties on fossil fuels in the near future requires national debate and resolution. We need to tap into funding available for lower carbon emitting technologies in order to protect the future of the economy. Energy efficiency presents significant opportunities IPAP: Increasing eco-protectionism in advanced economies We are currently embarking on work to look at the impact of carbon taxes and border taxes and the macroeconomic impacts. This threat remains a reality which is why Eskom is planning for a low carbon future. Green industrialisation also presents new market opportunities for South Africa IPAP: Opportunities to develop new industries and substantially increase energy efficiencies Energy efficiency is being driven internally and with our customers. Eskom can act as a key enabler for the development of renewable industries in support of their generation as well as IPPs eg Solar Park Concept 24

25 (From IPAP 2 presentation to the media) Appendix A: Green Industries and energy efficiency IPAP: Key opportunities The ReFit programme will create significant investment opportunities in the renewables market Solar Water Heating Eskom has doubled the subsidy and is working with large customers to assess the feasibility of employee programmes. Concentrated Solar Power Wind Eskom has obtained funding through the World Bank to build a CSP pilot. A technology feasibility study is currently being carried out. From an Eskom point of view we have included CSP as an option in the IRP and see it as an anchor plant for a major solar programme. Eskom has also obtained funding through the World Bank to build a 100 MW wind facility in the Western Cape. The commercial process is currently underway. Biomass We have begun a process to determine the feasibility of co-firing with biomass at existing coal plants. Automotives Substantial improvements in industrial energy efficiency This is being driven with our key industrial customers Potential to create thousands of direct jobs but requires more scoping 25

26 Way forward Continue engagement with government: Development of national climate policy Introduction of taxes Integration of policies arising from DoE, DWEA, DTi, etc with a link to climate change, trade, energy and industrial development Engagement in the international climate process Successfully hosting the climate negotiations next year Immediate commencement of the REFIT procurement programme for 1025 MW. Continued refinement of Eskom s Climate Change Strategy and the communication thereof. 26

27 Thank you

28 BACK-UP SLIDES CLEAN COAL PROGRAMME RENEWABLES PROGRAMME

29 Eskom s Clean Coal Programme Improved efficiencies on existing Sub Critical Pulverised Coal - future Supercritical Pulverised Coal Medupi & Kusile - current Ultra-Supercritical Pulverised Coal - scanning Fluidised Bed Combustion - pilot Conventional and advanced emissions control - Current Carbon Capture and Storage collaborative research Underground coal gasification IGCC - current IGCC = Integrated Gasification Combined Cycle 29

30 UCG-IGCC Basic Principles Surface Plant (incl. IGCC) commercially proven with other gases Gas out UCG is a process where air is injected into the cavity, water enters from surrounding strata, and partial combustion and gasification takes place at the coal face after ignition. The resulting high-pressure syngas stream is returned to the surface, where the gas is cleaned and then combusted in a highefficiency gas & steam turbine combined cycle plant to generate electricity. Air in Graphic Reference : Science & Technology Review, Lawrence Livermore National Lab, USA, April 2007 UCG commercially proven in Former Soviet Union (FSU) Eskom is demonstrating in RSA 30

31 Eskom Coal Research Coal Research Coal, Ash & Slag Characterisation Operational Optimisation Fly Ash Utilisation QemScan Database Net CV, Constant P Calorimeter Fly Ash Formation Coal Quality Effect Model Mill Particulate Emissions Plant Coal Variability & Long Term Changes Combustion Optimisation On-line Coal Analysis Coal Beneficiation DTF Pf Pilot Rig Combustion Model Coal Diversification Diagnostic Tools Coarse Coal Discards RSA Inventory Non-commercial coal Fine Coal Discards PF Mass Flow Measurement On-line Abrasiveness Probe On-line Analysers RSA Inventory (done by DMR) Assessment & Recovery Coal Processing & Impact on Plant On-line Reactivity Flame Monitoring Heat Flux Condition-based Monitoring Primary Emissions Reduction Safety Low NOx Burners Sorbent Evaluation (FGD) Sorbent Evaluation (FBC) Reburn Technologies Firing (gas, coal & biomass) Spontaneous Combustion Strategic Clean Coal Technologies International Coal Benchmarking Fluidised Bed Combustion Fluidised Bed Gasification - IGCC Underground Coal Gasification Education Lab Scale Kinetics Lab Scale Sorbent Testing Test Rig Pilot Plant Combustion Theory Combustion Practical Test Rig Demonstration Plant 31

32 POTENTIAL COAL ROADMAP FOR ESKOM Sub-Critical PF Several small oxyfuel demo plants planned up to 2015 German ULTRA super critical demo >45% in 2012 SUPER critical demo in Poland in 2009 (>43%) Several international demos of IGCC complete by 2014 Super-Critical PF Ultra-super critical PF Sub-Critical FBC (for niche fuels, eg. discards) IGCC UCG co-fired into Majuba UCG-IGSC with GT Simple Cycle - Peaking UCG-IGCC with GT Combined Cycle - Baseload UCG-IGFC with H2 co-production CCS Presumes 28-year development time no longer applied 32

33 Eskom Renewable Energy Summary of Eskom s Focus All renewable energy resources will be considered- Big Four. Biomass ( MSW- Co-Firing), Solar (CSP), Wind, Ocean (Waves and Current) Eskom s programme seeks to find multi-mw options for grid supply, with an internal target. Off-grid or stand-alone renewables will not be part of Eskom s implementation, the exception is SWH in the DSM portfolio. Research into off-grid or stand alone options is acceptable in support of national objectives, though implementation will be done by other parties. 33

34 Eskom Impact Concentrating Solar Power Central Receiver Technology Application Grid connected supply. Eskom impact High Power Range Plant sizes of MW Load Factor Depends on site and storage, app 70%. Life of Plant 35 years Cost of Generation Moderate Footprint 100MW would require app 4km2 34

35 Technology Assessment - Wind Application Grid connected supply. Eskom impact Medium/High Power Range Industry standard 2-3MW / turbine. Plant sizes of MW Load Factor Depends on site. Avg 22-28%. Life of Plant 20 years Cost of Generation Moderate Footprint 100MW would require app 20km2 35

36 Eskom Impact Bioenergy Generation using wood waste or Bagasse Application Meeting internal power requirements, also grid supply. Eskom impact Small/medium Power Range Plant sizes of 5-50MW Load Factor App 75%. Life of Plant 30 years Cost of Generation Low Footprint Depends on resource and project. 36

37 Biomass Proof of Concept The initial uptake of biomass co-firing in Eskom should be based on: Minimising Risks on plant availability Ease of Implementation Minimising initial Capital Cost Utilising fuels with a large reference base and user support group Utilising fuels that meet local sustainability criteria (including social, economic and environment) The option that best fits these requirements is expected to be co-milling or separate milling and co-injection of wood chips or pellets with coal Of the biomass fuels available wood based biomass have the largest growth expectation, with the main advantages being their high availability, heat content and transportability It is the biomass of choice for most European Utilities Technical risks tend to be lower than other biomass fuel sources Up to 5-10% wood pellet biomass can be co-combusted without significant modifications to the existing plant Biomass storage, pre-processing and handling are generally the largest costs associated with conversion into co-firing in a coal plant 37

38 Biomass Resource The biomass potential for can be divided into four groups, that of wood, agricultural, municipal solid waste (MSW) and grass residues. The wood biomass includes commercial plantations, sawmills, pulp mills, harvestable woodlands, alien vegetation and deciduous tree off-cuts. The crop residues includes maize, wheat, sorghum, sunflowers and sugarcane. Grasses are represented by the woodland and savanna biomes of South Africa as defined by the NBI Institute. MSW is presented by the vast amounts of waste send to over 500 landfill sites. Early indicated potential over MW. Estimates indicate that there is potentially 1.26 billion GJ of energy available annually from biomass residues. Biomass energy could thus theoretically provide 50 % of the national demand. * Ref. 38 RSA Renewable Energy White Paper

39 Experience to date Solar water heating (SWH) Eskom has been active in the area of solar water heating for many years. Activities in the 90s were focussed on assessments of different systems and attempts to develop lower cost SA-based units. Subsequent work was aimed at understanding the requirements from the systems and the behavioural impact on the consumer as such several pilot installations were made. The focus changed slightly as the SWH systems were not an attractive option to the residential consumer, given the low cost of electricity. As such, the use of SWH systems from a commercial and industrial perspective was considered. Current efforts are aimed at increasing the uptake significantly. Efforts are focussed not only on significantly increase the number of systems installed, but also see the accreditation of suppliers and registration of installer significantly enhanced; a key factors in enabling higher market penetration. 39

40 Positioning Renewables in Eskom Even though the global economic situation has seen a decrease in the demand for electricity, Eskom remains committed to its expansion programme; significant investments are required resulting in capital prioritisation. As far as new generation is concerned, the main current focus is on baseload additions. As far as providing baseload options is concerned, few renewables are capable of load factors required from baseload plant CSP and the biomass-based options being the only real options to consider. However, these options have to be developed to a confidence level similar to that of other technologies to be seriously considered in decision making. Options that have relatively low capital requirements and short lead times, e.g. wind can play a role while longer term options are developed. The development of a low cost Solar Water Heating option has to be encouraged and uptake stimulated. Research has to continue to drive new options forward, especially amongst the ocean power solutions, to deliver the next options for implementation. 40

41 CLIMATE CHANGE/RENEWABLE RESEARCH Cofiring of Biomass (Wood, Grass, Crop residues) in PF Stations Municipal Solid Waste Continued support for SWH Commission 100 MW Wind and 100MW Solar Research into off-grid or stand alone options is acceptable in support of national objectives, though implementation will be done by other parties. Wind and Solar Resource Assessment will be site specific. STRATEGIC FUTURE Combine with CSP with UCG in Eskom/SASOL strategic partnership for Hybrid PS Retrofit Solar Hybrid to PF Stations Hybrid UCG Gas, CSP combined cycle powerstation UCG Co-firing UCG Solar Water Heating CSP 100 Solar PF Hybrid Biomass Cofire Wind Ocean Pumped Storage Ocean Current Municipal Solid Waste Ocean Wave 41