The Future of the Energy System in South Africa Presentation at a GTAC seminar at National Treasury

Transcription

1 The Future of the Energy System in South Africa Presentation at a GTAC seminar at National Treasury Dr Tobias Bischof-Niemz, Head of the CSIR Energy Centre Pretoria, 4 August 2017 Cell: TBischofNiemz@csir.co.za Dr Tobias Bischof-Niemz Chief Engineer

2 10 Context

3 World: In 2016, 124 GW of new wind and solar PV capacity installed globally Global annual new capacity in GW/yr Solar PV Wind Total South African power system (approx. 45 GW) Sources: GWEC; EPIA; BNEF; CSIR analysis This is all very new: Roughly 80% of the globally existing solar PV capacity was installed during the last five years

4 World: Significant cost reductions materialised in the last 5-8 years Global annual new capacity in GW/yr Solar PV Wind Solar PV technology cost Wind technology cost 455% % % Total South African power system (approx. 45 GW) Subsidies Cost competitive 12 Sources: IEA; GWEC; EPIA; BNEF; CSIR analysis

5 Renewables until today mainly driven by US, Europe, China and Japan Globally installed capacities for three major renewables wind, solar PV and CSP end of 2015 Operational capacities in GW end of USA Canada Americas w/o USA/Canada Europe Middle East and Africa India China Japan Australia Rest of Asia Pacific Wind Solar CSP PV Total World Sources: GWEC; EPIA; CSPToday; CSIR analysis Total RSA power system (45 GW) South Africa has 1.5/1.5/0.2 GW installed capacity of wind, solar PV and CSP end of 2016

6 REIPPPP results: new wind/solar PV 60-80% cheaper than first projects Results of Department of Energy s RE IPP Procurement Programme (REIPPPP) and Coal IPP Proc. Programme Significant reductions in actual tariffs Actual average tariffs in R/kWh (Apr-2016-R) Nov Mar % -83% Aug Aug 2014 Solar PV Wind Nov Notes: Exchange rate of 14 USD/ZAR assumed Sources: Deployment-NERSA.pdf; StatsSA on CPI; CSIR analysis

7 Actual tariffs: new wind/solar PV 40% cheaper than new coal in RSA Results of Department of Energy s RE IPP Procurement Programme (REIPPPP) and Coal IPP Proc. Programme Significant reductions in actual tariffs from the RE IPP Procurement Programme (REIPPPP) have made new solar PV & wind power 40% cheaper than new coal in South Africa today 20 Actual average tariffs in R/kWh (Apr-2016-R) Nov Mar % -83% Aug Aug 2014 Solar PV Wind Nov 2015 Actual average tariffs in R/kWh (Apr-2016-R) Notes: Exchange rate of 14 USD/ZAR assumed Sources: Deployment-NERSA.pdf; StatsSA on CPI; CSIR analysis 0.62 Solar PV IPP -40% 0.62 Wind IPP 1.03 Baseload Coal IPP

8 The CSIR conducted in-depth power-system analyses to determine the least-cost expansion path for the South African electricity system The Integrated Resource Plan (IRP) is currently being updated by the Department of Energy / Eskom Draft IRP 2016 Base Case entails a limitation: Amount of wind and solar PV capacity that the model is allowed to build per year is limited, which is neither technically nor economically justified/explained (no techno-economical reason provided) The CSIR is therefore conducting a study to determine the Least Cost electricity mix in RSA until 2050 Majority of assumptions kept exactly as per the Draft IRP 2016 Base Case First and most important deviation from IRP 2016: no new-build limits on renewables (wind/solar PV) Second (smaller) deviation: costing for solar PV and wind until 2030 aligned with latest IPP tariff results Scope of the CSIR study: purely techno-economical optimisation of the costs directly incurred in the power system Two scenarios from the Draft IRP 2016 are compared with the Least Cost case Draft IRP 2016 Base Case new coal, new nuclear Draft IRP 2016 Carbon Budget significant new nuclear Least Cost least-cost without constraints An hourly capacity expansion and dispatch model (incl. unit commitment) using PLEXOS is run for all scenarios to test for technical adequacy same software platform as by Eskom/DoE for the IRP 25 Sources: CSIR analysis

9 28 Key Input Assumptions

10 Input as per IRP 2016: Demand is forecasted to double by 2050 Forecasted demand for the South African electricity system from 2016 to 2050 Electricity Demand in TWh/yr IRP 2016 IRP 2010 Note: by 2050 the electricity demand per capita would still be less than that of Australia today Sources: DoE (IRP 2016); Eskom MTSAO ; StatsSA; World Bank; CSIR analysis

11 Input as per IRP 2016: Decommissioning schedule for existing plants Energy supplied to the South African electricity system from existing plants between 2016 and 2050 Electricity in TWh/yr Decommissioning of Eskom s coal fleet Demand Existing supply Solar PV CSP Wind Other Peaking Gas (CCGT) 82 Hydro+PS Nuclear Coal 2050 All power plants considered for existing fleet that are either: 1) Existing in ) Under construction 3) Procured (preferred bidder) 30 Sources: DoE (IRP 2016); Eskom MTSAO ; StatsSA; World Bank; CSIR analysis

12 Demand grows, existing fleet phases out gap needs to be filled Forecasted supply and demand balance for the South African electricity system from 2016 to 2050 Electricity in TWh/yr Decommissioning of Eskom s coal fleet Demand Supply gap Solar PV CSP Wind Other Peaking Gas (CCGT) Hydro+PS Nuclear Coal The IRP model fills the supply gap in the least-cost manner, subject to any constraints imposed on the model 31 Note: All power plants considered for existing fleet that are either Existing in 2016, Under construction, or Procured (preferred bidder) Sources: DoE (IRP 2016); Eskom MTSAO ; StatsSA; World Bank; CSIR analysis

13 Inputs as per IRP 2016: Key resulting LCOE from cost assumptions for new supply technologies Today s new-build lifetime cost per energy unit 1 (LCOE) in R/kWh (April-2016-Rand) 2011 As per South African IRP Fixed (Capital, O&M) Variable (Fuel) Solar PV CO 2 in kg/mwh Wind Baseload Coal (PF) Nuclear Gas (CCGT) Mid-merit Coal Gas (OCGT) Diesel (OCGT) Assumed capacity factor 2 82% 90% 50% 50% 10% 10% 33 1 Lifetime cost per energy unit is only presented for brevity. The model inherently includes the specific cost structures of each technology i.e. capex, Fixed O&M, variable O&M, fuel costs etc. 2 Changing full-load hours for new-build options drastically changes the fixed cost components per kwh (lower full-load hours higher capital costs and fixed O&M costs per kwh); Assumptions: Average efficiency for CCGT = 55%, OCGT = 35%; nuclear = 33%; IRP costs from Jan-2012 escalated to May-2016 with CPI; assumed EPC CAPEX inflated by 10% to convert EPC/LCOE into tariff; Sources: IRP 2013 Update; Doe IPP Office; StatsSA for CPI; Eskom financial reports for coal/diesel fuel cost; EE Publishers for Medupi/Kusile; Rosatom for nuclear capex; CSIR analysis

14 Wind: supply profile assumptions Normalised power output 1.0 Utilisation Annual capacity factor = 36% Hour of the year 35

15 Solar PV: supply profile assumptions Normalised power output 1.0 Utilisation Annual capacity factor = 20.4% Hour of the year 36

16 In the first half of 2017, the average annual capacity factor of the solar PV, wind and CSP fleet was 24%, 34% and 22% respectively Average Capacity Factor Capacity Operational ( ) 19% 26% 26% 26% 24% 1474 MW 1568 MW H % 32% 35% 34% 7% H % 22% 200 MW Supply Sources Solar PV Wind CSP H Notes: Capacity operational as per actual start of operation (can differ from REIPPP contracted date), CSP - only measured from date when more than two CSP plants commissioned. Wind includes Sere wind farm (100 MW). Sources: Eskom; DoE IPP Office

17 Projects that have already applied for Environmental Impact Assessments can cater for 90 / 330 GW of wind / solar PV capacity Polokwane Johannesburg All EIAs (status early 2016) Wind: 90 GW Solar PV: 330 GW Latitude Upington Bloemfontein Durban Cape Town Port Elizabeth EIA: Onshore Wind EIA: Solar PV REDZ Longitude Sources:

18 39 Results with Conservative Renewables and Battery Costs

19 Draft IRP 2016 Base Case is a mix of roughly 1/3 coal, nuclear, RE each Draft IRP 2016 Base Case Total electricity produced in TWh/yr As per Draft IRP (5%) 93 (18%) 47 (9%) 33 (6%) 148 (28%) (33%) More stringent carbon limits 40 Sources: DoE Draft IRP 2016; CSIR analysis Solar PV CSP Wind Gas (CCGT) Nuclear Peaking Hydro+PS Coal

20 Draft IRP 2016 Carbon Budget case: 40% nuclear energy share by 2050 As per Draft IRP 2016 Draft IRP 2016 Base Case Total electricity produced in TWh/yr Draft IRP 2016 Carbon Budget Total electricity produced in TWh/yr (28%) (5%) 93 (18%) 47 (9%) 33 (6%) 173 (33%) More stringent carbon limits (14%) (6%) (8%) 110 (21%) 185 (35%) 78 (15%) No RE limits, reduced wind/solar PV costing, warm water demand flexibility 41 Sources: DoE Draft IRP 2016; CSIR analysis Solar PV CSP Wind Peaking Gas (CCGT) Hydro+PS Nuclear Coal

21 Least Cost case is largely based on wind and solar PV As per Draft IRP 2016 Draft IRP 2016 Base Case Total electricity produced in TWh/yr Draft IRP 2016 Carbon Budget Total electricity produced in TWh/yr Total electricity produced in TWh/yr Least Cost (5%) 93 (18%) 47 (9%) 33 (6%) (33%) (28%) More stringent carbon limits (8%) 110 (21%) 74 (14%) 32 (6%) 185 (35%) 78 (15%) No RE limits, reduced wind/solar PV costing, warm water demand flexibility (21%) 257 (49%) 12 (2%) 55 (10%) 33 (6%) 60 (11%) 42 Sources: DoE Draft IRP 2016; CSIR analysis Solar PV CSP Wind Peaking Gas (CCGT) Hydro+PS Nuclear Coal

22 Least Cost means no new coal and no new nuclear until 2050, instead 85 GW of wind and 74 GW of solar PV plus flexible capacities As per Draft IRP 2016 Draft IRP 2016 Base Case Draft IRP 2016 Carbon Budget Least Cost Total installed net capacity in GW Total installed net capacity in GW Total installed net capacity in GW More stringent carbon limits No RE limits, reduced wind/solar PV costing, warm water demand flexibility Note: REDZ = Renewable Energy Development Zones Current REDZ cover 7% of South Africa s land mass Sources: DoE Draft IRP 2016; CSIR analysis Solar PV CSP Wind Peaking Gas (CCGT) Hydro+PS Nuclear Coal Plus 3 GW demand response from residential warm water provision

23 Conservative renewables and battery costing: Least Cost is R60-75 billion/yr cheaper than Draft IRP 2016 by 2050 As per Draft IRP IRP 2016 Base Case IRP 2016 Carbon Budget Least Cost Energy Mix in 2050 Demand: 522 TWh 5% 14% 18% 0% 0% 1% 9% 6% 28% 19% 8% 21% 0% 0% 0% 16% 6% 13% 35% 21% 49% 11% 6% 10% 1% 2% Cost in 2050 Total system cost 1 (R-billion/yr) 700 Average tariff (R/kWh) % cheaper Environment in 2050 CO 2 emissions (Mt/yr) Water usage (billion-litres/yr) Cleaner Jobs 2 in 2050 Direct & supplier ( 000) % more jobs 44 Because of lack of data, zero jobs for biomass/-gas assumed Coal Coal (new) Nuclear Nuclear (new) Hydro + PS Gas Peaking Biomass/-gas Other storage 1 Only power generation (Gx) is optimised while cost of transmission (Tx), distribution (Dx) and customer services is assumed as 0.30 R/kWh (today s average cost for these items) 2 Lower value based on McKinsey study (appendix of IEP), higher value based on CSIR assumption with more jobs in the coal industry; Sources: Eskom on Tx, Dx cost; CSIR analysis; flaticon.com Wind CSP Solar PV

24 46 Results with Realistic Renewables and Battery Costs

25 Work in progress: Update of Least Cost case with more realistic cost assumption Conservative cost assumptions for renewables and batteries were used in the initial modelling step Solar PV 20% cost reduction until 2050 Wind no further cost reduction until 2050 CSP slow cost reduction until 2030 to reach today s achieved tariffs by then Batteries no cost reduction until 2050 The result when applying these today s cost assumptions for all new technologies: No new coal No new nuclear 47 If realistic cost assumptions for new technologies are applied, new coal and new nuclear clearly do not come back into the picture, but the structure of energy supply in 2050 changes more towards solar Solar PV down to 0.20 R/kWh by 2040 (today: 0.62 R/kWh in RSA, 0.40 R/kWh in UAE & Chile) Wind down to 0.35 R/kWh by 2040 (today: 0.62 R/kWh in RSA, 0.45 R/kWh in Morocco) CSP down to 0.80 R/kWh by 2040 (today: 2.02 R/kWh in RSA, 1.20 R/kWh in UAE) Batteries down to 200 $/kwh by 2030, 150 $/kwh by 2040, 100 $/kwh by 2050 (today: $/kwh) EV uptake 1 million EVs by 2030, 3 million EVs by 2040, 5 million EVs by 2050

26 With more realistic cost assumptions for solar PV, wind, CSP and batteries, the renewables share grows to >90% by 2050 IRP 2016 Least Cost CSIR Least Cost Base Case 2017 Total electricity produced in TWh/yr Total electricity produced in TWh/yr (21%) 257 (49%) 12 (2%) 55 (10%) 33 (6%) 60 (11%) Li-Ion Batteries Pumped storage Realistic Wind, PV and CSP cost battery cost EV uptake Solar PV CSP Wind Hydro Peaking Gas Nuclear Coal (31%) 106 (20%) 207 (40%) 8 (1%) 31 (6%)

27 Installed capacity of > 90 GW solar PV, 70 GW wind & 30 GW CSP 300 IRP 2016 Least Cost Total installed capacity in GW CSIR Least Cost Base Case 2017 Total installed capacity in GW Realistic Wind, PV and CSP cost battery cost EV uptake Li-Ion Batteries Pumped storage Solar PV CSP Wind Hydro Peaking Gas Nuclear Coal

28 67 Next Steps and Summary

29 Summary: A mix of solar PV, wind and flexible power generators is least cost It is cost-optimal to aim for >70% renewable energy share by 2050 Solar PV, wind and flexible power generators (e.g. gas, CSP, hydro, biogas, demand response) are the cheapest new-build mix for the South African power system There is no technical limitation to solar PV and wind penetration over the planning horizon until 2050 Clean and least-cost is not a trade-off anymore: South Africa can de-carbonise its electricity sector at negative carbon-avoidance cost The Least Cost mix is >R70 billion per year cheaper by 2050 than the current Draft IRP 2016 Base Case Additionally, Least Cost mix reduces CO 2 emissions by 55% (-100 Mt/yr) over Draft IRP 2016 Base Case 68 Note: Wind and solar PV would have to be 50% more expensive than assumed before the IRP Base Case and the Least Cost case break even Sources: CSIR analysis

30 69 Outlook for Energy Planning beyond Electricity

31 South Africa s energy system relies on domestic coal and imported oil Simplified energy-flow diagram (Sankey diagram) for South Africa in 2014 in PJ Primary Energy Conversion End Use Oil 897 Non-energy 179 Coal Liquefaction 709 T Transport 749 Nuclear 151 Power Plants E Electricity 700 Renewables 661 H Heat Natural Gas 161 Sources: IEA; CSIR analysis Export 1 935

32 Today, very little sector coupling electricity relatively easy to decarbonise, but transport and heat sector more challenging E Electricity Primarily supplied by Coal Decarbonisation potential Very high RE potential RE fully cost competitive T Transport Oil Liquid biofuels limited potential Needs coupling to electricity H Heat Coal/biomass Electricity Biomass limited potential Needs coupling to electricity 71

33 E Workhorses of the future energy system: solar PV and wind Solar PV and wind are the cheapest bulk energy providers Their technical potential can be considered unlimited, especially in a large country like South Africa 72

34 E Additional renewable electricity sources in South Africa Biogas from Municipal solid waste Waste water Agricultural waste Animal waste Energy crops additionally: source of CO2 Other forms of biomass Hydro CSP (Concentrated Solar Power) 73 Power-to-Power storage Pumped hydro Battery storage

35 T Transport sector consists of a number of sub-sectors Ground transportation of people Ground transportation of goods Aviation Shipping 74

36 T In-principle options to decarbonise transportation Liquid biofuels Biodiesel Bioethanol Biogas E E Power-to-Gas/-Liquids H2 Methane Methanol Other liquid fuels Power-to-eMobility Electricity 75 Sources:

37 T Liquid biofuels with limited technical potential supplementary Today s annual liquid fuels consumption in South Africa: million litres of petrol million litres of diesel million litres of jet fuel 500 million litres of fuel oil ================================== 26.7 billion litres of liquid fuels per year Arable land in South Africa: km 2 Average production of biofuel per hectare: l/ha/yr All arable land in South Africa could produce 24 billion litres of liquid fuels per year Today s liquid fuel demand (without growth) could not be supplied by biofuels 76 Sources:

38 T Hydrogen or hydro-carbons can be produced from RE electricity Inputs Electrolysis Fuel Production Outputs Renewable electricity E H2 H2 H2O H2 CO2 Methane Methanol Other liquid fuels CO2 77 Sources: CSIR Energy Centre analysis

39 T Power-to-eMobility: battery driven for urban areas and highway overhead lines for long-distance transport of goods Electrification of passenger transport Around the corner (2020s will see large global uptake) Electrification of transport of goods Pilot projects 78

40 H Space heating/cooling and warm water largely electrified already in RSA, industrial process heat to be converted from coal to electricity Space heating/cooling Industrial process heat Warm water 79

41 Electricity demand is fluctuating intraday, intra-week, and seasonally Actual RSA demand for week from Aug 11 in 15-minute resolution, scale to ~ 2025 demand level GW Monday Tuesday Wednesday Thursday Friday Saturday Sunday 80 Sources: CSIR analysis Electricity Demand

42 Future energy system will be built around variability of solar PV & wind Actual scaled RSA demand & simulated 15-minute solar PV/wind power supply for week from Aug GW Sources: CSIR analysis 1 3 Monday Tuesday Wednesday Thursday Friday Saturday Sunday Excess Solar PV/Wind Residual Load (flexible power) Useful Wind Demand shaping Power-to-Power 1 Useful Solar PV Day of the week Electricity Demand X-to-Power (natural gas, biogas, hydro, CSP) Power-to-X (sector coupling into heat/transport/chemicals) 2 4

43 Nuclear can add carbon-free electricity: cost, not a technical question Actual scaled RSA demand & simulated 15-minute solar PV/wind power supply for week from Aug GW 1 Demand shaping 2 X-to-Power (natural gas, biogas, hydro, CSP) Power-to-Power 4 Power-to-X (sector coupling into heat/transport/chemicals) Monday Tuesday Wednesday Thursday Friday Saturday Sunday Excess Solar PV/Wind Nuclear Residual Load (flexible power) Useful Wind Useful Solar PV Electricity Demand Sources: CSIR analysis

44 Electric Vehicles (EVs) latest: Tesla s Model 3 Changes Everything 83 Sources:

45 Individual view: Electric Vehicles are already today cheaper than diesel/petrol cars ICE EV 84 Distance travelled Fuel cost Daily commuting 100 km/d 100 km/d Workdays per year 250 d/a 250 d/a Fuel consumption CAPEX 2,000 l/a 3,750 kwh/a 300,000 R 25,000 km/a Fuel economy 8 l/(100 km) 15 kwh/(100 km) Fuel price 13 R/l 2 R/kWh 26,000 R/a 400,000 R 25,000 km/a 7,500 R/a Instalments (10 a, 10%) 49,000 R/a 65,000 R/a Insurance, license 10,000 R/a 10,000 R/a Maintenance, service 10,000 R/a 5,000 R/a OPEX 20,000 R/a 15,000 R/a Total Cost of Ownership 95,000 R/a 3.8 R/km 87,500 R/a 3.5 R/km

46 Individual view: Even with a low utilisation of only 10,000 km/a, costs are similar ICE EV 85 Distance travelled Fuel cost Daily commuting 40 km/d 40 km/d Workdays per year 250 d/a 250 d/a Fuel consumption CAPEX 800 l/a 1,500 kwh/a 300,000 R 10,000 km/a Fuel economy 8 l/(100 km) 15 kwh/(100 km) Fuel price 13 R/l 2 R/kWh 10,400 R/a 400,000 R 10,000 km/a 3,000 R/a Instalments (10 a, 10%) 49,000 R/a 65,000 R/a Insurance, license 10,000 R/a 10,000 R/a Maintenance, service 5,000 R/a 2,000 R/a OPEX 15,000 R/a 12,000 R/a Total Cost of Ownership 74,400 R/a 7.4 R/km 80,000 R/a 8.0 R/km

47 National Treasury view: 1 million EVs in South Africa would avoid $1 bn annual fuel payments ICE EV Existing coal Fuel consumption 2,000 l/vehicle/a 3,750 kwh/vehicle/a Cash outflow per fuel unit 50 $ct/l 0 $ct/kwh Cash outflow for fuel 1,000 $/vehicle/a 0 $/vehicle/a New wind/pv Solar PV capacity required Cost of imported material (inverter and PV panels) Wind capacity required Cost of imported material (wind turbine) 2 kw/vehicle ~ 50 $ct/w 1 kw/vehicle ~ 1,000 $/kw Cash outflow for fuel 1,000 $/vehicle/a 1,000 $/vehicle once off 86 Number of vehicles 1 million 1 million Total cash outflow for fuel 1 billion $/a 0 or 1 billion $ once off

48 Power system view: 1 million EVs in South Africa would increase electricity demand by 1.7% ICE EV Solar PV capacity required 2 kw/vehicle Wind capacity required 1 kw/vehicle Number of vehicles 1 million New installed capacity None PV: 2 GW or wind: 1 GW Solar PV investment cost 1 $/W Wind investment cost 2,000 $/kw Total investment in power sector None PV or wind: 2 billion $ Fuel consumption 3,750 kwh/vehicle/a Number of vehicles 1 million 87 New electricity demand None 3.75 TWh/a (+1.7%) 11-12% of Medupi s output

49 Scenario: Electricity the new primary energy, complemented by bio Hypothetical energy-flow diagram (Sankey diagram) for South Africa in the year 20?? Sun T Transport H2 Non-energy E.g. fertiliser Wind Electricity H2 Hydro Electricity E Electricity H2 PtL fuels H2 Natural Gas Heat Electricity CO2 Heat H Liquid biofuels Heat 88 Biomass

50 Main cost driver for electricity-based synfuels is the cost of RE input Inputs Electrolysis Fuel Production Outputs Renewable electricity Electrolyser H2 Reverse Water Gas Shift Reactor H2O CO2 South Africa s competitive advantage: more sun and wind means cheaper renewable electricity Fischer- Tropsch Reactor Syngas Electricity CAPEX Cost of synthetic fuel Synfuel 89 Sources: CSIR Energy Centre analysis

51 Power-to-X provides a huge potential for South Africa South African renewable electricity will always be cheaper than in most other countries in the world Excellent solar & wind resources let South Africa achieve some of the world s lowest renewables tariffs Cheapest renewable electricity is a competitive advantage that will always be there In addition, South Africa has vast experience in the creation of synthetic liquid fuels The country gets roughly 1/3 of its liquid fuel demand from Coal-to-Liquid Sasol is one of the largest Coal-to-Liquid producers globally This combination provides a huge opportunity for South Africa to commercialise renewable-electricitybased, carbon-neutral synthetic fuels from Power-to-Liquid processes The EU has started to create the market for such fuels via its mandatory biofuels blending requirements South Africa is in a pole position to be a premier supplier of carbon-neutral synfuels for the EU! 91

52 Ha Khensa Re a leboha Siyathokoza Enkosi Thank you Re a leboga Ro livhuha Siyabonga Dankie 92 Note: Thank you in all official languages of the Republic of South Africa