Economic impacts of South Africa s energy mix

Economic impacts of South Africa s energy mix CSIR Energy Centre Sustainable Energy for All in South Africa National Science and Technology Forum Johannesburg. 6 April 8 Jarrad G. Wright JWright@csir.co.za Dr Tobias Bischof-Niemz Chief Engineer

Agenda 4 Global context Local context RSA energy mixes and economic impacts Conclusions

World: Significant cost reductions materialised in the last 5-8 years Global annual new capacity [GW/yr] 55% Solar PV Wind Solar PV technology cost (global ave.) Wind technology cost (global ave.) 5 5 4 4 7 7 8 7 9 8 9 8 4 5 6 5 6 7 76 4 56 68% Total South African 46 8 7 power system 4 7 % (approx. 45 GW) 7 64 5 55 45 5 8 9 4 6 7 7 8 9 4 5 6 7 74 9 57 7 98 Subsidies Cost competitive 4 Sources: GWEC; IRENA; IEA PVPS; CSIR analysis

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 7 78 Operational capacities in GW (end 7) 54 4 89 5 USA.9 Canada Americas w/o USA/Canada Europe. 4.5.5.5 Middle East and Africa* 88. 8. China India 49 Japan 5 7 Australia 5 7 Rest of Asia Pacific 5 5. Wind Solar CSP PV Total World Total RSA power system (45 GW) * Still to be updated tp 7; Sources: GWEC; IRENA; IEA PVPS; SolarPower Europe; CSIR analysis South Africa has./.5/. GW installed capacity of wind, solar PV and CSP (end 7)

Agenda 4 Global context Local context RSA energy mixes and economic impacts Conclusions 6

Energy supply is domestic coal-dominated in South Africa but most oil and liquid fuels is imported Simplified energy-flow diagram (Sankey diagram) for South Africa in 5 (PJ) Imports Domestic Primary Energy (PJ) Conversion (PJ) End Use (PJ) Oil 84 Refineries 84 Import 45 Import 47 Non-energy 88 Coal 6 5 Transformation 949 T Transport 76 Nuclear Power Plants 74 E Electricity 88 Renewables* 694 H 7 Natural Gas 78 * Renewables include biomass/waste, wind/solar/hydro. Sources: DoE; CSIR analysis Export 5 Export 6 Export 5 Heat 44 TFEC: PJ

Energy is coal-dominated in South Africa end-use is 5% transport, 5% electricity and 5% heating/cooling Simplified energy-flow diagram (Sankey diagram) for South Africa in 5 (PJ) Imports Domestic Primary Energy (PJ) Conversion (PJ) End Use (PJ) Oil 84 Refineries 84 Import 45 Import 47 Non-energy 88 Coal 6 5 Transformation 949 T Transport 76 8 Nuclear Renewables* 694 Natural Gas 78 * Renewables include biomass/waste, wind/solar/hydro. Sources: DoE; CSIR analysis Power Plants 74 Export 5 Export 6 Export 5 E H Electricity 88 Heat 44 TFEC: PJ Focus on this sector

From Jan-Dec 7, 6 TWh of net electricity were produced in SA Actuals captured in wholesale market for Jan-Dec 7 (i.e. without self-consumption of embedded plants) Annual electricity in TWh 6. 8.6 4.6 9.4 5. Net Sent Out Imports System Load (domestic and export load) Exports Available for distribution in RSA 9 Notes: Net Sent Out = Total domestic generation (Sent Out) minus pumping load (not shown seperately) Sources: Eskom; Statistics South Africa for imports and exports

Actual tariffs: Considerable reductions in tariff for new wind, solar PV and CSP in South Africa Results of Department of Energy s RE IPP Procurement Programme Actual average tariffs in R/kWh (Apr-6-R) 5-59% -8% 4-4%.65.4.8.6.96.8..5.7.87.9.6.87.69.6 Nov Mar Aug Aug 4 Nov 5 BW BW 4 (Expedited) CSP Solar PV Wind Notes: Assumed USD:ZAR = 4.7; For CSP Bid Window and.5, the weighted average of base and peak tariff is indicated, assuming 5% annual capacity factor and 64%/6% base/peak tariff utilisation ratio; BW = Bid Window; Sources: Department of Energy s publications on results of first four bidding windows http://www.energy.gov.za/ipp/list-of-ipp-preferred-bidders-window-three-4nov.pdf; http://www.energy.gov.za/ipp/renewables_ipp_procurementprogram_windowtwoannouncement_may.pptx; http://www.ipprenewables.co.za/gong/widget/file/download/id/79; StatsSA on CPI; CSIR analysis

In 7, wind, solar PV & CSP supplied.8% of total SA system load Actuals captured in wholesale market for Jan-Dec 7 (i.e. without self-consumption of embedded plants) Annual electricity in TWh 5.6 5. (.%). (.4%).7 (.%) 4.6 Residual Load Notes: Wind includes Eskom s Sere wind farm ( MW). Sources: Eskom Wind Solar PV CSP System Load (domestic and export load)

Projects already applied for EIAs can supply 9/ GW of while overlap with REDZ can supply 45/7 GW of wind/solar PV capacity RSA domestic demand + exports (7): 5 TWh All EIAs ( 49 km,.% of RSA) (status early 6) Wind: 9 GW ( TWh) Solar PV: 9 GW ( 64 TWh) All REDZ (5 47 km, 4.4% of RSA) (phase ) Wind: 55 GW ( 78 TWh) Solar PV: 78 GW ( 7 TWh) All EIAs in REDZ (6 676 km,.6% of RSA) Wind: 45 GW ( 5 TWh) Solar PV: 7 GW ( 4 TWh) After exclusion zones; EIA = Environmental Impact Assessment; REDZ = Renewable Energy Development Zones Sources: https://www.csir.co.za/sites/default/files/documents/wind_and_pv_aggregation_study_final_presentation_rev.pdf; https://www.csir.co.za/sites/default/files/documents/wind%and%solar%pv%resource%aggregation%study%for%south%africa_final%report.pdf

Agenda Global context Local context RSA energy mixes and economic impacts....4 Electrical energy mix and costs CO emissions and water usage Potential job creation opportunities But... what about storage? 4 Conclusions

A need to fill the gap in the least-cost manner (subject to reliability constraints) - meeting new demand or replacing existing fleet Energy supplied to the South African electricity system from existing plants (6-5) Whether a high demand forecast is expected in South Africa or a low demand forecast we need electricity infrastructure investment Electricity [TWh/yr] 5 Electricity [TWh/yr] 5 48 5 4 44 4 7 5 8 All power plants considered for existing fleet that are either: ) Existing in 6 ) Under construction ) Procured (preferred bidder) 6 5 5 4 45 5 6 All power plants considered for existing fleet that are either: ) Existing in 6 ) Under construction ) Procured (preferred bidder) 5 5 4 45 5 4 Solar PV CSP Wind Other Peaking Gas (CCGT) Hydro+PS Nuclear Note: Energy from existing generators is shown representatively; All power plants considered for existing fleet that are either Existing in 6, Under construction, or Procured (preferred bidder) Sources: DoE (IRP 6); Eskom MTSAO 6-; StatsSA; World Bank; CSIR analysis Coal Demand

A need to fill the gap in the least-cost manner (subject to reliability constraints) - meeting new demand or replacing existing fleet Energy supplied to the South African electricity system from existing plants (6-5) Whether a high demand forecast is expected in South Africa or a low demand forecast we need electricity infrastructure investment Electricity [TWh/yr] 5 Electricity [TWh/yr] 5 4 6 5 44 All power plants considered for existing fleet that are either: ) Existing in 6 ) Under construction ) Procured (preferred bidder) 48 8 44 69 5 4 45 5 5 4 6 7 58 All power plants considered for existing fleet that are either: ) Existing in 6 ) Under construction ) Procured (preferred bidder) 5 97 77 95 86 8 5 5 4 45 5 5 Supply gap Solar PV CSP Wind Other Peaking Gas (CCGT) Hydro+PS Nuclear Note: Energy from existing generators is shown representatively; All power plants considered for existing fleet that are either Existing in 6, Under construction, or Procured (preferred bidder) Sources: DoE (IRP 6); Eskom MTSAO 6-; StatsSA; World Bank; CSIR analysis Coal Demand

Technology costs declines changes long-term planning outcomes considerably Today s new-build lifetime cost per energy unit (LCOE) in R/kWh (April-6-Rand) As per South African IRP 6.89.69 Fixed (Capital, O&M)..9.4.4 Variable (Fuel).6.6 Solar PV CO in kg/mwh Wind Baseload Coal (PF) Nuclear Gas (CCGT) Mid-merit Coal Gas (OCGT) Diesel (OCGT) 4 6 6 Assumed capacity factor 8% 9% 5% 5% % % 7 Lifetime cost per energy unit is only presented for brevity. Modelling inherently includes the specific cost structures of each technology i.e. capex, Fixed O&M, variable O&M, fuel costs etc. 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 = 5%; nuclear = %; IRP costs from Jan- escalated to May-6 with CPI; assumed EPC CAPEX inflated by % to convert EPC/LCOE into tariff; Sources: IRP 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

Draft IRP 6 Base Case is a mix of / coal, / nuclear, / RE Draft IRP 6 Base Case Total electricity produced in TWh/yr As per Draft IRP 6 55 5 45 4 5 5 5 5 46 5 6 5 6 4 5 44 66 45 5 7 4 5 58 8 (5%) 9 (8%) 5 49 (9%) (6%) 5 48 (8%) (9%) 7 (4%) More strict carbon limits 8 Solar PV Wind CSP Other storage Sources: DoE Draft IRP 6; CSIR analysis Biomass/-gas Peaking Gas Hydro+PS Nuclear (new) Nuclear Coal (new) Coal

Draft IRP 6 Carbon Budget case: 4% nuclear energy share by 5 As per Draft IRP 6 Draft IRP 6 Base Case Draft IRP 6 Carbon Budget Total electricity produced in TWh/yr 55 5 45 4 5 46 5 5 5 5 6 5 6 4 5 44 5 66 45 5 5 7 4 58 5 8 (5%) 9 (8%) 49 (9%) (6%) 48 (8%) (9%) 7 (4%) Total electricity produced in TWh/yr 55 5 45 4 5 5 5 5 More strict carbon limits 46 5 6 4 66 4 98 6 5 45 9 5 6 6 4 57 (%) 8 (6%) (6%) 5 44 (8%) 85 (5%) 69 (%) No RE limits, reduced wind/solar PV costing, warm water demand flexibility 9 Solar PV Wind CSP Other storage Sources: DoE Draft IRP 6; CSIR analysis Biomass/-gas Peaking Gas Hydro+PS Nuclear (new) Nuclear Coal (new) Coal

Least-cost is largely based on wind and solar PV complemented by flexibility (including existing coal, new gas, hydro and CSP) As per Draft IRP 6 Draft IRP 6 Base Case Draft IRP 6 Carbon Budget Least Cost Total electricity produced in TWh/yr 55 5 45 4 5 46 5 5 5 5 6 5 6 5 4 44 5 66 45 5 5 7 4 58 5 8 (5%) 9 (8%) 49 (9%) (6%) 48 (8%) (9%) 7 (4%) Total electricity produced in TWh/yr 55 5 45 4 5 5 5 5 More strict carbon limits 46 5 6 5 6 4 66 45 5 9 6 6 4 98 4 57 8 (6%) (6%) 5 44 (8%) (%) 85 (5%) 69 (%) Total electricity produced in TWh/yr 55 5 45 4 5 5 5 5 46 5 6 5 7 8 4 5 9 No RE limits, reduced wind/solar PV costing, warm water demand flexibility 46 86 5 76 7 4 96 4 59 5 9 (%) 57 (49%) (%) 55 (%) (6%) 6 (%) Solar PV Wind Biomass/-gas Gas Nuclear (new) CSP Other storage Peaking Hydro+PS Nuclear Sources: DoE Draft IRP 6; CSIR analysis Coal (new) Coal

Least-cost deploys considerable solar PV and wind and flexibility with no new investments in coal or nuclear capacity As per Draft IRP 6 Draft IRP 6 Base Case Draft IRP 6 Carbon Budget Least Cost Total installed net capacity in GW Total installed net capacity in GW Total installed net capacity in GW 5 4 5 5 5 5 4 7 6 8 7 6 9 5 9 7 8 4 7 4 6 6 4 8 5 5 5 5 More strict carbon limits 5 5 4 7 6 95 8 6 4 8 9 5 8 7 4 49 5 6 8 6 5 5 5 5 4 7 6 98 5 5 5 No RE limits, reduced wind/solar PV costing, warm water demand flexibility 7 5 58 7 5 7 4 74 85 7 9 8 5 Solar PV Wind CSP Other storage Sources: DoE Draft IRP 6; CSIR analysis Biomass/-gas Peaking Gas Hydro+PS Nuclear (new) Nuclear Coal (new) Coal Plus GW demand response from residential warm water provision

Draft IRP 6 Base Case: Nuclear and coal dominate the supply mix in 5 Demand and Supply in GW Exemplary Week under Draft IRP 6 Base Case (5) 8 6 4 Monday Tuesday Wednesday Thursday Friday Saturday Sunday Solar PV Peaking Gas Nuclear Customer demand Wind Hydro + PS Coal Sources: CSIR analysis, based on DoE s Draft IRP 6

Scenario: Least Cost Solar PV/wind dominate in 5, curtailment and variability managed by flexible gas, DR, PS and hydro capacity Demand and Supply in GW Exemplary Week under Least Cost (5) 9 8 7 6 5 4 Monday Tuesday Wednesday Thursday Friday Saturday Sunday Curtailed solar PV and wind Solar PV CSP Hydro + PS Biomass/-gas Nuclear Customer demand DR Wind Peaking Gas Coal Sources: CSIR analysis

Conservatively, Least Cost is R-5 billion/yr cheaper than the statusquo (Base Case) and Carbon Budget by As per Draft IRP 6 IRP 6 Base Case IRP 6 Carbon Budget Least Cost Energy Mix in Demand: 4 TWh % % 4% 5% % 7% % 4% % 58% 8% 6% % % % 8% % 4% 47% % 8% % % % 5% 4% 54% Cost in Total system cost (R-billion/yr) Average tariff (R/kWh) 84 4 67..7.7 R -5 bln/yr cheaper ( 6-9%) Environment in CO emissions (Mt/yr) Water usage (billion-litres/yr) Jobs in Direct & supplier ( ) 4 Coal Coal (new) Nuclear Nuclear (new) Hydro+PS Only power generation (Gx) is optimised while cost of transmission (Tx), distribution (Dx) and customer services is assumed as. R/kWh (today s average cost for these items) 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 Gas Peaking Biomass/-gas Other storage Wind CSP Solar PV

Conservatively, Least Cost is R5-4 billion/yr cheaper than the statusquo (Base Case) and Carbon Budget by 4 As per Draft IRP 6 4 IRP 6 Base Case IRP 6 Carbon Budget Least Cost Energy Mix in 4 Demand: 48 TWh 5% 5% % % % 8% 5% 7% 4% 9% % 4% % % % % 8% 4% 7% % 4% % % 6% 4% % % Cost in 4 Total system cost (R-billion/yr) Average tariff (R/kWh) 55 5 495.5.4.5 R 5-4 bln/yr cheaper ( 6-7%) Environment in 4 CO emissions (Mt/yr) Water usage (billion-litres/yr) Jobs in 4 Direct & supplier ( ) 5 Coal Coal (new) Nuclear Nuclear (new) Hydro+PS Biomass/-gas Only power generation (Gx) is optimised while cost of transmission (Tx), distribution (Dx) and customer services is assumed as. R/kWh (today s average cost for these items) 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 Gas Peaking Other storage Wind CSP Solar PV

Conservatively, Least Cost is R6-75 billion/yr cheaper than the statusquo (Base Case) and Carbon Budget by 5 As per Draft IRP 6 5 IRP 6 Base Case IRP 6 Carbon Budget Least Cost Energy Mix in 5 Demand: 5 TWh 5% 4% 8% % % % 9% 9% 6% 8% 8% % % % % 6% 6% % 5% % 49% % 6% % % % Cost in 5 Total system cost (R-billion/yr) Average tariff (R/kWh) 7 688 67.4.. R 6-75 bln/yr cheaper ( %) Environment in 5 CO emissions (Mt/yr) Water usage (billion-litres/yr) Jobs in 5 Direct & supplier ( ) 6 Coal Coal (new) Nuclear Nuclear (new) Hydro + PS Biomass/-gas Other storage Only power generation (Gx) is optimised while cost of transmission (Tx), distribution (Dx) and customer services is assumed as. R/kWh (today s average cost for these items) 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 Gas Peaking Wind CSP Solar PV

CO emissions trajectory is never binding and water use declines as coal fleet decommissions CO emissions Water usage Electricity sector CO emissions [Mt/yr] 5 5 Electricity sector Water usage [bl/yr] 5 5 8 5 PPD (Moderate) Draft IRP 6 (Base Case) Draft IRP 6 (Carbon Budget) Least-cost 5 5 5 4 45 5 5 Draft IRP 6 (Base Case) Draft IRP 6 (Carbon Budget) Least-cost Peak-Plateau-Decline (PPD) is not very ambitious anymore least-cost is easily below PPD 5 5 5 4 45 5

Least-cost emits % more CO than Carbon Budget but emits % less than the Base Case by As per Draft IRP 6 IRP 6 Base Case IRP 6 Carbon Budget Least Cost Energy Mix in Demand: 4 TWh % % 4% 5% % 7% % 4% % 58% 8% 6% % % % 8% % 4% 47% % 8% % % % 5% 4% 54% Cost in Total system cost (R-billion/yr) Average tariff (R/kWh) 84 4 67..7.7 R -5 bln/yr cheaper ( 6-9%) Environment in CO emissions (Mt/yr) Water usage (billion-litres/yr) 5 6 76 4 67 96 Cleaner +% vs CB -% vs BC Jobs in Direct & supplier ( ) 9 Coal Coal (new) Nuclear Nuclear (new) Hydro+PS Only power generation (Gx) is optimised while cost of transmission (Tx), distribution (Dx) and customer services is assumed as. R/kWh (today s average cost for these items) 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 Gas Peaking Biomass/-gas Other storage Wind CSP Solar PV

Least-cost emits 5% less CO than Carbon Budget and 55% less than the Base Case by 4 As per Draft IRP 6 4 IRP 6 Base Case IRP 6 Carbon Budget Least Cost Energy Mix in 4 Demand: 48 TWh 5% 5% % % % 8% 5% 7% 4% 9% % 4% % % % % 8% 4% 7% % % 4% % 6% 4% % % Cost in 4 Total system cost (R-billion/yr) Average tariff (R/kWh) 55 5 495.5.4.5 R 5-4 bln/yr cheaper ( 6-7%) Environment in 4 CO emissions (Mt/yr) Water usage (billion-litres/yr) 9 6 67 66 Cleaner Same as CB -55% vs BC Jobs in 4 Direct & supplier ( ) Coal Nuclear Coal (new) Nuclear (new) Gas Hydro+PS Peaking Other storage Biomass/-gas Only power generation (Gx) is optimised while cost of transmission (Tx), distribution (Dx) and customer services is assumed as. R/kWh (today s average cost for these items) 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

Least-cost emits 5% less CO than Carbon Budget and 65% less than the Base Case by 5 As per Draft IRP 6 5 IRP 6 Base Case IRP 6 Carbon Budget Least Cost Energy Mix in 5 Demand: 5 TWh 5% 4% 8% % % % 9% 9% 6% 8% 8% % % % % 6% 6% % 5% % 49% % 6% % % % Cost in 5 Total system cost (R-billion/yr) Average tariff (R/kWh) 7 688 67.4.. R 6-75 bln/yr cheaper ( %) Environment in 5 CO emissions (Mt/yr) Water usage (billion-litres/yr) 87 4 99 86 8 5 Cleaner -5% vs CB -65% vs BC Jobs in 5 Direct & supplier ( ) Coal Coal (new) Nuclear Nuclear (new) Hydro + PS Biomass/-gas Other storage Only power generation (Gx) is optimised while cost of transmission (Tx), distribution (Dx) and customer services is assumed as. R/kWh (today s average cost for these items) 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 Gas Peaking Wind CSP Solar PV

Localised job creation per technology is a function of capital (build-out) as well as operations (utilisation) for each technology 5 57 6 Direct Suppliers Capex Job-years per GW installed 5 99 4 75 8 45 4 68 8 6 4 4 4 9 8 7 4 9 5 Opex Annual jobs per TWh 5 8 6 4 5 8 Coal (incl. coal mining) Nuclear (incl. Uranium mining) Gas (excl. shale gas extraction) Solar PV Note: It seems like the McKinsey study (appendix of IEP) under-estimates direct/supply job numbers in the coal industry. Thus, CSIR have assumed more jobs in the coal industry than in the Mickinsey study. Sources: DoE IEP 6 Annexure B: Macroeconomic parameters CSP Wind

Increasing job opportunities as more and more RE is deployed as South Africa transitions away from coal in the long-term As per Draft IRP 6 Draft IRP 6 Base Case Draft IRP 6 Carbon Budget Least Cost Job-years [ ] Job-years [ ] Job-years [ ] 5 5 5 5 78 75 6 4 4 44 9 4 7 4 6 5 6 8 6 4 95 5 44 5 5 5 5 More strict carbon limits 5 77 75 6 4 4 4 85 6 4 49 4 46 67 4 5 4 5 6 77 57 5 5 5 5 5 75 49 7 8 77 4 6 94 No RE limits, reduced wind/solar PV costing, warm water demand flexibility 59 8 4 84 67 4 5 6 5 5 4 5 5 4 Solar PV Wind Peaking Hydro+PS Coal CSP Biomass/-gas Gas Nuclear Note: Direct and supplier jobs only (jobs resulting from construction, operations and first level suppliers); Because of lack of data, zero jobs for biomass/-gas assumed; Sources: DoE; CSIR analysis

Conservatively, Least Cost is R6-75 billion/yr cheaper than the statusquo (Base Case) and Carbon Budget by 5 As per Draft IRP 6 IRP 6 Base Case IRP 6 Carbon Budget Least Cost Energy Mix in Demand: 4 TWh % % 4% 5% % 7% % 4% % 58% 6% 8% % % 47% % 8% % 4% % 8% % % % 5% 4% 54% Cost in Total system cost (R-billion/yr) Average tariff (R/kWh) 84 4 67..7.7 R -5 bln/yr cheaper ( 6-9%) Environment in CO emissions (Mt/yr) Water usage (billion-litres/yr) 5 6 76 4 67 96 Cleaner +% vs CB -% vs BC Jobs in Direct & supplier ( ) 9-5 -4-49 5-% more jobs 5 Because of lack of Coal Nuclear Hydro+PS Peaking Other storage CSP data, zero jobs for biomass/-gas assumed Coal (new) Nuclear (new) Gas Biomass/-gas Wind Solar PV (affects Decarbonised) Only power generation (Gx) is optimised while cost of transmission (Tx), distribution (Dx) and customer services is assumed as. R/kWh (today s average cost for these items) 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

Conservatively, Least Cost is R6-75 billion/yr cheaper than the statusquo (Base Case) and Carbon Budget by 5 As per Draft IRP 6 4 IRP 6 Base Case IRP 6 Carbon Budget Least Cost Energy Mix in 4 Demand: 48 TWh 5% 5% % % % 8% 5% 7% 4% 9% % 4% % % % % 8% 4% 7% % 4% % % 6% 4% % % Cost in 4 Total system cost (R-billion/yr) Average tariff (R/kWh) 55 5 495.5.4.5 R 5-4 bln/yr cheaper ( 6-7%) Environment in 4 CO emissions (Mt/yr) Water usage (billion-litres/yr) 9 6 67 66 Cleaner Same as CB -55% vs BC Jobs in 4 Direct & supplier ( ) 85-4 9-6 4-58 -% more jobs 6 Because of lack of Coal Nuclear Hydro+PS Peaking Other storage CSP data, zero jobs for biomass/-gas assumed Coal (new) Nuclear (new) Gas Biomass/-gas Wind Solar PV (affects Decarbonised) Only power generation (Gx) is optimised while cost of transmission (Tx), distribution (Dx) and customer services is assumed as. R/kWh (today s average cost for these items) 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

Conservatively, Least Cost is R6-75 billion/yr cheaper than the statusquo (Base Case) and Carbon Budget by 5 As per Draft IRP 6 5 IRP 6 Base Case IRP 6 Carbon Budget Least Cost Energy Mix in 5 Demand: 5 TWh 5% 4% 8% % % % 9% 9% 6% 8% 8% % % % % 6% 6% % 5% % 49% % 6% % % % Cost in 5 Total system cost (R-billion/yr) Average tariff (R/kWh) 7 688 67.4.. R 6-75 bln/yr cheaper ( %) Environment in 5 CO emissions (Mt/yr) Water usage (billion-litres/yr) 87 4 99 86 8 5 Cleaner -5% vs CB -65% vs BC Jobs in 5 Direct & supplier ( ) 5-95 5-5 -5 -% more jobs 7 Because of lack of Coal Nuclear Hydro + PS Peaking Other storage CSP data, zero jobs for biomass/-gas assumed Coal (new) Nuclear (new) Gas Biomass/-gas Wind Solar PV (affects Decarbonised) Only power generation (Gx) is optimised while cost of transmission (Tx), distribution (Dx) and customer services is assumed as. R/kWh (today s average cost for these items) 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

What if more realistic solar PV, wind and storage costs are realised Conservative cost assumptions for renewables and batteries were used initially - predominantly solar PV and wind complemented by flexibility Solar PV % reduction by, % reduction by 5 (from.6 R/kWh today to.5 R/kWh) Wind CSP Unchanged from today (.6 R/kWh) 4% reduction to (from. R/kWh to. R/kWh) Batteries Equivalent of USD/kWh by, 5 USD/kWh by 4, USD/kWh by 5 If expected cost trajectories for new technologies are applied, what happens to the structure of the electrical energy supply mix? Solar PV 7% reduction to 4 (from.6 R/kWh to. R/kWh) Wind CSP 4% reduction to 4 (from.6 R/kWh to.5 R/kWh) 4% reduction to (from. R/kWh to. R/kWh) Batteries Equivalent of USD/kWh by, 5 USD/kWh by 4, USD/kWh by 5 9

With expected cost trajectories for solar PV, wind and batteries - renewables share grows to >85% by 5 with gas displaced Total electricity produced in TWh/yr IRP 6 Least Cost Total electricity produced in TWh/yr Least Cost (cheaper RE and storage) 6 55 5 45 4 5 5 5 5 4 5 95 6 4 6 6 59 (%) 46 (%) 5 6 9 (%) 5 86 6 7 5 5 57 (49%) 8 76 7 4 (5%) 5 8 (%) 7 55 9 4 (%) 96 4 5 6 (%) Expected Wind, PV and CSP cost Battery costs More DR 6 55 5 45 4 5 5 5 5 45 5 6 6 6 5 46 69 4 98 (4%) 4 46 (%) 8 (%) 9 5 (4%) 7 88 4 9 5 8 565 5 5 (45%) 9 (%) 9 (%) 8 (%) 58 (%) 4 DR Storage (batteries) Pumped storage Biomass/-gas Solar PV CSP Wind Hydro Peaking Gas Nuclear Coal

Installed capacity of GW solar PV, GW wind & storage deployment (pumped storage and batteries) IRP 6 Least Cost Least Cost (cheaper RE and storage) Total installed net capacity in GW 5 Total installed capacity in GW 5 7 7 6 5 5 5 5 7 6 99 5 5 76 5 58 7 7 4 7 4 74 85 5 7 9 5 Expected Wind, PV and CSP cost Battery costs More DR 5 5 5 5 7 6 9 9 4 8 79 9 9 6 7 9 6 6 9 4 5 4 DR Storage (batteries) Pumped storage Biomass/-gas Solar PV CSP Wind Hydro Peaking Gas Nuclear Coal

Expected RE and storage cost reductions means a slightly faster reduction of CO emissions/water use and lower emissions by 5 Scenario: Least-cost (new outcomes) CO emissions Water usage Electricity sector CO emissions [Mt/yr] Electricity sector Water usage [bl/yr] 5 5 5 5 4 5 PPD (Moderate) Draft IRP 6 (Base Case) Draft IRP 6 (Carbon Budget) Least-cost Least-cost (cheaper RE+storage) 5 5 5 4 45 5 5 Draft IRP 6 (Base Case) Draft IRP 6 (Carbon Budget) Least-cost Least-cost (cheaper RE+storage) Cheaper RE and storage means quicker RE deployment and lower CO emissions by 5 5 5 5 4 45 5

Scenario: Least Cost with expected RE and storage cost trajectories Demand and Supply in GW Exemplary Week under Least Cost (5) 9 8 7 6 5 4 Monday Tuesday Wednesday Thursday Friday Saturday Sunday Curtailed solar PV and wind Battery Wind Peaking Gas Coal Customer demand DR Solar PV CSP Hydro + PS Biomass/-gas Nuclear 4 Sources: CSIR analysis

Future energy system will be built around variability of solar PV & wind Actual scaled RSA demand & simulated 5-minute solar PV/wind power supply for week from 5- Aug 44 7 65 6 55 5 45 4 5 5 5 5 GW Sources: CSIR analysis Monday Tuesday Wednesday Thursday Friday Saturday Sunday Excess Solar PV/Wind Residual Load (flexible power) Useful Wind Demand shaping Power-to-Power Useful Solar PV 4 Electricity Demand X-to-Power (natural gas, biogas, hydro, CSP) Power-to-X (sector coupling into heat/transport/chemicals) 4

Agenda 4 Global context Local context RSA energy mixes and economic impacts Conclusions 45

Conclusions Favourable technology costs, a world-class solar/wind resource and large geographical land area means new-build capacity in South Africa should predominantly be solar PV/wind complemented by flexibility In just REDZ (Phase ) constituting 4.4% of RSA land area, 55 GW wind (78 TWh) and 78 GW solar PV (7 TWh) - RSA demand in 7 was 5 TWh Flexibility sourced from existing coal, imported hydro, natural gas, CSP and demand side response Energy mix transitioning to considerable RE share by 5 can be achieved in South Africa at least-cost, with less CO emissions, lower water usage and an opportunity for increased job creation potential Electricity costs at least R6-75-bln/yr cheaper than business-as-usual and carbon budget (% cheaper) CO emissions are 65% lower than business-as-usual and 5% lower than carbon budget Water usage is 65% lower than business-as-usual and % lower than carbon budget Direct and supplier job creation potential % more than business-as-usual and % more than carbon budget Direct and supplier coal sector jobs by 5 reduce by % whilst absolute job numbers grow (as the power system grows) from 75-8 to 5-5 46 The dark horse in the race (battery storage) doesn t change outcomes in the electricity sector as much as most think but notable differences occur If costs reduce as expected, increased storage deployment shifts deployment of wind/solar PV more towards solar PV whilst displacing imported natural gas peaking capacity Sector coupling using excess solar PV/wind being researched with considerable opportunities expected