We need an electricity trading system to help SA out of the Jurassic age

Business Day, Robert Laing, 18 august, 2016.

ONE of the best examples of the power of markets is the power market in progressive countries (i.e. not SA).

Switching the electricity market from a state-owned monopoly to one where lots of competing buyers and sellers trade megawatt-hours in much the same way shares are traded via networked computers, has wrought wonders everywhere it has been introduced…

…While SA’s electricity market remains backward, this country is lauded as a world leader in other areas of the power business.

For instance, by the end of March, SA had attracted R53.4bn in private-sector investment to increase this country’s power generation capacity by more than 2GW, To global applause, not only is this additional power no burden on the tax payer, nearly all of it is green.

Competition between the independent power producers has driven the cost of renewable energy down from R2.37 per kilowatt-hour to 77c, according to data available on the government website www.ipp-projects.co.za.

Another area in which SA excels is cross-border electricity trade, with the World Bank citing the Southern African Power Pool as a role model for the rest of the planet.

Sadly, all this innovation is saddled with a dinosaur called Eskom…

…SA’s electricity problems are easy to fix. For starters, policy makers need to officially kill the reds so that municipalities start investing in their electricity grids again. Secondly, the government needs to follow Margaret Thatcher’s example and make Eskom power stations separate, privately-owned companies that not only have to compete against the independent power producers, but also against one another.

It is vital that Eskom’s power stations be separate businesses from its pylons so that the grid is run by an independent operator.

Finally, we need to invite an exchange such as Intercontinental Exchange to operate a modern electricity trading system, to link all these competing power stations with customers such as municipalities and mines.

Here is the full article







Eskom has put more than renewable energy at risk

BizCommunity Bruce Raw, GreenCape, 10 August, 2016.

The true impact of cancellations, delays and uncertainty around the independent power producer (IPP) and renewable energy programmes go much further than the energy sector. It puts at risk thousands of current and future jobs, a host of local manufacturing companies, community welfare and, most importantly, undoes what is arguably the most effective public private partnership model this country has ever seen.

Bruce Raw, Energy Programme Manager at GreenCape

Cheaper and cleaner

The direct benefits of the IPP programme are already clear for all to see. Since the inception of operations in 2014, CSIR figures show connected wind and solar PV facilities have contributed close to R5bn to South Africa’s economy, as a result of avoiding load shedding in 2014 and 2015 and diesel and coal costs.

Moreover, the inclusion of the private sector in developing major infrastructure such as generation facilities and upgrades to points in the grid, has relieved the public fiscus of spending over R37bn in construction costs (as of March 2016) with a projected total of R73bn (rounds one to four projects).

These are funds which could be diverted to supporting other socio-economic upliftment programmes across the country. It has further been projected that at the current, built-in South Africa prices combination of IPPs spanning renewable energy and liquefied natural gas will be both cheaper and cleaner than new build coal.

Investor certainty is crucial

The Renewable Energy IPP Procurement Programme (REIPPPP) has, over the past six years, attracted a total of over R194bn in investments, with over R53bn (27%) of this coming from foreign investors. This was achieved, in no small part, by creating investor certainty provided for in the REIPPPP. The effects of the current uncertainty created by Eskom’s statements and actions could be severe. If experience has taught us anything is that business does not like uncertainty.

A large independent wind blade manufacturer has already experienced delays and potential cancellations of its planned expansion into South Africa when the IPP was revised. Now, just as the company is seeking the go-ahead to set up a manufacturing plant in the country, we are once again beset by a lack of clear direction.

And this is not the only investment on the line. A combined investment pipeline from PV module manufacturers, earmarked for Atlantis, of close to R700m hangs precariously in the balance as we wait for clarity from the department and the incumbent.

Here is the full article

Understanding the cost of electricity from Medupi, Kusile and IPPs

Chris Yelland, Engineering News, 22 July, 2016.

In order to understand and compare the cost of electricity from a power plant, whether it is coal-fired, nuclear, hydro, gas, wind or solar, one needs to look further than simply the capital, fuel or operating and maintenance costs in isolation, to a concept known as the “levelised cost of electricity” over the lifetime of the plant. By CHRIS YELLAND.

The levelised cost of electricity (LCOE) from a generation plant is the net present-day monetary cost per present day kWh unit of electricity delivered, which when adjusted for inflation each year over the lifetime of the plant, will recover its full costs, including the initial investment, cost of capital (including dividends and interest), fuel and all other fixed and variable operating and maintenance costs…

LCOE from renewable energy IPPs

In contrast to the LCOE calculated for Medupi and Kusile of R1,05/kWh and R1,19/kWh (above), the fully indexed average price per kWh (inflated to base date May 2016) actually being paid by Eskom for renewable energy procured from IPPs in terms of 20-year power purchase agreements, was presented by the IPP Office of the SA Department of Energy on 16 April 2015 as:

Average price paid by Eskom Bid Window 1 Bid Window 2 Bid Window 3 Bid Window 4
Wind R1,52/kWh R1,19/kWh R0,87/kWh R0,69/kWh
Solar PV R3,66/kWh R2,18/kWh R1,17/kWh R0,87/kWh
CSP R3,56/kWh R3,33/kWh R3,31/kWh1 R3,09/kWh1, 2


Here is the full article

Elon Musk hits the road with his master plan – Go, Elon, Go!

BDLive, 21 July, 2016.

DETROIT — On Wednesday, Tesla Motors CEO Elon Musk unveiled an ambitious plan to expand the company into electric trucks and buses, car sharing and solar energy systems.

In a blog post titled “Master Plan, Part Deux”, Musk sketched a vision of an integrated carbon-free energy enterprise offering a wider range of vehicles, and products and services beyond electric cars and batteries.

The newest elements of the strategy included plans to develop car-and ride-sharing programmes, as well as commercial vehicles — businesses where other companies already compete, and in some cases have ample head starts on Tesla…

Click here for this view of the future!

SA’s power lies in breaking up Eskom’s monopoly model

BDLive, Anton Eberhard, 21 July 2016.

THE chairman of Eskom’s board has written to the energy minister, stating that Eskom will not sign any further power purchase agreements with independent power producers (IPPs) after the current round of renewable energy projects are concluded. The potential consequences could be devastating for private investment in SA’s power sector, and could terminate the government’s most successful public-private procurement programme…

…Eskom argues, misleadingly, that IPPs are too expensive. It quotes first-generation IPP costs and ignores the extraordinary fall in contracted renewable energy prices — more than 70% for solar photovoltaics and almost 50% for wind energy…

…What we need now is a separate state-owned electricity market and transmission operator that takes care of electricity planning, power procurement and contracting, system operation and balancing, and transmission. Let’s call it Gridco. This obviously needs to be independent of Eskom generation and IPPs, so it can procure power at the least cost….

…It is not naïve to believe SA’s electricity sector can, and will, be restructured. I’ve seen it happen in many countries. Perhaps, SA’s fiscal position will have to deteriorate further before we accept we can no longer fully fund our public utilities — we’ve pumped R83bn into Eskom since 2008 — and that a greater openness to private investment is inevitable. It would be better to start that reform process now, before we are once again in crisis….

Here is the full article – a must read!!!