Want lower energy prices? Put baseload out to pasture.

Financial Review, 18 September. 2017.

by Bruce Mountain


(Ed. note: This is an article about Australia and its energy policiy – although in my view it applies very much to South Africa)

One of the few constants in Australia’s energy debate is the fervour of politicians’ and administrators’ homage to the idea that electricity prices should be lower than they are. That electricity prices have reached the level they have, suggests the homage has all too often been a camouflage for other agendas. For too long ideology and the protection of vested interests has lurked behind the apparent pursuit of “lower electricity prices”. The obsession with coal-fired “baseload” generation is an enduring manifestation of this malaise.

It merits critical scrutiny.

“Baseload” describes a generating plant, hitherto most commonly coal-fired, that is characterised by high capital costs and relatively lower variable costs. This cost structure renders such plant inherently inflexible: its viability depends on its ability to operate continuously. Such plant also has minimum stable generation levels and responds slowly to changing demand. For this reason, it was not long ago that the roofs in many Australian homes accommodated oversized and poorly insulated water heaters designed to keep the baseload plant operating in the dead of night. Though grossly wasteful, it was the best that could be done given the technological limitations of the era.

New technology, more flexibility

Fortunately the world moved on. From the late 1980s open-cycle gas turbines supplemented hydro generation in providing flexibility to match demand and supply. In other countries, market arrangements have also encouraged customers to respond to short-term price signals and this “demand response” has come to play a major role.

There have been astonishing developments in other areas. The installed cost of photovoltaics (solar panels) have declined by about 80 per cent over the past seven years. Despite patchy policy support, it has taken just seven years for photovoltaics to reach one in five detached houses. Electricity produced by photovoltaics on a roof typically costs about one-sixth of grid-supplied electricity. It is no surprise that photovolatics are now being installed at record rates not just on household roofs but also on farms and in businesses.

And now the trajectory of costs in batteries, particularly those with lithium chemistries is declining even more steeply than we have seen in photovoltaics. The combination of battery and photovoltaics installed behind customers’ meters now promises to meet customers’ needs more cheaply than grid-only supply.

Responsive demand

South Australia suffers from concentrated electricity markets, dependency on expensive gas and structurally high network charges. The combination of behind-the-meter photovoltaics and battery with the grid for back-up is already cheaper than grid-only supply for most small customers in SA. While batteries plus solar and grid back-up is not yet viable for most customers in the rest of Australia, the gap is small and quickly getting smaller.

If the federal government is determined to deliver lower electricity prices, it might focus its effort on ensuring that demand is more responsive to short term price signals, and on making up the narrowing shortfall needed to encourage widespread uptake of distributed batteries. Such policies will not be difficult to develop or implement, they will require outlays many times smaller than those needed to build baseload coal plants, and will show results during the term of a government.

The market must adjust

Such policies will, however, speed up the nonetheless inevitable decline in many customers’ reliance on the shared power system. Generators and retailers should be expected to adjust without assistance: they operate in a market after all. The shared grid still has a future albeit different to its past and even in a declining market there will be ample opportunity for investment in decarbonising electricity production.

Networks are more difficult. Their excessive asset values reflect historic asset write-ups (when policy makers thought demand was inelastic) and many years of wasteful gold plating. Furthermore technology change (distributed energy resources, and more efficient appliances) is leading to declining use of the shared network. Write-downs to bring the regulatory asset values into line with their economic values is needed. The biggest adjustment is needed where the networks are partially or fully government owned. The challenge is not insurmountable but requires governments to take responsibility for their past mistakes. For the privately owned networks, asset write-downs raise legitimate worries about political expropriation and these would need to be resolved.

Read more: http://www.afr.com/opinion/columnists/want-lower-energy-prices-put-baseload-out-to-pasture-20170916-gyizrr#ixzz4t6ZundDe
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Engineering study dispels myths on limits to renewable energy in the South African grid

Engineering News, Chris Yelland, 16 September, 2017.

A serious engineering study and report has dispelled the myths and propaganda peddled by fired former Eskom CEO Brian Molefe and suspended Eskom acting CEO Matshela Koko on the limits and costs of accommodating significant levels of variable renewable energy capacity in the South African power grid.

Note: To ensure strict technical accuracy, significant parts of the text below, particularly the results detailed, are taken directly from wording in the report.

Click here to download the full report

The study and associated report was prepared for the South African Department of Energy (DoE) and Eskom, and commissioned and funded by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) under the DoE’s South African – German Energy Programme (SAGEN).

The study was conducted by international engineering consultants Dr.-Ing. Markus Pöller and Marko Obert, of Moeller & Poeller Engineering GmbH (MPE), and was published in South Africa in September 2017.

The study report is entitled Assessing the impact of increasing shares of variable generation on system operations in South Africa – a flexibility study”.

Here is the full article.

New study points to 90% renewables mix being least cost by 2050

Engineering News, Dr Tobias Bischof-Niemz, 15 September, 2017.

ew analysis conducted using updated cost assumptions for solar photovoltaic (PV), onshore wind and batteries shows that the share of renewable energy in an electricity mix that would also be the least cost for South Africacould grow to above 90% by 2050.

Such a portfolio, the study indicates, will be 30% cheaper than the generation mix currently outlined in the Draft Integrated Resource Plan (IRP) Base Case, published by the Department of Energy (DoE) in November 2016.

The analysis represents an update of the least-cost mix presented in March by the Council for Scientific and Industrial Research (CSIR) in response to the DoE’s call for public comment on the IRP Base Case.

In the March response document, the science council argued that the least-cost mix to meet a projected 2050 demand of 522 TWh would comprise more than 70% renewables, with the balance of the energy arising from coalgas and hydro. Such a mix was calculated to be R75-billion a year cheaper than the one proposed in the Base Case and included no nuclear, which made up 28% in the Base Case.

(Ed. note: What will prevail in our energy decisions – corruption and vested interests, or common sense?).

Here is the full article.

EDITORIAL: Kubayi turns off energy future

BusinessDay, 7 September, 2017.

(Ed.note: The next capture, or misinformed, or something else is going on? Eskom’s obstruction HAS GOT TO BE STOPPED!!!)

SA’s world-feted renewable energy independent power producer programme, which attracted investments of R201bn in five years, looks like it is over as we knew it.

The programme was run as a competitive bid process, and over the four bid windows prices for renewable energy dropped dramatically, with wind power falling 55% and solar photovoltaic 76%. For bidders, which included the world’s big energy firms, the attraction lay in the certainty and comfort of investing in an environment in which there was a clear line of sight of the risks and the returns.

Bloomberg ranked SA in the top 10 destinations for renewable energy investment.

That all changed for good on Friday when Energy Minister Mmamoloko Kubayi kicked bid windows 3.5 and 4 – which have been in limbo for the past two years – even further into the future. While these bids will be signed by the end of October, they will not be commissioned until 2021.

An additional round of bids — known as the expedited round, which included the best projects from previous rounds that had not been selected – has been put off indefinitely.

More damaging than the delay was the fact that the minister slapped a price ceiling of 77c/kWh on bid windows 3.5 and 4. In doing so, she undermined the integrity of the competitive bidding process, which had already determined the power purchase price for each project, and hung a large question mark over any further bid rounds that might be held.

The investment certainty that had been the hallmark of the programme evaporated in an instant.

Investors will now be assessing what to do. Half of the wind projects in round 4 were below 77c/kWh, so these bids are still possible. For the solar photovoltaic projects a delay is not such a bad thing as they will get the advantage of hardware prices that are trending downwards.

So, while many of the projects could still go ahead, firms will think hard about participating in the future.

For makers of wind towers and solar panels, the situation is less easy to salvage. By putting off future rounds that had been envisaged just two years back, the outlook for manufacturers is bleak. Several have closed shop in SA during the impasse and more will follow.

Eskom’s argument against signing the outstanding power purchase agreements with successful renewable energy producers has been that it has an oversupply of energy. As economic growth has slowed and people and industry have migrated from the grid, demand has shrunk and excess supply has grown.

With its mountain of debt, Eskom needs to sell more electricity if it is to find some stability and sustainability. This is particularly so as new assets are completed and come on stream. But these dynamics have made it impossible.

Eskom has succeeded in stalling the independent power producer programme, but it will be unable to halt the energy revolution that is leading to the death of conventional power utilities all over the world.

Without the government programme, producers are still able to form direct supply relationships with customers, such as mines and big industry. Increasingly, they are doing so.

The cities also want to buy renewable energy directly from producers, reducing their reliance on Eskom and finding sources of energy that are cleaner and cheaper than coal. The City of Cape Town is in the lead and has taken the energy minister to court to compel her to provide it with the permission to do so.

No amount of anticompetitive or errant behaviour on the part of Eskom will be able to stop this movement.

The problem is not, and has never been, the independent power producers; the problem is Eskom.

Here is the sad and scary article

Letter from Trumpland: Will the Irma & Harvey tag team drown US climate denial?

Daily Maverick, Glen Retief, 5 September, 2017.

Worst, biggest, wettest, hottest, costliest. Will a forest of climate superlatives force the world’s largest per-capita climate polluter to reconsider its increasingly bizarre-looking policy of official climate denial? By GLEN RETIEF.

As Florida declares a state of emergency, bracing for the possible impact from Category 4 Hurricane Irma, we in America remain drenched in images of the catastrophic damage wrought by Hurricane Harvey, the worst rainfall event ever to be recorded in the continental United States.

Over the past week, we saw kayakers struggling past a stop sign on a paved bayou. Cars got abandoned in impromptu lakes; the internet abounded in abandoned wet dogs and drowning cats. Texas Governor Greg Abbott estimated the damage at $180-billion, comparable to the world’s most expensive storm, Hurricane Katrina.

Nor was Harvey the week’s biggest weather news, even before Irma made her ominous appearance. As Donald Trump urged survivors in a Houston shelter to “have a good time”, UNICEF reported 16-million children and their families in imminent need of live-saving support in South Asia, where monsoon floods have left a third of Bangladesh under water.

Having finally shrugged off its most parched drought since the dust-bowl 1930s, cool, breezy San Francisco recorded its hottest-ever temperature on Friday, an astounding 41 Celcius in the shade.

Worst, biggest, wettest, hottest, costliest. Will a forest of climate superlatives force the world’s largest per-capita climate polluter to reconsider its increasingly bizarre-looking policy of official climate denial? From the withdrawal from the Paris Climate Accords to the rescinding of standards requiring that federally funded infrastructure in flood plains bear in mind climate change, the current administration’s hallmark policy has been to pretend that global warming is not a serious problem.

The question has real consequences for South Africa, which faces projected warming of 5-8° C over its own interior by 2050, along with fiercer storms and longer droughts.

Early post-Harvey signs do not seem hopeful. This week Myron Ebell, manager of Trump’s transition team at the Environmental Protection Agency, commented, by way of deflecting concerns that the unusually warm water in the Gulf of Mexico had intensified Harvey’s rainfall, that the previous decade brought few large hurricanes to US shores.

Here is the full article