The real risk to ESKOM: coal

With all the current hype about ESKOM’s current request for massive tariff increases, a bigger threat to our energy security is currently being ignored. And that is the supply of coal.

Coal is a limited resource whose price has already come under extreme pressure (see http://www.indexmundi.com/commodities/?commodity=coal-south-african&months=300). Having sat in the range of USD20-35 per ton for many years, since Jan 2007 it has sat above USD50 per ton, spiking to over USD160 per ton last year. South Africa was largely shielded from these large increase due to long term coal purchase contracts. However, significant new investment into coal is required to supply the new power stations being planned (Medupi currently being built, Kusile to be built).

China is building new coal powered stations at a rate, and by 2030 they are likely to have more than doubled their current coal consumption (http://www.eia.doe.gov/oiaf/ieo/coal.html). In addition, oil supply is constrained, and thanks to technology from companies like SASOL, coal can be turned into oil, so these prices have become linked.

To think that South Africa will continue to be able to buy coal at its historical low price is to believe pigs can fly. Thus when ESKOM states that we need urgent investment into coal mines (http://business.iafrica.com/news/2193264.htm), this should be raising alarm bells left right and centre! If ESKOM was prepared to may a market price for coal, companies would invest. But clearly they are not, hence the investment is not happening.

Watch out, South Africa, the blackouts from lack of coal are bound to return.

Frank

South Africa and the Nuclear Industry

It really distresses me that, instead of focussing on Renewables, there is still such emphasis on Nuclear in South Africa.

The background is that simply nuclear is too expensive as a future option (see http://www.greentechmedia.com/articles/read/nuclear-power-too-costly-to-revive). The claim is that nuclear can be a massive help in terms or reducing carbon emissions, but in reality there are two reasons why this is not true:

1. By the time a nuclear power plant is built, it is too late for any carbon benefits that they may have to accrue – we need climate change action now.
2. By the time a nuclear power plant is built (without the overruns that always happen), solar will be a cheaper option, creating more jobs, with far less risks.
3. Even now a combination of gas turbines + investments in carbon sequestration is cheaper and reduces carbon more per dollar invested than nuclear (see http://www.rmi.org/rmi/Library/E08-01_NuclearIllusion).

So it’s no surprise that Ontario just cancelled their nuclear plans due to price reasons: http://greeninc.blogs.nytimes.com/2009/07/01/ontario-puts-nuclear-expansion-plans-on-ice/

Yet in South Africa the nuclear lobby has setup an Industry Association (NIASA). R900,000 has been raised from the “sponsors” (including Eskom, Necsa, PBMR, Areva and Westinghouse) to promote Manufacturing, Education and Training, Communications and Regulation around Nuclear in South Africa. Due to this, it is likely that all major universities will have a curriculum in nuclear science and engineering by 2011. In addition, a 1 hour documentary is being produced for TV to promote Nuclear. (See http://www.eepublishers.co.za/view.php?sid=19842)

This is all, of course, backwards. Venture Capital in clean energy hit USD155.4 billion in 2008 in continues to grow, and the rest of the world is focusing on Clean Tech as the big next job creating space.

But here in South Africa it seems we are to continue on the risky, low jobs, capital intensive, big corporate profits Nuclear Path and ignore the obvious – that solar is our future.

Frank

FOOD TO FUEL

The whole biofuels space sometimes makes me sick. How can it be allowed that the US converts ¼ of their grain food crop into petrol when there are a billion people starving in the world? Not only has George Bush’s energy policies caused the Iraq/Afghanistan tragedies, they are now leading to people starving.

http://www.guardian.co.uk/environment/2010/jan/22/quarter-us-grain-biofuels-food

Frank

Solar water heating up? Or will it explode?

As many may know, South Africa has a solar water heater subsidy scheme driven by ESKOM. Although I believe a subsidy scheme is a good idea to grow the market, I believe that the way it is currently being implemented isseriously problematic.

For a subsidy scheme to be successful, international experience has shown
that long-term market certainty is a pre-requisite for a successful solar
water heating market. Unfortunately, I do not believe this is the case in
South Africa for the following reasons.

Firstly, it is a major concern of mine that the Solar Water Heating
programme is driven as a Demand-Side Management intervention out of ESKOM.
ESKOM's current business model is predicated on selling as much electricity
as possible, not reducing consumption. Demand-Side Management is about
managing demand in such a way that you don't have grid failures so that you
can continue to sell as much electricity as possible. Right now, with more
demand than supply, it makes sense for ESKOM to promote DSM (including SWH)
as it will help keep the grid stable. However, as soon as additional
capacity is added to the grid, it will become business as usual again (i.e.
sell as much electricity as possible), and SWHs will no longer make sense to
ESKOM.

Secondly, the way ESKOM has handled the SWH subsidy programme so far is
laughable. The reasons for this include:

• The subsidies are calculated using a testing regime implemented by the SABS that is not similar to any other approved international way of testing solar water heaters. Thus the test biases towards powerful systems rather than towards optimal solutions. It also requires complete systems to be tested, an expensive process that only increase the revenue of the SABS and adds no value to the industry.
• The test does NOT really test the long term quality of the system, just the thermal performance.
• The first round of subsidies were not large enough to stimulate the market. Now there have been a sudden dramatic increase in subsidies, in some cases this is as much as 300% (not 120% as indicated in the article), in other cases it has been 0%.
• The new formula for calculating the subsidies is not public, and seems to be unreasonably biased to large powerful expensive systems.
• Lastly, and most importantly, there is no certainty around HOW this programme is going to run over the next few years, let alone next 10 years.

Thus the market may boom in the short term, but then there may be a sudden
change in the subsidy (again), leading to the market collapsing. This gives
investors little certainty about the market.

The lack of decent quality testing protocols and market certainty means that
we are likely to have a market flooded by cheap systems, where the suppliers
will disappear as quickly as they arrived if (when?) the subsidy changes,
leaving consumers in the lurch with low-quality products they cannot have
maintained or warranty support.

It is imperative that the SWH subsidy scheme be taken out of the hands of
ESKOM and be placed with an independent body who is primarily tasked with
ENERGY EFFICIENCY, or the reduction of electrical consumption, not DEMAND
SIDE MANAGEMENT, the management of electricity demand to increase sales
revenue. This body would require a long term funding source to drive a
long-term, transparent, consistent subsidy programme, and a proper quality
testing regime. Without this we run the risk of the bottom falling out of
the market.

Frank

2nd CO2 tax & the NIRP

If one department in government seems to understand that maybe climate change is an issue, it is treasury. Or maybe they just see it as another way to make revenue? Anyway, fist we had the 2c/kWh levy for fossil fuel based electricity; now there will be a tax on cars from March depending on how much CO₂ they spew: http://www.engineeringnews.co.za/article/sa-to-introduce-new-car-tax-despite-concerns-2010-01-14. If you want that 4x4, better go buy it now.

Then the Integrated Resource Plan magically appeared in the government gazette on the 31^st December. As expected, a depressingly low 1020 MW is allocated to both the Medium-Term Power Purchase Plan (MTPPP) (for Independent Power Producers) and to the Renewable Energy Feed In Tariff (REFIT). 725 MW (I’ve heard) is for the Renewables, of which 400 MW will be wind. A tiny amount by all accounts. And amazingly they think they can get all of this online by 2011, starting 1^st March? Where’s the Power Purchase Agreement?

Of course, it should also be noted that this national plan does not align with ESKOM’s plans (surprise surprise). Read this article where the WWF takes the differences between the two to pieces: http://www.engineeringnews.co.za/article/tick-the-box-style-power-plan-slammed-by-wwf-2010-01-14

Frank

Ontario cans nuclear power

http://greeninc.blogs.nytimes.com/2009/07/01/ontario-puts-nuclear-expansion-plans-on-ice/

Is that the sound of chins hitting the floor in Areva and Westinghouse? Poor nuclear lobby, another deal in the can, gotta suck. All those billions of profits you could have made, all the millions spent wining & dining & putting-in-pockets down the tube.

It’s plain and simple: nuclear is too expensive and too risky (even with the so-called carbon benefits), and within 15 years solar will be way cheaper than nuclear. South Africa just needs to catch a wake-up and realise, that with its solar potential, Concentrated Solar Power is the way to go.

Frank

I spot some irked solar water heater customers

Boom, overnight EKSDOM decides to double its subsidy for Solar Water Heaters: http://www.engineeringnews.co.za/article/eskom-hopes-to-accelerate-swh-rollout-as-it-doubles-rebates-2010-01-13

I can imagine the suckers who bought subsidised systems two years ago (700 of them) and last year (1600 of them) will be pretty irked. Glad I don’t have to deal with those customers phoning in!

But why now? Well, for one think ESKOM is taking some SERIOUS flak over their price tariffs, so why not a little feel-good distraction? And where are they getting the money for this sudden doubling. Oh yes, it’s in the 35% electricity hike. Cool, so those who don’t get a SWH will pay for those who do get one. Hehe.

But I still have my serious reservations about a company who is motivated to make profit through selling electricity running a program designed to reduce the sales of that exact same commodity. Sounds like a conflict in interest to me.

Hmm, guess I might hang around until the subsidy doubles again... or maybe they’ll halve it once they get their price hikes...

Frank

Why Cap and Trade for CO2 is a BAD idea...

This is another brilliant little animation from the same people who brought us “The Story of Stuff”. It is “The Story of Cap and Trade” and how we are being lead down the garden path around solutions for Climate Change:

http://storyofstuff.com/capandtrade/

For the Story of Stuff and other similar, see http://storyofstuff.com/.

Frank