The REAL price of coal

A new Harvard study has found that, if the full lifecycle costs of coal in the United States were factored in to the electricity price, then the price would be an ADDITIONAL R0.75 to R2.15 /kWh!

And that is in the US. In SA, we burn worse quality coal… so why on earth are we even considering coal in our future?

Frank

Question: What do Julius Malema and ESKOM have in common?

Answer: They both would like to see coal nationalised.

Hmm, makes me wonder if there is some conspiracy theory going on here – could Juju be on the ESKOM payroll?

But seriously, for some time I have been warning that one of the under-rated risks to our future electricity generation is the availability of low-priced, environmentally-friendly coal. (OK, there is no such thing as environmentally friendly coal – that is a pipedream of the Carbon Capture and Storage people). But in terms of the actual resource availability, like most commodities, the available supplies seem to be over rated, the cost to mine are going up, and of course international demand is going up dramatically. Thus it is little surprise that ESKOM would like to see coal classified as a strategic mineral and ensure its own supplies.

Now to the shock of most of you, I am not necessarily against the nationalisation of mines and/or coal (I am certainly against the unregulated free market management of these resources). But perhaps there is another approach that should be considered in this debate.

Return ESKOM from a profit-driven company to a services company. At the moment, ESKOM is running like any normal business, i.e. for profit (and short term profits at that). It was this mind-set that lead ESKOM to speculate in derivatives, reduce their coal supplies at power stations, etc, as it made the books look good. What we need is ESKOM to refocus on delivering a service – namely low-cost, long-term sustainable electricity. Now their vision waffles on about this, but unless the financial motives of the employees change (i.e. not bonuses based on profit, but bonuses paid on long term secure electricity), ESKOM’s behaviour is not likely to change.

It is this shift that could bring Energy Efficiency to the fore, thus allowing us to delay the building of any new coal power stations, while we begin the switch to clean renewable fuels.

Frank

ESKOM math

Firstly, a very Happy New Year, even though 8% of it has already drifted by!

There has been a strange but interesting batch of ESKOM press releases recently.

The first argued that SA had saved from the retrofit of 43.5m CFLs, “1800MW of electricity power” and that that is “1/3 of Medupi or Kusile”. What a load of rubbish! Let’s assume that a 60W bulb was replaced with an 11W CFL. Then the saving is 49W WHEN THE BULB IS RUNNING. 89W x 43.5m bulbs = 2100 MW, close enough to the 1800MW argued. But how many hours is the average lightbulb on? Let’s be conservative and say 5 hours a day, although in reality it is probably less. A coal power station probably runs 23 hours a day on average. Thus a 1800MW power station will produce 41 GWh of electrical energy a day, while 1800MW of lightbulbs will consume only 9 GWh per day. So in reality, the lightbulbs are only 1/14 (7%) of a Medupi or Kusile! It is the classic mistake of confusing POWER (MW) with energy (MWh).

Another example of this is the argument that South Africa’s proposed IRP will lead to “SA’s electricity generation in 2030” being sourced “from coal (48%), renewable energy (16%), nuclear (14%) and a combination of imported hydro, gas and pump storage (22%).” But again, these are the peak POWER figures of the power stations. Coal & Nuclear run at a much higher capacity factor than solar or wind (i.e. more average equivalent full-time hours of operation every day). Thus if you calculate the ENERGY figures, it gives a very different story:

• · COAL and other: 70%
• · RE: 7%
• · NUCLEAR: 23%

That is a pathetic target for 2030! Just 7% of electrical energy from renewables.

Then to ESKOM target of installing 925,000 SWH by 2013. Over the last 2 years or so, they have installed 33 000. At a rate of 16500 per year, we will have 82,500 SWH installed by 2013…. (Good Luck!) They also say that 6.4 GWh of electricity has been saved by SWH. Simply dividing that by 33000 SWH equals 193 kWh/SWH. That’s about 4000 litres of hot water per SWH. Or about 45 baths per SWH.

Maybe people are bathing less because the lights are too dark…

Frank

PS: Off to Lesotho next week to install a met mast at 3300m! Wish us luck…

Comments on Energy Minister Dipuo Peters' speech at the Nuclear Roundtable 1 Dec

On the 1^st December, the Minister of Energy spoke at the nuclear Roundtable.

She said the following: “Nuclear energy is becoming a preferred solution address matters related to energy security and energy independence and in efforts to mitigate the dangers posed by climate change. A number of countries are showing renewed interest in nuclear energy while others are considering the expanding existing programmes, as is the case with our own country.” Preferred? I worry about that.

She also said: “Countries that have successful nuclear programmes have a high percentage of citizens who understand what nuclear energy is, the risks and benefits associated with it and therefore support such programmes.” That is a blatant mistruth. One only has to look at the European rejection of Nuclear Energy.

Below is a question proposed by the media, with a detailed response. I have briefly further critiqued her responses:

1. Why does government believe nuclear is a technology that should be pursued?

Government believes this for several reasons

• Nuclear power is a proven baseload electricity option
1. The baseload / peaking load paradigm is changing internationally. The introduction of IT and demand side management systems with dynamic supply/demand pricing structures is changing the game. Distributed energy is the future.
• Nuclear power can effectively reduce our greenhouse gas emissions
1. But not within a reasonable timeframe, and not without a massive CO₂ footprint during the build phase.
• Nuclear power could be used to improve local beneficiation of our uranium by creating jobs across all aspects of the fuel cycle
1. Very few jobs compared to Renewables
• Nuclear power is economically competitive, and is second only to coal power in terms of levelised cost of electricity
1. If this is true, why did ESKOM not go ahead with Nuclear 1? Because it was too expensive. So this is simply not true.
• Nuclear power is safe when well managed, and we have proven this for over 25 years at Koeberg.
1. Except for “the bolt” issue, and a few others.

Government is also aware that the following key issues that need to be addressed when embarking on a nuclear programme

• Disposal and/storage of long term radioactive waste
1. A major, internationally unresolved headache
• Non-proliferation of sensitive nuclear technology
1. Becoming harder and harder to do
• Security of nuclear installations and materials
1. We have already had scares of Greenpeace activists getting access to facilities and people being caught illegally trading sensitive nuclear materials.
• Safety of people and protection of the environment
1. Two words: ‘Black Swan”. A black swan is a highly unlikely high unpredictable catastrophic event. For examples, Chernobyl and the BP Gulf oil spill. There is no reason why this could not happen again.
• Public perception and understanding of nuclear technology
1. I think the public perception is right on – it is dangerous
• Skills development for localisation of industry
1. Minor compared to the job creation Renewables could have

What Nuclear does do is allow for an arms-deal size amount of money to be managed by a few greedy people, with no care for the real impact on South Africa’s economy and people.

Frank

Sustaining Cape Town - imagining a liveable city

The book in which I contributed a chapter has been published! “Sustaining Cape Town - imagining a liveable city” - I was quite delighted to see it for the first time in hard print yesterday.

The book grew out of some work done for the City of Cape Town on imagining what an alternative future for the City of Cape Town might look like, and how to achieve it. I was privileged enough to be able to do the work on Energy, and thus propose an alternative energy approach and solution for Cape Town and the Western Cape.

The book is printed by Sun Press, edited by Mark Swilling, ISBN 978-1-920338-30-5. It will shortly be available from www.sun-e-shop.co.za

Frank

SA Peak Coal

Here is a thought not taken into the IRP2 planning process: What if Peak Coal were hit to South Africa in 2020? Similar to peak oil, the argument is that a few years after discoveries have peaked, production will peak too, and this is independent of an increasing resource price. But the SA context is a little different, with the current reserves having just been DOWNSIZED from 50 gigatonnes to 15 gigatonnes!

This is detailed in a report from the consultancy Umvoto, a summary of which can be found here.

So it seems that there may be a new pressure coming to move away from coal: price.

Frank

IRP2 Figures released!

IRP2 is being released tomorrow, here are the figures for 2030:

• 48 % Baseload Coal
• 14 % Baseload Nuclear
• 16 % Renewable Energy (dispatchable)
• 9 % Peaking Open Cycle Gas Turbine
• 6 % Peaking Pump Storage
• 5 % Mid-merit Gas
• 2 % Baseload Import Hydro.

That means 33% of all new build will be Renewables, 25% Nuclear, 9% Coal. 4.5GW of wind for 2020.

Frank

One clear reason why the Energy Intensive User Group does not have South Africa's interest at heart

The South African Energy Efficiency Association should know better than to publish a pro big-energy business article like this one from the Energy Intensive User Group. The article claims to be unpacking the fallacies around the so called “secret deals”, but is in fact a defence of the tariff structure that favours them.

Let me start out by saying that the cheapest form of new generation is energy efficiency – thus if we reduce consumption, we can make that power saved available to other consumers. New build drives up the price of electricity, where as saving adds to the bottom line of business (and increases GDP). Thus saving energy will generally always be to the good of the country

But one of the more fascinating lines in this article says the following: “Note that if large users consume less or do not expand, there will be less levies recovered from them which means smaller users will have to pay even higher prices.” What???? Is the organisation that is promoting Energy Efficiency actually saying that large consumers should consume MORE i.e. NOT become energy efficient? This is ludicrous, and underlines the weak influence that the Energy Efficiency lobby has on government and industry.

In addition, the following is argued:

· Large residential users (>600kWh) are now cross-subsidising the poor (i.e. low consumers). This certainly does not encourage government to help such residential over-consumers reduce consumption; in fact they may encourage it.

· That “it is a fact” that “long-term and stable consumers are actually subsidising the smaller unpredictable consumers”. TO what extent? The smaller consumers only use a fraction of our electricity. The largest 138 customers consume nearly 40% of the energy, and largest 40 000 customers 75%. Residential consumption is 4% of sales and 10% of revenue! So who is profiting off who?

Energy efficiency should be at the heart of our energy policy. But it is not – policy is still ruled by big energy intensive business.

Frank

Nuclear socialism

Hi All

I am sitting in JHB international airport waiting to catch a flight to Maun, Botswana, where I will be commissioning another off-grid system. Do you know that if you fly in the customs union you cannot buy in Duty Free? I did not, and have done so before, although apparently you can get into a lot o ftrouble. Thing is, they won’t even charge you duty (VAT) to buy the items you want. Seems like a missed opportunity to make a sale.

But I digress.

Another study has come out showing why Nuclear is a bad idea simply due to finance problems. Check it out at: http://www.vermontlaw.edu/Documents/IEE/20100909_cooperStudy.pdf

Some quotes:

“A nuclear plant will cost $7,000 to $10,000 per kilowatt”

“It shouldn't be called the French Nuclear Miracle. It's more like a recurring nightmare.”

The French Nuclear Miracle is a misconception. There is no reason to think that things will change if the U.S. follows France. It would replicate what I call Nuclear Socialism. Nuclear power would remain a ward of the state."

But scary thing – I saw an advert from the South Korean Nuclear Corporation in the Economist.... Sp it’s not just Areva in South Africa anymore.

Frank

Portugal powered by almost 45% Renewables

Power from Renewables can be done.

http://www.nytimes.com/2010/08/10/science/earth/10portugal.html?_r=1&pagewanted=all

Frank

Solar PV is now cheaper than nuclear

Solar PV power is now cheaper than nuclear, according to a new paper, and this is without all the concerns of nuclear: long time to build, government guarantees, fuel and spent-fuel management risk, terrorist risk, etc.

And to think, CSP with storage will end up even cheaper!

See: http://www.nytimes.com/2010/07/27/business/global/27iht-renuke.html?_r=5&pagewanted=1&src=busln

Full report: http://www.ncwarn.org/wp-content/uploads/2010/07/NCW-SolarReport_final1.pdf

In response to: "An energy crisis or not? - Dr Philip Lloyd

Response from Dr Philip Lloyd:

Dear Frank

Thanks for your note. Debate always helps, and if I stir a little, it is to stimulate debate - as you do!

First, I must disagree with your love of diversity. Technologies become more robust as they are more widely applied, and that is particularly true in a single economy. I give you the example of France, which decided to go nuclear. It now has 58 reactors of essentially an identical design. A huge industry has been created to service this technology; about 230 000 jobs have been created; and the cost of bulk power in France is now the lowest in the world. "Spread the risk" you advise - minimising the risk in what you have may be a better option.

"The rest of the world seeks to tax carbon emissions." If you have been following the US debate, you will know the US ain't going that way any day soon. China isn't; India isn't. Some of the Europeans are going in that direction, but then, they have governments that desperately need new sources of revenue.

As regards our "dirty" act, consider for a moment that the average nation gets ~80% of its energy from fossil fuels, of which about one third comes from each of coal, oil and natural gas. We lack oil and natural gas, so instead of getting ~27% of our energy from coal, we get about 70%. That is the reason why we appear to be 'dirty' relative to our peers - in fact, we are providing our people with the most reliable and cheap power we can provide, and doing so from our own resources, which is a real merit in a developing nation such as our own.

Yes, I will grant you that in theory you can provide gigawatts of renewable power on demand - the problem is that no-one has so far succeeded, and until they do, it will have to remain a pipe dream. As for CSP plants, the costs (if NERSA is to be believed) are high, and I cannot figure out a way of paying for high cost power - and neither can NERSA. The question just gets passed around like a hot potato. Crack that one, and we will all thank you.

"Taking a lifecycle cost, the Renewables work out cheaper too." Really? Where? I can give you the US nuclear costs - they are the lowest of all the US sources of energy; or the French (which I have already quoted); and when I last looked, our Koeberg was at the bottom of the heap. A recent study on wind power found large turbines to be achieving a 4-year MTBF requiring a major overhaul - that knocks your lifecycle costs out of the window (http://www.ewec2010.info/fileadmin/ewec2010_files/documents/side_events/Reliability_PJT.pdf). Don't give me hypothetical costs - quote real life experience.

Yes, I entirely agree with you about energy efficiency. Eskom has been preaching it for years, with a definite modicum of success. Unfortunately even when there is energy efficiency, economic growth and energy consumption are very directly related, and we need economic growth, so that we are driven to supply more energy to meet the growing demand. The debate is how best to do that.

I admire your optimism, but, please, let it be tempered with just a touch of realism. I am sure that with persistence, renewables will find their rightful place - I am equally certain that, with 80% of the world's energy presently coming from fossil fuels, they will be with us for quite a while.

Best regards

Philip Lloyd

In response to: "An energy crisis or not? - Dr Philip Lloyd

Dear Editor, EE Publishers

I am surprised at the negative tone expressed towards diversified energy, carbon emission caps and renewable energy by Dr Philip Lloyd in “An energy crisis or not?” (http://www.eepublishers.co.za/view.php?sid=22258).

Firstly, he expresses that “Diversity of energy resources is a luxury you can afford if you have enough.” But diversity is precisely what you need when you DONT have enough, to ensure that you spread the risk of betting on a single technology. The more diversity, the less risk of failure, the more you can build quickly

In terms of carbon, as the rest of the world seeks to tax carbon emissions, South Africa has two options – either to pursue the dirty energy option and become an international pariah, or commit to cleaning up its act, starting with a form of carbon tax. Morally and ethically, in the light of climate change, the first option is unpalatable.

For Renewables, he claims that “no one has yet figured out a way to produce renewable gigawatts of power on demand except by hydropower”. He neglects to mention that Concentrated Solar Power with storage can do this, not to mention that distributed wind can also act as baseload with a high level confidence. Coupling multiple Renewables together with a little pumped storage can indeed provide 100% baseload. I draw you attention to some work done by Stanford University showing how California could supply 100% of its power from Renewables (“Matching Hourly and Peak Demand by Combining Different Renewable Energy Sources, http://www.stanford.edu/group/efmh/jacobson/HosteFinalDraft.pdf). With a country as vast as ours with its abundant resources, it should be easier than for California!

But in reality, South Africa does not have a baseload problem – it has a peaking power problem. Again, CSP plants with storage would be ideal for this application, storing energy during the day and running as peaking plants on demand.

Dr Lloyd argues that we need to build coal power stations quickly, but we can roll out Renewables far faster than coal (2 years to build wind), and certainly many times faster than the other proposed alternative, Nuclear (20 years). Taking a lifecycle cost, the Renewables work out cheaper too, with less risks associated with long term fuel prices (for coal and uranium).

But the fastest way to create more capacity is by using less, and this is where Energy Efficiency could play a huge roll in South Africa. For too long our electricity has been too cheap, and we use it inefficiently. If we as a country were to drive a massive energy efficiency campaign, perhaps 100,000 jobs could be created, with a massive net boost to GDP, while alleviating for the short term any need for new power stations.

Thus it becomes quite clear that we can meet our energy needs quite quickly without reliance on coal. What is needed is the political will and foresight to see the benefits of Renewables while shunning the courtship of the current vested interests of coal and ESKOM.

Frank Spencer MSc(Eng) BPhil (Sus Dev)

Solar power at night

One of the negative things often levelled against solar power is that it can only produce power when the sun shines, and thus cannot be operated as a base load power plant.

Not anymore.

Solar power at night is now officially here, and I am not talking about moon and starlight power! The first Concentrated Solar Power plant with molten salt storage has gone live. The molten salt is a type of battery that stores energy produced during the day as heat, and then this heat can be used at night to create electricity.

See:

http://www.solarthermalmagazine.com/2010/07/14/enel-inaugerates-molten-salt-thermal-energy-storage-system-for-archimede-solar-thermal-power-plant/

http://www.ice.gov.it/sedi/umbria/energia/angelantoni/Archimede%20Company%20Profile.pdf

http://www.guardian.co.uk/environment/2010/jul/22/first-molten-salt-solar-power

CSP with storage is the future of base-load power for the grid - but will South Africa, with the best sun in the world, be riding this sunbeam?

Frank

REFIT project timeline

I am starting to wonder if we will see any Renewable Energy Feed-In Tariff (REFIT) projects start before 2013. If so, we can say bye-bye to meeting our abysmal 4% RE target by 2013!

Here’s why: The new Single Buyers Office (SBO). The REFIT programme is going to be moved from the National Energy Regulator (NERSA) to the SBO (“The Single Buyer Office will execute the REFIT programme in accordance with the process set out in New Generation Regulations and in accordance with the Evaluation Criteria provided by the Regulator.”)

The SBO process will consist of the following steps:

· RFQ

· RFP

· Evaluation +Selection of Preferred Bidder(s)

· Negotiation with Preferred Bidder(s)

· Financial Close

The proposed timeline for this:

Project Milestones REFIT Proposed timeline
Establishment of enabling environment........ Q3 2010
Issue of RFQ............................................. 1 month after enabling environment established
Receipt of Statement of Qualification (SOQ)..2 months after RFQ
Issue of RFP...............................................2 to 3 months after SOQ
Bid submission date ....................................3 to 6 months after RFP
Bid evaluation and selection of preferred bidders.......................2 to 3 months
Financial close.............................................Up to 6 months

So that is 1½ years from Q3 2010 at best, which takes us to 2012 before licenses are awarded.

But hang-on, who is going to staff the SBO? ESKOM employees of course. Independent in name, but he who pays the piper calls the tune! So I guess one can assume that the above timeline is rather, um, optimistic...

Frank

RE: SWH vs Heat Pumps

Interesting Carte Blanche programme on SWH vs Heat Pumps: http://beta.mnet.co.za/carteblanche/Article.aspx?Id=4030&Showid=2

The South African Car Pricing Scam

It has amazed me that for years and years the South African public has been misled into believing that cars are “affordably” priced, both for new and used cars.

They are not – and we the taxpayer are being taken for a ride. A minimum Billion Rand a year ride. Let me explain.

South Africans are not allowed to import cars directly from overseas. We have a protected market, supposedly to support the local car manufacturing industry. However, if you live within the South African Customs Union (SACU), you CAN import cars, and at a fraction of the price. A Business Day article today has the National Association of Automotive Component and Allied Manufacturers bemoaning the fact that South Africa is losing over a Billion Rand in car revenue due to the import of some 10,000 Asian cars being imported into the SACU, and then ending up being driven in South Africa. That is a saving of R100,000 per car!!!

Great to know this! I definitely intend to try do this, because it will certainly save me a FORTUNE on a 2^nd hand car. And I will have R100,000 to spend in the South African economy on other things.

Car Price Examples:

New top of the range Prius in the US: R224,560, in South Africa: R378,000.

2^nd Hand 2006 Honda Civic in the UK: R80,000, in South Africa: R150,000.

And I could list a hundred more.

Capetonians can buy green electricity!

It is a great day in Cape Town. From today you can buy pure, carbon-free, wind produced electricity! And the price: Only 25c/kWh more than regular electricity. What a bargain!

Don’t believe me? Check out: www.capetown.gov.za/buygreenelectricity. You can get an application form there.

So what are you waiting for? Buy some green electricity today! (Capetonians only)

Frank

ESKOM's secret deals revealed

So the truth is out. The DA has released the secret ESKOM report (downloadable from their web-site here) that includes the details of the low-cost deals with some of the big electrical consumers in South Africa.

Here is my summary:

• Motraco, a Mozambican electricity distribution company, pays 12c/kWh. This agreement is in place until Dec 2025. Motraco owes ESKOM R100million.
• ESKOM’s projected cost of production in 2008/2009 was 32,2 c/kWh.
• Gross profit margin is 35.2%, Net profit margin is 6.9%.
• Net reserve margin in Mar 2009 was 8.5%. Critical is considered 15%.
• BHP Billiton consume 9.3% of all the electricity ESKOM consumes. Despite this, because of the commodity linked contracts, the revenue from BHP Billiton was 50% less in 2009/2010 than in 2008/2009. BHP contributes 0.1% to the SA GDP.
• ESKOM pays R108/ton on long-term coal contracts, but during the coal shortages, paid 150% more - R270/ton. The contributed heavily to ESKOMs R8.3billion shortfall in 2009/2010.
• ESKOM’s bad debt amounts to over R2.8billion. Soweto owes R1.8billion of this.
• An accounting provision is made for the Chief Executive Officer of R41.3m /year. This is why Jacob Maroga claimed R85m in severance (2 years package).
• Staff turnover of up to 7.3%.

There is another summary on Moneyweb.

In a nutshell, we have a poorly performing utility, selling a large chunk of its electricity well below cost that the rest of the consumers need to subsidise. If they can’t even get their coal contracts, large customer contracts and CEO contracts right, how can we trust them?

Frank

A sad day in South Africa's Ecological, Economic and Energy landscape

Last night the world bank loan was approved. To understand why this is a tragedy, Mark Swilling could not have explained it better in his article Intelligent Power, also published in the Cape Times a few days ago.

Frank