Energy discussion must be resolved soonest to spur economic transformation – Dr Yves Guenon

08/06/2018 (South Africa)
Energy discussion must be resolved soonest to spur economic transformation – Dr Yves Guenon

Certainty, particularly around South Africa’s future baseload energy supply must be achieved in the Integrated Resource Plan (IRP), in order to ensure supply security, which will, in turn, stimulate investment and economic transformation, Izibani consultancy founder and French South African Chamber of Commerce (FSCC) chairperson Dr Yves Guenon stated on Thursday.

Speaking at a panel on South Africa’s energy policy, which was held at the Mazars office, near Rosebank, Guenon noted that the foremost priority of the IRP is to ensure supply security “100% of the time” regardless of which energy technology receives the biggest allocation.
He stressed that developed countries also had vastly fluctuating economies and protracted labour strikes, but that they continued to receive investment because the electricity supply was secure.

However, he also stressed that while the revised IRP energy mix must prioritise supply security, it should also be aligned to the country’s specific economic realities.
Guenon noted that the IRP, having considered the aforementioned points, must balance baseload and intermittent production, and that the three viable generation technologies for baseload supply at present are coal, nuclear and gas.

He reiterated that the balance be founded on economics rather than bias for or against a particular technology.

Guenon added that, by 2030, at the latest, the country would have to replace around 10 GW of coal-fired baseload energy generation capacity. Guenon favoured replacing that baseload capacity with nuclear.

His reasoning is that nuclear is a comparatively low carbon-emission producer, which is capable of long-term production, and that South Africa has the necessary expertise available to operate nuclear power stations.

He cited Koeberg, noting that to date, its reactors had run for 480 days without any stoppages.

Meanwhile, Engie Southern Africa business development VP Michael Steiner noted that liquefied natural gas (LNG) prices, when combined with intermittent renewable energies, are very competitive.

He noted that while the Southern Africa Development Community (SADC) and specifically Tanzania, Mozambique and Angola, have large natural gas reserves, implementing the infrastructure to exploit those reserves has been, and will continue to be, enormously time consuming.

He suggests that the appropriate thing would be to, “bridge some of this time by making use of a relatively clean fuel that is available on the world market at competitive prices, that can be input into South Africa industries today, and not ten or fifteen years in the future.”

Sener Southern Africa MD and Spanish Chamber of Commerce in South Africa (SCCS) VP Siyabonga Mbanjwa agreed, stating that, currently, LNG prices are “opportune.”

He believes gas has potential for more than just use as an energy source for power generation, punting it as a catalyst to stimulate industrial development in South Africa.

“The fact that we have natural gas a stone’s throw away, that we are not fully exploiting, is regrettable. We need a decent sized gas pipeline to stimulate the economy, as the recently released figures for gross domestic product growth are more than disappointing – the worst in nine years.”

He noted that while gas could be an answer to the baseload question, it was, in his view, definitively an answer to the question of how to drive industrialisation, given its uses in multiple industries and the potential knock-on effects of such growth.

“We should use LNG as a temporary measure, while we’re sorting out whether we will explore and exploit shale gas, or while we’re establishing pipelines and sorting out agreements with our neighbours.”

Mbanjwa suggested renting a single floating storage regasification unit to provide offshore supply while the country tries to establish a gas industry.

Herbert Smith Freehills partner Brigette Baillie added that the existing legislation around nuclear, and gas is “very thin” and that gas legislation in particular needed a lot of work.

She pointed out that, at the moment, the gas exploration and production legislation is tied to the Mineral and Petroleum Resource Development Act, which she described as a "political arena".

“In order to give investors certainty, it is extremely important that the Gas Amendment Bill be expedited.”

IRP AND JOBS

Guenon noted that, given South Africa’s signing of the Paris Agreement, the IRP must place some emphasis on low-carbon emission generation by coming to a consensus on what “low-carbon emission technology” is.

He explained that coal-fired generation produces about 820 g of CO2/kWh, compared with wind generation’s 11 g of CO2/kWh. He noted that if government decided to implement an upper limited of 11.5 g of CO2/kWh, it would eliminate nuclear and solar from the mix, as well as coal.

Guenon added that even in the process of establishing an IRP definition on low-carbon emission technology, economics must be taken into account.

Steiner further noted that different technologies enabled vastly different levels of job creation, and as Electric Power Research Institute senior regional manager Barry MacColl had pointed out, national imperatives would have an impact on the policy adjusted IRP.

Baillie suggested that the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) be reviewed based on IRP allocations, as well as economic development imperatives.

Guenon stated that REIPPPP tenders would need to include a technology transfer component in future.

Steiner noted that there are a finite number of projects for REIPPPP, and that government could not just roll out round after round to simulate job creation.

He and Baillie suggested that manufacturing and other industries would have to pick up the slack in that regard.

Guenon noted that while the REIPPPP has and will attract foreign investment, none of those investors would establish workshops and manufacturing facilities to support projects that amount to less than 1 GW/y, as it was uneconomical.

Mbanjwa reiterated that long-term policy certainty and planning underpinned everything and that until the IRP was published and agreed to, even grudgingly, by society at large, very little in terms of job creation or industrialisation would emerge.

Energy Minster Jeff Radebe has committed to delivering the revised IRP by August.

Thursday’s panel was jointly organised by the SCCS, the FSCC and Afrika Verein.

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