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Coal and Innovation in Eskom

Coal and Innovation in Eskom

CoalCoal andand InnovationInnovation inin EskomEskom -- risingrising toto thethe globalglobal challengechallenge

DrDr SteveSteve JJ LennonLennon ManagingManaging DirectorDirector (Corporate(Corporate Services)Services) Outline

¾South African Situation ¾Current Supply and Demand Projects ¾Meeting the and security challenges South African Electricity Situation Electricity demand and supply – key challenges

• South has reached the end of its surplus generation capacity • 1st challenge: Avoiding mismatch between demand and supply – Excess capacity - stranded resources – Capacity shortage - constrained economic growth • 2nd challenge: Correct choice of capacity to be constructed from an array of available options that differ dramatically in terms of: – Cost (construction and operating) – Lead time to construction – Environmental impact – Operating characteristics Long Term Demand forecast

National + Foreign long term forecasts plus Position line

130000 Electricity growth - 6% 120000 position based on Position - 4% 4% electricity growth 110000 High forecast - 3.2% supporting 6% economic Moderate forecast - 2.3% growth 100000

90000

80000 MW 70000

60000

50000

40000

30000 2005 2010 2015 2020 2025 Current Supply and Demand Projects Capacity Funnel Projects

Feasibility, Research Opportunity Build Identification Pre-feasibility Business Case, Contract

165 Concluding

PBMR 4500 3500 New Supply 1600 350 Oscar 1150 1500 1200 1775 Yanke 100 1332 961 600 UCG e 1600 Discard Coal Tango Lima Renewable Komati 1200 November Ingula Sierra India 1 100 1520 1128 Victor 6000 900 2400 3000 Concentrating 100 Camden Grootvlei Papa Nuclear 1 Solar Mike 4500 Co-Gen 1 Gas 2 500 Foxtrot 1050 300 400 1000 4500 Zulu 2400 0 Quebec Arnot 500 Hwange 1000 Echo Medupi P1&P2 HVDC 1 4500 Delta Hydro Coal 1 0 Hydro 1 600 Golf 4500 1050 600 450 Nuclear CBM 10000 350 2000 1300 Juliett Bravo Ankerlig Gourikwa 500 Nuclear n Gas 1 Gas Non Eskom 1000 Coal 2 Kilo Generation 1 Hydro 2 Whiskey Coal 765kV 400kV Solar

Transmission 26 125 MW 22 650 MW 18 350 MW 11 941 MW

Renewables * Red outer circle indicates – out of Borders project Capacity additions underway (Various stages of implementation)

Energy Efficiency 3000 MW

Coal Return to Service 9000 MW 3600 MW

Open Cycle Gas Wind 100 MW Transmission 2100 MW ~3000 km Nuclear 3000 MW Pumped storage 1330 MW

R150bn planned – 2007 – 2011 alone! Meeting the Climate Change and Challenges Climate Change Response Strategy

• Key Elements – Diversification of supply side mix – Energy Efficiency – Technological market – Policy advocacy – Adaptation Diversification of Supply Side mix Current aspirant portfolio

• Aimed at ensuring national demand is met whilst diversifying to non or low CO2 emitting technologies • By 2025 Eskom aspires to the following portfolio of Generation Assets* – totaling over 80 000MW of capacity: – Additional nuclear capacity of up to 20,000 MW – Additional capacity of at least 1,600 MW – Additional imports to a maximum of the prevailing reserve margin (15%) – Additional pumped storage as required – Additional 4000MW of OCGT (including IPPs) – Additional cleaner coal capacity (Carbon Capture and Storage ready) limited beyond 2015 to decrease the coal proportion from 86% to below 70% by 2025 • Support an enabling environment for more renewables – carbon credits, feed in tariffs, green trading etc

*Reviewed annually and subject to regulatory approvals and investment hurdles Diversify primary 13

Existing Mix by 2025

Coal OCGT Nuclear Renewable Energy Imports Pumped Storage Energy Efficiency Energy Efficiency 15 • Demand-side management and energy efficiency to achieve 8000 MW by 2025 • 3000MW by 2013 (R10bn) • Billion kWh programme internally Wal-Mart

NaturalNatural LightingLighting andand coolingcooling

SmartSmart LEDLED refrigerationrefrigeration LightingLighting Technological Innovation Technology opportunities under development

Ocean Current Energy Cogeneration Underground Coal

Advanced Nuclear Solar Thermal

Carbon Capture and Regional Storage HVDC Hydro Advanced Transmission Power Lighting An Efficient Future…

EPRI 2006 Carbon Market Investment Decision Making

• Eskom’s approach to Investment decision making includes consideration of:-

– Indirect costs – transmission benefits, CO2 cost and benefit, diversification benefits – Direct costs – capital, Operating & Maintenance, – Project risk – Strategic business alignment – Safety, health and environment – Macro and socio economic impact • Investment decisions must ensure long term energy security whilst reducing CO2 emissions •CO2 value essential to level the playing field Carbon Market Mechanisms

• Clean Development Mechanism • Shadow Carbon value used in investment decision making (50% of EU scheme value) • Future widespread and mature market essential • Applicable to all technologies and practices Comparative Costs in 2020-2025

Levelized Cost of Electricity, $/MWh 100

90 An Extraordinary Opportunity to Develop a Low-carbon Portfolio 80

70 Combined Cycle Integrated Gasification 60 Coal with Combined Cycle Wind capture with capture 50 Biomass Nuclear 40

30 0 1020304050

Cost of CO2, $/metric ton Source - EPRI Policy Advocacy Policy Advocacy • Constructive and long term input to domestic policy and strategy • Leader in defining position of global business community – International Chamber of Commerce –WBCSD –IEA – United Nations Processes (CSD, BAE etc) • Current focus on a post 2012 dispensation – contributing to the solution without compromising ’s economic and social whilst assuring Security of Supply Adaptation

Adaptation • Negative impacts of climate change will be experienced no matter what mitigation options are taken:- – Variable weather patterns – more droughts and floods, hotter summers, colder winters – Land use change – Changing population patterns – Changing customer base – impacts on agriculture and vulnerable industries. • Eskom adaptation actions – More robust water supply infrastructure – Low water consumption technology choices – Robust transmission infrastructure – Contingencies – eg spare towers – Integrated system – flexibility in delivery – Redundancy in the system Key Enablers Key Enablers

‰ Strategically aligned regulatory environment ‰ A national energy efficiency ethic ‰ Efficient and timeous approvals – especially environmental ‰ Unlocking the value of Carbon – CDM and global Carbon value ‰ Green power market mechanisms ‰ Strategic alignment on Primary – coal, , imports ‰ Availability of skills ‰ Maximisation of local benefits – fleet strategies, ASGISA leverage. SA Inc approach ‰ Availability of global and contracting capacity ‰ Increased investments in RD&D and technology transfer ThankThankThank you!you!you!