CoalCoal andand InnovationInnovation inin EskomEskom -- risingrising toto thethe globalglobal challengechallenge DrDr SteveSteve JJ LennonLennon ManagingManaging DirectorDirector (Corporate(Corporate Services)Services) Outline ¾South African Electricity Situation ¾Current Supply and Demand Projects ¾Meeting the Climate Change and energy security challenges South African Electricity Situation Electricity demand and supply – key challenges • South Africa 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 Eskom 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 Coal 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 Cogeneration 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 Turbines Transmission 2100 MW ~3000 km Nuclear 3000 MW Pumped storage 1330 MW R150bn planned – 2007 – 2011 alone! Meeting the Climate Change and Energy Security Challenges Climate Change Response Strategy • Key Elements – Diversification of supply side mix – Energy Efficiency – Technological Innovation – Carbon 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 renewable energy 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 power trading etc *Reviewed annually and subject to regulatory approvals and investment hurdles Diversify primary energy mix 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 Biomass Energy Cogeneration Underground Coal gasification 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, Fuel – 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 emissions trading 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 Natural Gas 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 South Africa’s economic and social sustainability 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 energies – coal, uranium, imports Availability of skills Maximisation of local benefits – fleet strategies, ASGISA leverage. SA Inc approach Availability of global manufacturing and contracting capacity Increased investments in RD&D and technology transfer ThankThankThank you!you!you!.