In the long run, the initial upfront

costs are well worth it {writer: Roxanne Sonnenberg}

Despite numerous calls to the energy industry to explore alternative power sources – and particularly renewable energy sources – many industry players still feel that this switch could be an expensive one.

Yet, in the long run, the positive effects of a switching to alternative energy sources such as renewable energy will not only be seen in the environment – as the carbon emissions will be lowered dramatically – but also in the economies of countries making the switch.

With a switch from fossil fuels to alternative energy sources becoming increasingly inevitable, those who adapt first could possibly gain some competitive advantages in the long run.

Proof that even in the face of adversity opportunity will always be present, can be found in the energy sector in the United States military, China, Mexico, France and even parts of South Africa.

The US military remains the largest consumer of energy in the world. The US Defense Department is now at a point where it needs to cut its energy consumption drastically. A recent report released from the Pentagon highlighted the need of the department to increase its use of renewable energy supplies while improving operational effectiveness.

The institution that will be responsible for reducing the US military’s energy consumption is the very same one that brought us the Internet – the Defense Advanced Research Projects Agency (DARPA). It has developed a programme that aims to alter completely the design for lighting on US military platforms.

The programme is called high-efficiency distributed lighting, or HEDLight.

Saving on lighting

It is expected that naval ships using HEDLight will save up to 87% of electricity used on existing lighting systems. This means that for every $1 million presently spent on lighting, the Navy will in future only spend approximately $130 000.

In December 2009, former US president George W. Bush signed into law an energy bill that would transform America.

In an effort to conserve energy, the US government inserted a mandate that would basically outlaw the energy-wasting fluorescent light bulb.

With the outlawing of the fluorescent light bulb, which left a ‘gap’ for the development of a commercially viable alternative lighting system, light-emitting diodes (LEDs) became the most efficient method of producing light commercially today.

DARPA was awarded a contract of $416m to retrofit lighting. Even submarines are fitted with LED lights, as they operate in various temperatures ranging from minus-40 degrees to almost boiling point.

Simply put, this lighting fixture is at least 87% more efficient in comparison to the fluorescent light bulbs used in Navy deployment. These LED lights are so efficient that they produce almost no background heat and are said to last up to eight years in continuous operation. This means that LED light bulbs outlive the common incandescent bulbs by 4 600%!

Mexican experience

Mexico has become active in its attempt to secure energy. For the first time, the country is looking to open its shores to major foreign oil companies such as Chevron and Shell in an attempt to address its falling production levels.

It was reported that in June, China imported a record 5.4 million barrels of oil daily. China National Petroleum Corporation recently announced a new venture with Encana to develop an unconventional gas resource in Montney and Horn River.

Back home, South Africa’s energy gap is becoming worrisome as big business has set alarm bells ringing when it recently announced that special attention needs to be paid to programmes that would help to offset an anticipated shortfall of electricity supply – which is expected to emerge during the course of the next year.

The electricity system recently stabilised since the 2008 blackouts, mainly due to the decline of demand brought about by the first recession experienced in South Africa in 17 years.

However, the demand for electricity is recovering, and Eskom, the state power utility, has started sending out warning messages concerning the vulnerability the system is facing in 2011 and 2012.

The vulnerability is expected shortly before the synchronisation of the grid for the Mepudi Power Station’s first six 790-megawatt units in April 2012.

Medium-term plan

Bobby Godsell, the chairperson of Business Leadership South Africa (BLSA), is reportedly working on a business proposal that aims to save, create efficiencies or develop co-generation, involving 500MW over the medium term.

This comes as funding for the R142-billion Kusile Power Station is still to be secured.

With the proverbial ‘good times’ soon to be over, the need to close South Africa’s gap – with regard to supply and demand for energy – has become urgent. There is a need to find a sustainable model to fund the expansion of the power network as well as a need to facilitate private sector involvement.

BLSA argues that though currently there is insufficient space for private participation in South Africa, private participation in infrastructure rollout has to be considered if the goal of establishing the necessary infrastructure is to be reached.

The World Wide Fund for Nature (WWF) has said that at least one half of South Africa’s electricity generation could come from renewable energy sources by 2030.

Richard Worthington, WWF climate change programme manager, believes that renewable energy is no longer merely a concern for the environment, but rather essential to the economy heading into the future.

Reaching the 50% renewable energy goal by 2030 remains feasible even though the country is presently still heavily dependent on coal to produce energy.

In the report entitled “Renewable energy in a just transition to sustainable supply”, South Africa shows potential to upscale rapidly to renewable energy.

The report introduced the sustainable national accessible power planning (Snapp) tool, which calls for an interrogation of the government’s proposed energy plan and allowance for different energy scenarios.

Currently, the need for increased electricity to meet development objectives coincides with the growing awareness, both short- and long term, of the implications that it could have on the country’s economy.

Hydropower in Africa

In terms of electricity generation and regional power trade, hydropower projects could save Africa at least $2bn a year, even though Africa remains behind other regions in the ability to harness its potential. Africa still has a huge power investment requirement.

Despite the large hydropower potential of approximately 100 000MW, the continent needs to boost its generation capacity by 7 000MW a year, with its power connections increasing by five million in order to keep up with demand.

According to Vahid Alavian, the World Bank region water and hydropower adviser, most countries in Africa are too small to generate power efficiently even though Africa has huge generation capacity.

Furthermore, more than 20 countries have a population smaller than five million people, and less than 20 countries have economies less than $5m.

In the interim, South Africa’s Department of Energy director-general Nelisiwe Magubane says that Africa’s ability to generate hydropower should not be underestimated. She noted the capital cost of hydropower plants are often considered prohibitive, but it is crucial to look at its lower operating costs in comparison to other energy sources.

Yet again, the importance of the government allowing private sector participation in the form of public-private partnerships or independent power producers is being highlighted.

Wind power

Information provided by a University of Cape Town research student Killian Hagemann is now being viewed as a breakthrough in the development of wind energy in South Africa.

It found that South Africa has enough wind to provide 35% of the country’s electricity.

The wind-generated electricity would work out to be cheaper than the electricity produced by the coal-fired power stations of Medupi and Kusile.

Hagemann’s research shows that the wind in South Africa is reliable and consistent enough to supply power to the national grid if turbines are built to form a network across the country. Wind turbines start to generate power at four metres a second, which in the long run becomes cheaper than coal-powered energy, as wind energy does not produce massive amounts of climate-changing carbon that coal produces.

Though studies have been concluded in the late 1900s, which indicate wind potential of anything from 500MW to 5 000MW, the Western Cape has already begun projects proposing independent power producers (IPPs) for a total of 6 000MW, with benefits that include reducing carbon intensity of our exports, consistent higher job creation rates and great portfolio risk management.

IPPs such as the Darling Wind Farm contribute packets of renewable energy in the 1MW to 10MW range.

In 2002 at the World Summit on Sustainable Development, Eskom pledged to decrease its coal dependency by 10% in 10 years. After much debate, the renewable energy feed-in tariffs were approved by the energy regulator.

With the World Bank insisting that a small portion of its loan to Eskom be used on other energy products, the state utility has yet to start delivering on its promise made by Steve Lennon that “Eskom is South Africa’s renewable energy leader”, as “its expertise are unmatched anywhere in the country”.

Industry commentators argue that wind and solar power, though irregular sources, can only contribute to the grid powered up by conventional baseload power stations; however, this has not deterred Europe, where the contribution of renewable power sources is significantly high.

Moving away from oil

Indicative of the opportunities that come with change is the development of alternatives such as efficient electric motors.

The chief executive officer of South Africa’s Optimal Energy Kobus Meiring recently said that while it has already received R200m for the development of the Joule electric vehicle, it requires considerably more to break even.

This comes in an attempt to stimulate the start of a new type of automotive industry in South Africa.

The aim of Optimal Energy is to produce South Africa’s very first electric vehicle, with around 90% of the anticipated 50 000 vehicles a year production volume to be exported. The second prototype presently being tested is called the Joule, a plug-in-and-charge vehicle with a range of 300 kilometres before it requires charging.

With the first Joule set to be released in 2014, the funds to industrialise Joule are becoming an urgent need.

Meiring believes the Joule is different, since it is a commercial product that can be sold to a growing market in Europe and parts of the US.

However, the window of opportunity to enter the electric vehicle market is very small, and it is advised for possible investors to become involved before time runs out.