New resource plan launched into world of uncertainty {writer: Staff reporter}

In March this year, the South African Cabinet approved an adjusted Integrated Resource Plan (IRP2), containing a substantial nuclear energy component at a time when one commentator observed that what is happening at the Fukushima Nuclear Power Plant in Japan has brought the world to “the end of the nuclear era”.

Electricity supply in South Africa is again under increasing stress and the outlook, with winter approaching, looks gloomy.

With the prospects for this year already negative, recent events have knocked a large chunk of supply out of the system just before the annual peak demand of winter sets in, with very little spare capacity to deal with it.

This threatens everything, from mining and manufacturing output to social stability in delivery-stressed townships, economic growth and, most importantly, the country’s ability to try and meet the government’s latest target of creating five million new jobs over the next nine years.

At the recent Presidential Business Summit on Job Creation, business leaders told the government that reversing job losses and creating new jobs, particularly in the mining sector, would require stable and reliable electricity supply, among others.

During the rolling blackouts of 2008, the mining sector bore the brunt of Eskom’s energy-saving measures, losing millions of rands in lost production.

It was the mining sector that shed the most jobs in the global economic crisis that set in shortly afterward.

Already in October last year, the Department of Energy warned that South Africa would plunge back into a situation of rolling blackouts as from this year until 2016, unless urgent steps were taken to accelerate the realisation of the non-Eskom generation and energy-efficiency projects.

“The latest forecasts indicate a worsening situation starting in 2011 and proceeding through to 2016. This situation poses a real risk of rolling blackouts, similar to those experienced in 2008, and a serious threat to government’s objectives for growth and job creation,” the department warned at the time.

Worsening situation

Since February, the outlook has worsened dramatically. Some 4 000 megawatts – 10% of Eskom’s total capacity – at one point went off the national grid, due to planned maintenance and problems with overworked, ageing power stations. Eskom said these older power stations required substantial upkeep.

However, with reserve margins under pressure, and the problems that had developed across the national grid, Eskom was struggling to keep up with required maintenance without further compromising supply security.

On 9 February, the maintenance cut supply by a further 600MW when a turbine at Eskom’s Duvha Power Station – one of its largest – exploded during a test.

Replacement and repairs will cost up to R3 billion at a time when the utility is battling to raise its shortfall of R80bn in funding for its immediate expansion programme aimed at hauling the country out of its current power problems.

Worse even than the cost involved will be the fact that 600MW could be lost to the national grid for a period of up to 18 months before a new unit may arrive from France. If, during that time, any other mishaps occur – as did at the Koeberg Nuclear Power Station in 2008 – or if problems with old equipment and plants escalate, electricity supply in South Africa could run into very serious problems.

Then, as of 14 March, Koeberg’s unit two was shut down for maintenance, taking a further 900MW off the national power grid. It will take approximately 55 days to complete the refuelling, maintenance and statutory inspections, with an anticipated return to service by the second week
of May.

While Eskom spokesperson Tony Stott downplayed the impact as representing only 2.2% of Eskom’s total capacity, when this is combined with the 1.5% loss of capacity due to the Duvha accident, it adds up to 3.7%, which leaves Eskom’s preciously small spare capacity margin of 10% overexposed. At this stage, the utility should be operating with an absolute minimum margin of 15%.

Vicious cycle

These developments compromise Eskom’s planned maintenance programme, which means more big breakdowns may be looming – which could translate into rolling blackouts.

The problem becomes even more acute with rising consumer demand as well as seasonal peak demands only weeks away.

These developments prompted Eskom to devise a plan whereby it could save at least 1 000MW over the next three years by managing demand from its 500 biggest customers, and another 1 000MW through efficiencies at its existing plants to counter the expected shortfall this year.

To manage demand from its 500 biggest power users, Eskom may set mandatory reduced usage targets for them, which could compromise economic growth and thus job creation, among other things.

As for savings from increased efficiencies at existing plants, recent developments outlined above may already have diminished that option somewhat.

Eskom announced a five-year large-scale energy-saving awareness campaign called “49M” launched jointly with the government, business and labour partners. It aims at mobilising South Africans to cut down on power consumption and at reducing South Africa’s carbon footprint.

Without saving energy, Eskom says South Africa will face a supply shortfall of between six terawatt-hours and 9TWh this year and the next: 9TWh is the equivalent of Cape Town’s total annual consumption, or the capacity of a 1 000MW power plant.

Eskom says it expects pressure on the system to start easing in the last quarter of next year when the first unit of the 4 800-megawatt Medupi Power Station in Limpopo comes online.

That project, and the Kusile project – both coal-fired power stations – have run into a barrage of criticism and opposition over power generation-type choices, delays, escalating costs, funding issues, environmental concerns and more.

Consultants to Eskom estimate that if Medupi, Kusile and several other projects go ahead, 35 new coal mines will be required.

This already places a question mark behind the sustainability of Eskom’s plans.

Officially, Kusile’s initial price tag of R80bn to R100bn had already escalated to R124.42bn by May last year, with Eskom denying industry speculation that it has shot up to R175bn.

Industry sources say Treasury officials were calling for the scrapping of the project, as paying penalties of R30bn would be the cheapest option now. It has been estimated that so far, Eskom has been able to secure only 11% of the required funding for Kusile.

Eskom itself says one of its greatest challenges is funding uncertainty. Its overall budget for emergency increases in capacity for requirements over the next two years is R385bn. That figure is expected to shoot up to one trillion rands by 2026, by which time Eskom hopes to have doubled its capacity to 80 000MW.

International developments

The IRP2, which was to be promulgated on 1 April, comes at a time when Germany has decided to place a three-month moratorium on plans to extend the lifespan of its seven oldest nuclear reactors, and countries across the globe are re-evaluating the role of nuclear in their energy mix.

The Japanese nuclear crisis and the international reaction to it could not have come at a worse time for the South African government; however, not to have put an energy plan on the table would have cast a long shadow over the country’s mid- to long-term economic development prospects.

German Chancellor Angela Merkel came in for heavy criticism, with “panic button” being used by a number of commentators and one saying she ought to have “kept a cool head” because shutting down some plants for inspection is “an absurdity”.

The latest developments are set to impact on the nature and prospects of the Conference of the Parties (COP 17) under the United Nations Framework Convention on Climate Change to be hosted by South Africa in December this year in Durban.

In recent times, there has been much talk of a nuclear renaissance as an important part of the solution to carbon dioxide emission as a bridge technology until technically and economically viable renewable energy sources can be developed.

The initial plans to extend the life of reactors in Germany, which were originally commissioned during the 1970s and 1980s, were intended to ensure the country met its goal of reducing its emissions of CO2 by 40% by 2020, relative to 1990 levels. The viability of such parameters has suddenly changed dramatically.

If the present moratorium goes over into permanent shutdowns, as many assume it may, the elimination of 43.6TWh from an annual energy production of 544.5TWh in 2008 would imply a greater reliance on coal and natural gas-fuelled power plants.

As Daniel Brebner of Deutsche Bank put it in a newspaper interview: “Nuclear power has suddenly gone from being part of the solution for future green energy to a dangerous relic of the Cold War era.”

Germany will have to cover the shortfall by importing more gas and thermal coal, playing havoc with CO2 greenhouse targets.

But Germany is not alone: Austria has called for a stress test for all Europe’s 153 nuclear reactors, based in 27 countries; Italy is said to possibly renounce its return to nuclear power; doubts are being expressed in Poland; Switzerland has announced it is suspending its nuclear projects; and France is becoming a lone ranger in maintaining confidence in one of its leading industries.

Although United States President Barack Obama has insisted to date that nuclear power plants can be clean and safe, some commentators are convinced that this is set to change. Events in Japan could see the return of the huge anti-nuclear protests of the 1970s and 1980s to that country.

Even China announced in March that it was suspending approval of 25 reactors under construction.

The world has 442 reactors, with another 65 under construction. They generate almost 14% of global electricity – 75% in France, 52% in Belgium, 47% in Ukraine, 35% in Korea, 29% in Japan and 20% in the US.

South Africa’s new IRP2 foresees the country moving toward a scenario where nuclear power will deliver between 23% and 25% of its electricity over the next 20 years. It remains to be seen if this will be possible in the dramatically changed environment surrounding nuclear power.

Against the background of all this and the uncertainties that accompany it, one could expect countries to be much more reluctant to commit to binding international agreements on CO2 emissions come December’s COP 17 meeting in Durban.

Wider economic implications

“The existential crisis for the world’s nuclear industry could hardly have come at a worse moment. The epicentre of the world’s oil supply is disturbingly close to its own systemic crisis as the Gulf erupts in conflict, Ambrose Evans-Pritchard wrote in The Telegraph.

Russian Finance Minister Alexei Kudrin warned that the confluence of events in Japan and the Middle East could push the crude oil price to $200 a barrel, in what he called a “short-lived spike”. If this should happen, it would put paid to hopes for a global economic recovery.

According to the Evans-Pritchard report, developments in Bahrain could provoke Iran to launch a proxy war by arming insurgents, expanding into a threat to Saudi Arabia’s Eastern Province. “Any threat to Saudi control over the Ghawar oil field would be a global game-changer.”

The confluence of all the factors in the present energy mix, particularly price pressure and the safety concerns surrounding nuclear, could lead to tremendous new pressures to allow exploration for gas to take place in areas such as the Karoo.

All indications are that there will be an increased reliance on coal in the more immediate future before carbon capture and storage is available.

“Much depends on whether shale gas fulfils its promise, or how soon we achieve a quantum leap in solar technology, or exactly when the world hits peak oil, and at what price,” wrote Evans-Pritchard.

Dr Euan Mearns stated on The Oil Drum website that Fukushima has shattered the faith of democracies in the safety of nuclear power.

If Japanese engineers had prevailed despite the worst that nature could muster, it would have vindicated the industry.

“Alas, this is not the case. The future of the human global energy system has just changed course, with potentially far-reaching consequences for civilisation,” he wrote.