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Accelerating the Uptake of Renewable Energy Promoting the deployment of Wave Energy Conversion Technologies KM Nassiep Chief Executive Officer SA National Energy Research Institute Contents The Global push for increased RE uptake The local
Promoting the deployment of Wave Energy Conversion Technologies
KM Nassiep Chief Executive Officer SA National Energy Research Institute
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The Global push for increased RE uptake The local context and drivers for RE uptake The continued barriers to significant deployment in the region Short to mid-term Financing Model for Grid-Connected RE Biofuels Strategy Implications Energy R&D Priorities for RE
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International market development for RE continues to grow, exponentially in some cases Global climate change dialogue focuses heavily on contribution from RE in the post 2012 new commitment Continued rise in oil prices internationally, forecast even gloomier Local planning for SA contribution to post 2012 debate takes into account significant contribution from RE Local power generation sector stress (even distress!) Local water supply (potable) under threat
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Investment in RE in 2007 estimated at 66 billion USD (cf. 39 billion in 2005 and 55 billion in 2006) Germany leads the way in terms of capacity added in 2006, although China dominates totalled installed RE capacity as of 2006 RE currently supplies 17% of the world’s primary energy, with large hydro supplying 15% of global electricity production in 2006 Wind power increased more than any other RE technology with estimated 19-20 GW added (USA leads with 2.5 GW installed followed by Germany with 2.2 GW) Grid-connected PV continued to be the fastest growing power generation technology in the world, with 50% annual increases in cumulative installed capacity during 2006/7 – estimated 7.8 GW by end 2007 All together, RE electricity capacity worldwide reached an estimated 207 GW in 2006 (excluding large hydro)
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Ethanol production for vehicles reached 38 billion litres in 2006, an increase in 15% from 2005 USA leads increase in production, with significant increases in Brazil, France, Germany and Spain USA became largest producer of ethanol in 2006, with over 18 billion litres, surpassing Brazil for the first time Biodiesel production jumped by 50% in 2006, to 6 billion litres globally Almost half of world’s production continued to be in Germany, with notable increases in Italy, USA and parts of SE Asia
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Bali COP meeting in Dec 2007 culminated in development of a Bali Roadmap, that incorporated actions on the part of developing countries and developed countries Principle of “common but differentiated responsibilities” applies, with developing countries expected to focus more on sustainable development in the short to medium term, and developed countries more on emission reduction Either path relies on low carbon future, with RE expected to play major role See 2050 as the long term point at which CO2 concentration in atmosphere should be stabilised at 450 ppm or less Also need to ensure that global temperature increase by 2050 is limited to 2oC Sectoral approach proposes focus on power generation, transport, energy efficiency and adaptation as priorities
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Studies conducted by Banks and Schaeffler concluded that a 50% contribution from RE to primary energy supply was possible by 2050 Long Term Mitigation Scenarios studies undertaken by Winkler et al incorporates significant contribution from RE in the stabilisation wedges required by science to reduce emissions to appropriate level SA will consider voluntary emission targets for the post 2012 period If we are serious about these goals then policy, regulatory and financial support has to be forthcoming soon 50% goal for Southern Africa by 2050 is possible, if regional projects that build on geographic strengths are developed, e.g. biodiesel production
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“We are not starting to address climate change with the technology we have in hand, and we are not accelerating our investment in energy technology research and development,”
Prof John Holdren (Harvard University Professor, Director of WHRC, President of AAAS)
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Current electricity crisis a powerful incentive for RE industry because of Shorter lead times for construction (generally) Proximity to end use Reduced transmission and distribution costs (if located at source of demand) Narrowing gap in prices of RE technology versus cleaner fossil fuel plants (particularly if fitted with FGD and CCS technology) Policy framework in place RE target in place since 2003 So what’s the problem???
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Regulatory framework not conducive to smaller IPPs entering market (grid access conditions are not ideal) Approval for green power trading only recently approved by Cabinet Top-Up Feed-in Tariff still not in place – only mechanism that will support RE uptake
Legislation to make SWH mandatory not promulgated Prescribed contributions from RE not regulated even though Petroleum Products Amendment Act and Electricity Regulation Act make allowances for this Conditions precedent for financing of projects remain onerous, even though number
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SA among highest emitters of carbon dioxide in the world More than 75% of primary energy requirement from coal More than 90% of electricity generation from coal About 25% of final energy demand from transport sector SA ranked 14th in the world in terms of top emitters Eskom ranked as one of the largest emitters as a company Sasol II plant ranked as single largest emitter Congested roadways – rapidly increasing car park Link this to energy consumption low price elasticity of demand Conventional IC engines remain dominant – despite improvements in efficiency and emission controls No emphasis on modal shift from road to rail for freight and commuters No major shift to biofuels yet No stringent measures to ensure energy efficient vehicles on roads (no scrapping age for vehicles) No attempts to integrate ticketing and ensure interoperability of different modes of public transport
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CO2/GDP
500 1000 1500 2000 2500 3000 1960 1970 1980 1990 2000 2010 Year CO
2/GDP
South Africa Germany Korea Malaysia Spain
Source: IEA, 2006
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SADC task team on energy not focused on these issues Regional project development not taking shape, even with donor support Potential exists for regional biofuel project, combining agricultural strengths
Coherent legislation supporting common principles not evident, particularly in the case of development of feed-in tariffs RE not seen as major contributor to Eskom Build Programme and hence SA Power Pool
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Limited project development to date Klipheuwel Experimental Wind Farm 3,2 MW – offtake by Eskom Distribution on cost neutral basis Proposed Darling National Demonstration Wind Farm Phase 1 – 5 MW Project at advanced stage – EIA, PPA concluded Plant scheduled for commissioning in November 2007 Numerous small mini-hydro schemes Used mainly for grid stability Proposed wave energy conversion projects Stellenbosch Wave Energy Converter (W Coast) Pelamis Wave Energy Project (S Coast) Large scale imported hydropower Cahora Bassa in Mozambique (~2000 MW) Hybrid Mini-grid projects Projects in Hluleka, Lucingweni (E Cape) 10 kW wind, pv and diesel hybrids
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What are the impediments to further project development? Lack of market rules governing third party access to the national grid Lack of incentives for purchasers of green power Capital intensive nature of most renewable energy technologies Lack of equitable cost structures for different energy carriers – no externalities factored in Lack of incentive schemes for power producers, either tax concessions or subsidy schemes
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Approved by Cabinet in November 2003 Follows on the direction set by the Energy White Paper (1998) White Paper calls for real, measurable increase in renewable energy use, based on prescribed target Calls for strategies to be developed to promote specific areas where RE could be developed Policy aimed to create an enabling environment for renewable energy, setting a platform for industry development.
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Biomass Pulp & Paper 1% Sugar Bagasse 59% Landfill Gas 6% Wind 1% Solar Water Heating: Residential 9% Solar Water Heating: Commercial 14% Hydro 10%
Macro-economic Analysis: 10 000 GWh least cost renewable energy contribution (excl biofuels, solar thermal power generation and wave)
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10 000 GWh RET’s portfolio, including CSP, wave and updated with the World Bank economic and financial analysis due diligence study (June 2004) GWh Nov 2003-Nov 2007 Nov 2007- Nov 2010 Nov 2010 – Nov 2013 % MW Load factor Sugar bagasse 164 715 1544 14 339 52 SWH 162 987 3756 35 (426) Pulp &Paper 85 235 405 4 51 90 Hydro** 285 1210 3210 30 654 56 Landfill gas 291 840 840 8 120 80 Wind 13 13 245 2 100 28 Total 1000 4000 10,000 1690* CSP 613 613 6 100 70 Wave 14 84 1 24 40 Grand Total 4627 10697 1814* CSP Concentrating Solar Power generation *Including (426 MW) generation capacity replacement with solar water heating ** small scale hydro ≤10 MW
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Excluding biofuels, CSP, wave
Cum 2005 Price Total Total Cumulative GWh GWh c/kWh c/kWh c/kWh R mill/yr R mill/yr Biomass Pulp & Paper Mill 1 65 65 10.2 13.0
273 338 11.3 13.0
32 370 17.4 13.0 4.39 1.41 1.41 Landfill Gas Medium 215 585 18.4 13.0 5.41 11.64 13.05 Landfill Gas Small 160 745 19.4 13.0 6.44 10.30 23.34 Sugar Bagasse: High Pressure Boilers 3 795 4 540 22.5 13.0 9.51 360.75 384.10 Biomass Pulp & Paper: Mill 2 40 4 580 23.5 13.0 10.53 4.21 388.31 Solar water heating: Office & Banking space 224 4 804 23.5 13.0 10.53 23.58 411.89 Sugar Bagasse: Reduced Process Steam 570 5 374 24.6 13.0 11.55 65.85 477.74 Sugar Bagasse: include tops and trash 1 483 6 857 29.7 13.0 16.67 247.17 724.91 Hydro Large: Inter-basin Transfer 525 7 382 30.7 13.0 17.69 92.87 817.78 Landfill Gas micro 191 7 573 30.7 13.0 17.69 33.79 851.57 Solar water heating Hospitals 267 7 840 30.7 13.0 17.69 47.23 898.80 Solar water heating School Hostels 581 8 421 30.7 13.0 17.69 102.78 1 001.58 Solar water heating Security services 340 8 761 30.7 13.0 17.69 60.15 1 061.73 Hydro: Small Unconventional 205 8 966 34.8 13.0 21.78 44.65 1 106.38 Hydro: Run of River LH 41 9 007 34.8 13.0 21.78 8.93 1 115.31 Solar water heating: Low income household 930 9 937 35.8 13.0 22.81 212.09 1 327.40 Wind: Class1 63 10 000 38.9 13.0 25.87 16.30 1 343.70 Subsidy Energy Project Cost Market Values
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10 15 20 25 30
20 05 2 00 6 20 0 7 2 00 8 20 0 9 2 0 10 2 01 1 20 12 2 01 3 20 14
Cost/Price 2005 (Rc/kWh)
Project A Proje ct B Project C Ind ustry bu y-back price 1 3 c/KW h rising at 2%/ye ar Eskom ’s avoided (ne w entra nt) co sts of 2 5 c/kW h
Annual subsidy Annual subsidy
10 15 20 25 30
20 05 2 00 6 20 0 7 2 00 8 20 0 9 2 0 10 2 01 1 20 12 2 01 3 20 14
Cost/Price 2005 (Rc/kWh)
Project A Proje ct B Project C Ind ustry bu y-back price 1 3 c/KW h rising at 2%/ye ar Eskom ’s avoided (ne w entra nt) co sts of 2 5 c/kW h
Annual subsidy Annual subsidy
Illustration of degrees of competitiveness under current price arrangements
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Fig 5
400 600 800 1 000 1 200 1 400 1 600 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2005 Rand million / year
Subsidy needed at 0% real price increase in electricity buy back price (13c/kWh) Subsidy needed at 2% real price increase in electricity buy back price (13c/kWh) Subsidy needed at 0% real price increase in electricity buy back price (25c/kWh) Levy at 0.1 c/kWh levy at 3% sales increase Levy at 0.2 c/kWh levy at 3% sales increase Levy at 0.3 c/kWh levy at 3% sales increase
Figure 5 shows that the subsidy requirement at 25 c/kWh (new generation buy back price) is substantially lower than the current 13c'kWh buy-back price and that a levy on electricity sales between 0.1c/kWh and 0.3c/kWh could finance the 10 000 GWh target (in time) if electricity is priced at cost reflective tariffs
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Carbon Funding
Capital Subsidy
Bankable Project
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Mixed Credits Carbon Funding / Regulations
TRECs or possible Feed-in Tariff
Bankable Project
Economies of Scale Full Cost Accounting
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Large Wind Turbines Concentrating Solar Power Wave Power Biofuels Mini-grids Phase 3. 1st July 2010 – 30th June 2013 Small wind turbines PV Biogas Solar Water Heating Phase 2. 1st July 2007 – 30th June 2010 Biogas Solar Water Heating Mini-hydro Phase 1. 1st July 2004 – 30th June 2007
Technologies Phase
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Effective policies and legislation DME introduced Master Plan for Liquid Fuels In process of developing Electricity Market Plan National Treasury investigating Green Budgeting, together with environmental fiscal reform Energy Security Bill to be tabled this financial year – propose instruments to support RE uptake Effective regulation and implementation strategies Energy efficient technology support – banning imports of inefficient technology Possible RE Top-Up Feed-in Tariff (REFIT) Industrial Strategy for Biofuels
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Established in response to concerns from government regarding perceived threat to indigenous energy research capacity Established under Ministerial Directive (Minister of Minerals and Energy) in October 2004 Reports to both Ministries of Minerals and Energy & Science and Technology in terms of governance Is directed by the objectives of the 10-Year Innovation Plan of DST, as well as Master Plans for Liquid Fuels and Electricity from the DME Has mandate to conduct own research or solicit work from external parties
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Minister of Minerals & Energy CEF Board of Directors Chairman CEF (Pty) Ltd CEO Wholly incorporated divisions e.g. NEEA, EDC Part Shareholding Funds Wholly owned Subsidiaries, including SANERI (Pty) Ltd
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SANERI is 100% state funded at present, receiving grants via the Department of Science and Technology A total of R70 million has been transferred to SANERI from government, since 2004/5 An amount of R42 million has been made available in 2007/8 for activities related to: Flagship project development Chairs of Energy Research Programme Bursary Support Programme Establishment costs SANERI mandated to leverage additional funds through grants, royalty income and through collaborative projects
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Ensure long term health of energy research capacity in the country and assist in stimulating a culture of innovation in the energy research environment Support government goals of energy security of supply through identifying viable and sustainable diversified energy supply
Address deficiencies in current race, gender and age profile of postgraduate students, academia and scientists Stimulate socio-economic upliftment through improved access to modern, clean and affordable energy services Support economic growth through development of flagship projects that will ultimately result in commercial rollout
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9 thematic areas identified as areas of focus for energy R&D Energy infrastructure optimisation Energy Efficiency and DSM Understanding the impact of energy use on the environment Stimulating socio-economic development through the productive use of energy Cleaner fossil fuels, including clean coal technology Renewable energy Alternative energy, including hydrogen economy and fuel cells Energy planning and modelling and Energy policy research
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Implementation Strategies / Legislation SOEs Private Sector Universities
Policy / Planning R&D Activities
Commercial Contract R&D
Human Capital Development
Contract R&D Research Chairs Bursaries Regulatory
NERSA
All Spheres of Government
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Energy R&D Agenda Human Capital Development and Transformation
Energy Research Chairs at Universities Renewable Energy and Sustainable Energy Hub at the University of Stellenbosch Bursary Support Programme
Cooperative Energy R&D Activities Flagship projects
Clean Energy Solutions Advanced Fossil Fuel Use End Use and Infrastructure Management Energy Policy and Planning (R&D)
Governance
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What is needed? Suitable and comprehensive resource maps for SA Identification of local manufacturing opportunities Support for demonstration of first of breed technologies Identification of best of breed technologies – VHS vs Betamax Identification of income generating opportunities from renewable energy Development of alternative forms of production of hydrogen Greater application for fuel cells
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RE and Sustainable Energy Hub at University of Stellenbsoch Partnership on feasibility studies Contract Research Projects Bursary support programme Joint R&D – national and international collaboration Support for possible wave energy test hub Support for RE test centre in Western Cape
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