scenarios for south africa’s future electricity mix csir ... … · least-cost electricity mix...

Dr Tobias Bischof-Niemz

Chief Engineer

Least-cost electricity mix for South Africa by 2040

Scenarios for South Africa’s future electricity mix

CSIR Energy Centre

Cape Town, 3 November 2016

Jarrad Wright

Dr Tobias Bischof-Niemz

Joanne Calitz

Crescent Mushwana

2

Background

The Integrated Resource Plan (IRP) is the expansion plan for the South African power system

In its most recent version, the IRP 2010 plans a doubling of power-generation capacity from 2010 to 2030

Since the date of its release in early 2011, two main assumptions have changed

• The demand forecast is now significantly lower than in IRP 2010

• The costs of solar PV and wind are significantly lower than predicted in IRP 2010

The CSIR has therefore conducted a study to re-optimise the South African power mix until 2040

Two scenarios were defined to quantify two different ways of expanding the South African power system

• “Business-as-Usual” – generally aligned with IRP 2010, updated demand forecast, no new optimisation

• “Re-Optimised” – least-cost re-optimisation of the demand/supply gap that widens from 2020-2040

An hourly expansion and dispatch model (incl. unit commitment) using PLEXOS

was run for both scenarios to test for adequacy and for economic feasibility

3

Agenda

Background

Approach and assumptions

Results

Conclusions

4

Business-as-UsualBusiness-as-Usual Re-OptimisedRe-Optimised

IRP 2010: expansion plan for South Africa’s power system until 2030Installed capacity and electricity supplied from 2010 to 2030 as planned in the IRP 2010

Note: Renewables include solar PV, CSP, wind, biomass, biogas, landfill and hydro (includes imports); CO2 emission intensity moves from 912 kgCO2/MWh (2010) to 600 kgCO2/MWh (2030)Sources: DoE IRP 2010-2030; CSIR Energy Centre analysis

5%(12 TWh/yr)

14%(62 TWh/yr)

Renewables

80

100

0

20

40

60

2030

85.7

41.1

2.4

7.3

9.6

+1.8

4.89.2

Total installed

net capacity in GW

2010 2015 2020 2025

8.41.2

35.9

2.4 1.8

2.142.2

237 275CO2 emissions

[Mt/yr]

10%(25 TWh/yr)

34%(149 TWh/yr)

Carbon free

300

0

100

400

500

200

Electricity supplied

in TWh per year

436

2025 203020152010 2020

Nuclear

Hydro

Wind

CSP

Solar PV

Coal

Gas

Peaking

5

Link between planning and real world needs to be establishedIn-principle process of IRP planning and implementation

IRP model(least-cost optimisation)

Output• Capacity expansion

plan

Planning /

simulation

world

Actuals /

real world

Procurement(competitive tender

e.g. REIPPPP, coal IPPPP)

Inputs• Ministerial

Determinations based

on capacity expansion

plan

Inputs• Demand forecast

• Technology costs

assumptions

• CO2 limits

• Etc.

Outcomes• Preferred bidders

• MW allocation

• Technology costs

actuals (Ø tariffs)

Sources: CSIR Energy Centre analysis

Currently, no feedback loop from

procurement results to IRP planning

assumptions institutionalised

Installed capacity

80

100

60

40

20

0

4.8

9.2

1.2

8.4

2025202020152010

42.2

35.9

2.41.8

2.1

Total installed

net capacity in GW

Solar PV

2030

85.7

41.1

2.4

7.3

9.6

+1.8

Coal

Gas

Peaking

Nuclear

Hydro

Wind

CSP

�

6

Actual solar PV tariffs now well below cost assumptions of IRP 2010First four bid windows’ results (solar PV) of Department of Energy’s REIPPPP

0.62

0.91

3.65

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

1.17

2.18

Year

Tariff in R/kWh

(Apr-2016-Rand)

Actuals: REIPPPP (BW1-4)

Assumptions: IRP2010 - low

Assumptions: IRP2010 - high

Notes: REIPPPP = Renewable Energy Independant Power Producer Programme; BW = Bid Window; bid submissions for the different BWs: BW1 = Nov 2011; BW2 = Mar 2012; BW 3 = Aug 2013; BW 4 = Aug 2014; BW 4 (Expedited) = Nov 2015 Sources: StatsSA for CPI; IRP 2010; South African Department of Energy (DoE); DoE IPP Office; CSIR analysis

∑ = 2.8 GW

BW1 � BW 4 (Expedited)

7

Actual wind tariffs equally well below cost assumptions of IRP 2010First four bid windows’ results (wind) of Department of Energy’s REIPPPP

0.62

0.690.87

1.19

1.52

0.0

0.5

1.0

1.5

2.0

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

Year

Tariff in R/kWh

(Apr-2016-Rand)


Assumptions: IRP2010

∑ = 4.0 GW



8

Agenda

Background


Results

Conclusions

9

Demand grows, existing fleet phases out – gap needs to be filledForecasted supply and demand balance for the South African electricity system from 2016 to 2040

500

450

400

350

300

250

200

150

100

50

0

Electricity

in TWh/yr

2040

4732

20352030

3661

20252020

288

2016

Coal

Nuclear

Hydro (incl. PS)

Gas (CCGT)

Other (incl. cogen)

Peaking

Other RE

Wind

CSP

Solar PV

Supply gap

Decommissioning of

Eskom’s coal fleet

Notes: MTSAO demand forecasts are extrapolated from 2025 to 2040 using CAGR; IRP 2016 under development is using High Growth Low Intensity (CSIR) demand forecast as base case.

1. Peak demand = 53.2 GW 2. Peak demand = 68.7 GW Sources: DoE (IRP 2010); DoE (IRP 2013); Eskom MTSAO 2016-2021; StatsSA; World Bank; CSIR analysis

All power plants considered for

“existing fleet” that are either:

1) Existing in 2016

2) Under construction

3) Procured (preferred bidder)

10

Two scenarios defined to fill the supply/demand gap until 2040Forecasted supply and demand balance for the South African electricity system from 2016 to 2040

200

0

100

500

300

400

150

250

350

50

450

3661

2016

4732

2020 2025

Electricity

in TWh/yr

2030 2035 2040

288

Gas (CCGT)

Supply gap

Solar PV

Hydro (incl. PS)

CSP

Wind

Other RE

Peaking

Other (incl. cogen)

Nuclear

Coal

Notes: MTSAO demand forecasts are extrapolated from 2025 to 2040 using CAGR; IRP 2016 under development is using High Growth Low Intensity (CSIR) demand forecast as base case.

1. Peak demand = 53.2 GW 2. Peak demand = 68.7 GW Sources: DoE (IRP 2010); DoE (IRP 2013); Eskom MTSAO 2016-2021; StatsSA; World Bank; CSIR analysis

1

2

1

2

Scenario: “Business-as-Usual”

• Generally aligned with IRP

2010, but demand shifted

• Nuclear as per briefing to

Portfolio Committee on

Energy (11 October 2016)

• New coal, nuclear, some RE

• New capacities fixed as per

IRP 2010 (no optimisation)

Scenario: “Re-Optimised”

• Coal, nuclear, gas, RE are all

available as supply options

• Supply candidates chosen

by least cost optimisation

to meet energy and

capacity requirement

IRP 2010

11

Key assumptions: pessimistic regarding solar PV and wind cost,

optimistic regarding nuclear cost

All other assumptions and methodology fully aligned with IRP 2010, for example:

• Discount rate of 8% (real)

• PLEXOS software package used for long-term optimisation & production cost modelling

• Decommissioning schedule of existing Eskom fleet

• Demand forecast using MTSAO 2016-2021 (extrapolated until 2040),

reaches the IRP 2010 assumed 2030 level just before 2040

Technology Costing Logic Compared to IRP 2010

Solar PV Same as IRP 2010 by 2030 Slightly lower until 2030

Wind Bid Window 4 Expedited tariff

kept constant until 2040

Lower

CSP Same as IRP 2013 Slightly higher

Coal Coal IPP Higher

Nuclear as per IRP with Rosatom low-

estimate CAPEX

Similar

Gas as per IRP with fuel updates Higher

12

2.40

R/kWh

(Apr-2016-R)

3.10

1.24

1.51

1.171.05-1.161.03

Bid Window 1

Bid Window 1

Mid-merit Coal Gas (OCGT)Gas (CCGT) Diesel (OCGT)NuclearBaseload

Coal (Eskom)

Baseload

Coal (IPP)

WindSolar PV

Key input cost assumptions for new supply technologies

Actual new-build

tariffs

Assumptions based

new-build cost

50%92% 50% 10%Typical capacity factor2 � 10%

Lifetime cost

per energy unit1

1 Lifetime cost per energy unit is only presented for brevity. The model inherently includes the specific cost structures of each technology i.e. capex, Fixed O&M, variable O&M, fuel costs etc.2 Changing full-load hours for conventional new-build options drastically changes the fixed cost components per kWh (lower full-load hours � higher capital costs and fixed O&M costs per kWh); Assumptions: Average efficiency for CCGT = 55%, OCGT = 35%; nuclear = 33%; IRP costs from Jan-2012 escalated to May-2016 with CPI; assumed EPC CAPEX inflated by 10% to convert EPC/LCOE into tariff; Sources: IRP 2013 Update; Doe IPP Office; StatsSA for CPI; Eskom financial reports for coal/diesel fuel cost; EE Publishers for Medupi/Kusile; Rosatom for nuclear capex; CSIR analysis

0.62 0.62

82%

High-priced gas

at 150 R/GJ

13

Future cost assumptions for solar PV aligned with IRP 2010

0.62

3.65

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

Tariff in R/kWh

(Apr-2016-Rand)

Year

1.17

0.91

0.49 0.49

2.18

Assumptions for this study

Assumptions: IRP2010 - low

Assumptions: IRP2010 - high



∑ = 2.8 GW


14

Future cost assumptions for wind aligned with results of Bid Window 4

0.62

0.690.87

1.19

1.52

0.0

0.5

1.0

1.5

2.0

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

Year

Tariff in R/kWh

(Apr-2016-Rand)

Assumptions for this study

Assumptions: IRP2010

Actuals: REIPPPP (BW1-4)∑ = 4.0 GW



15

250

275275

0

50

100

150

200

250

300

2010 2015 2020 2025 2030 2035 2040

CO2 emissions

(electricity sector)

[Mt/yr]

CO2 emissions constrained by RSA’s Peak-Plateau-Decline objectivePPD that constrains CO2 emission from electricity sector

PPD = Peak Plateau DeclineSources: DoE (IRP 2010-2030 Update); StatsSA; CSIR own analysis

16

Agenda

Background


Results

Conclusions

17

Least-cost: 70% RE energy in South African electricity sector by 2040Comparison of energy supply for Business-as-Usual and a Re-Optimised scenario

7%

(18 TWh/yr)

19%

(91 TWh/yr)Renewables

18%

(64 TWh/yr)

7%

(18 TWh/yr)

71%

(332 TWh/yr)

40%

(146 TWh/yr)

Sources: CSIR analysis

100

0

500

200

300

400

150

50

250

450

350

2040

472 TWh

20352030

361 TWh

202520202016


in TWh per year

200

300

0

100

450

250

350

500

150

400

50

366 TWh

203020252016 2020 2035

474 TWh

2040


in TWh per year

Nuclear

Coal

Hydro & PS

Peaking

Other RE

Wind

Other

Gas (CCGT)

CSP

Solar PV

CO2217 Mt/yr 250 Mt/yr 217 Mt/yr 100 Mt/yr

Business-as-UsualBusiness-as-Usual Re-OptimisedRe-Optimised1 2

18

Significant solar PV and wind capacities rolled out until 2040Comparison of generation capacity for Business-as-Usual and a Re-Optimised path to 2040

0

200

175

150

125

100

75

50

25

Total installed

net capacity in GW

2030 Peak: 53.2 GW

2040 Peak: 68.7 GW

2040

101

36

138

4 213

121

11

2035

93

2030

80

37

88 22 68

7

2025

73

2020

63

2016

53

40

2

1

Coal

Nuclear

Hydro (incl. PS)

Gas (CCGT)

Other (incl. cogen)

Peaking

Other RE

Wind

CSP

Solar PV

50

25

175

200

0

125

150

100

75 63

2016

Total installed

net capacity in GW

53.2 GW

68.7 GW

2040

184

17 2

510

27

2

77

1

43

2035

151

2030

113

35

2

182

32

118

2025

83

2020

53

40

21



19

0

20

40

60

Demand and

Supply in GW

Business-as-Usual: Coal and nuclear dominate the 2040 energy mix

Monday Tuesday Wednesday Thursday Friday Saturday Sunday


DemandOther RE

Gas (CCGT)

Hydro

Peaking Other (incl. cogen) Nuclear

Solar PV

Wind

CoalCSP

Exemplary Week under Business-as-Usual in 2040

1

20

0

20

60

40

Demand and

Supply in GW

Re-Optimised: Wind and solar PV dominate the 2040 energy mix

Monday Tuesday Wednesday Thursday Friday Saturday Sunday


Demand

Nuclear

Coal

Other (incl. cogen)

Other RE

Gas (CCGT)

Hydro

Peaking

CSP

Wind

Solar PV

2

Exemplary Week under Re-Optimised in 2040

21

49

2040

7

2016

2

2020

77

43

2030

32

18

120

Re-Optimised scenario creates a steady, significant & increasing marketRoadmap of investment for wind and solar PV to 2040


2020-2030

Wind: 2.8 GW/yr

Solar PV: 1.5 GW/yr


2030-2040

Wind: 4.5 GW/yr

Solar PV: 2.5 GW/yr

15

2040

7

2016

2

2020

12

11

2030

87

24


2020-2030

Wind: 0.4 GW/yr

Solar PV: 0.4 GW/yr

2030-2040

Wind: 0.4 GW/yr

Solar PV: 0.4 GW/yr


22

Re-Optimised R87 billion/year cheaper by 2040 (without cost of CO2)

488

314

401

292

87

22

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

0

500

450

400

350

300

250

200

150

100

50

Total cost of

power generation in

bR/yr (constant 2016)

1

2

Total Present Value of Delta

= R330 billion in 2016 Rand

Delta (BAU - Re-optimised)

Re-optimised

Business-as-Usual

23

Business-as-Usual incurs large cost from building new coal and nuclearComparison of total electricity system costs average electricity tariff of BAU and Re-Optimised mix

Sources: CSIR

0

50

100

150

200

250

300

350

400

450

500

550

Total system cost (real)

(Apr-2016 Rands) in bR/yr

202520202016

517 (w/ CO2)

2035 20402030

0

50

100

150

200

250

300

350

400

450

500

550

20352025 2040

412 (w/ CO2)

Total system cost (real)

(Apr-2016 Rands) in bR/yr

20202016 2030

Coal (existing)Hydro (incl. PS)

Nuclear (new)

Nuclear (existing)

Gas (CCGT)

Other RE

Peaking

Other (incl. cogen)

Wind

CSP

Solar PV

Cost of CO2

Coal (new)


401 (w/o CO2)

292 (w/o CO2)

488 (w/o CO2)

314 (w/o CO2)

24

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

Relative

RE/nuclear cost

Relative

RE/coal cost

Today (2016)

Actual (2020-2040)

Sensitivity on cost difference: Even if RE were 50% more expensive

than assumed, Re-Optimised is still cheaper than Business-as-Usual


280

260

240

220

200

180

160

140

120

100

80

60

40

20

0

-20

-40Annual cost

delta of

BAU – Re-Optimised

by 2040

in bR/yr

87

25

Unit cost of power generation:

Re-Optimised case is almost 20 cents/kWh cheaper than BAU by 2040

1.03

0.87 0.85

0.80

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

-18%

Average cost of

power generation in

R/kWh (constant 2016) 1

2 Re-Optimised

Business-as-Usual

26

Factoring in cost of CO2 emissions:

Re-Optimised case is 23 cents/kWh cheaper than BAU by 2040

1.10

0.94

0.87

0.86

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

-21%

Average cost of

power generation in

R/kWh (constant 2016) 1

2 Re-Optimised

Business-as-Usual

27

Re-Optimised: CO2 emissions and water use significantly lowerComparison of CO2 emissions and water use for BAU and a Re-Optimised scenario to 2040

CO2 CapRe-optimisedBAU

99

250

275275

2015 2020 2025 2030 2035 2040

0

200

250

150

300

50

100

-150 Mt/yr(-60%)

195

216231

Electricity sector

CO2 emissions

in MtCO2/yr


61

49

0

10

20

30

40

50

60

70

2015 2020 2025 2030 2035 2040

22

56

Electricity sector

water use

in billion litres/yr

-40 billion litres/yr(-60%)

55

28

Agenda

Background


Results

Conclusions

29

South Africa can get 70% renewable energy share by 2040 at least cost

Solar PV, wind and natural gas is the cheapest new-build mix for the South African power system

It is the cost-optimal expansion to aim for a 70% renewable energy share by 2040

This “Re-Optimised” mix is almost R90 billion per year cheaper by 2040 than the Business-as-Usual

scenario (without factoring in cost of CO2 emissions – difference is > R100 billion per year with CO2)

The Re-Optimised mix will furthermore reduce South Africa’s CO2 emissions by 60% compared to BAU

Avoiding CO2 emissions and least-cost is not a trade-off anymore – South Africa can de-carbonise its

electricity sector at negative carbon-avoidance cost

Building out the required capacities until 2040 will provide a steady anchor offtake for a South African

solar PV and wind manufacturing industry

32

Thank youRe a leboga

SiyathokozaEnkosi

Siyabonga

Re a leboha

Ro livhuha

Ha Khensa

Dankie

scenarios for south africa’s future electricity mix csir ... … · least-cost electricity mix...

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