CEO Blog

by Johan van den Berg, CEO of SAWEA

Johan van den Berg is the CEO of the South African Wind Energy Association, the Chair of the South African Renewable Energy Council and the African Private Sector Focal Point for the Africa-EU Energy Partnership. A barrister, he has spent eighteen years in dispute resolution; environmental mediation; climate change avoidance/emissions trading and renewable energy in Southern Africa. He is a member of the Ministerial Advisory Committee on Energy.

The IRP Revisited

Acknowledging our new reality in Energy Planning

Last month (November) saw publication of the long-awaited update of the Integrated Resource Plan for comment. The plan is the twenty year energy blueprint for South Africa. Practically it seems to guide ministerial determinations on the procurement of energy and determines broadly the energy mix of the country for the long term. It is therefore an important document for the wind industry.

The comment period for the Integrated Energy Plan also closes soon. This plan is a broader and less detailed framework that informs the Integrated Resource Plan, and potentially other initiatives.

SAWEA’s Policy Working Group has been hard at work in compiling SAWEA’s response to the two documents. The latter requires more fundamental investigation and is a work in progress that all members are invited to enrich with their contributions. As for the former, SAWEA’s views can be summarized as follows:

1. Method of comparison for IEP modelling

SAWEA firmly believes that, wherever possible, the IEP should use market-proven pricing to inform modelling. We think this is more accurate and more appropriate than hypothetical costings or prices. Round 3 of the REIPPPP revealed levelised, twenty year prices for wind power at an average of 74c/kWh. This compares favourably with the latest levelised price for new coal power (Medupi) at a projected ZAR 1,05/kWh.

2. Treatment of positive and negative externalities

While conventional energy is generally associated with very significant negative externalities, wind power leads to positive externalities. SAWEA believes that the Integrated Energy Plan should take this into account.

Round 1 – 3 of the REIPPPP has shown that wind projects are very often developed in remote, rural areas. Moreover, the socio-economic structures of projects that have been successful are set to deliver very significant community and socio-economic benefits of a scale that holds the potential to fundamentally transform these communities for the better.

Likewise, the negative externalities of conventional power generation need to be accounted for. The University of Pretoria has quantified the external costs of Kusile at a minimum of 97c/kWh (see http://www.greenpeace.org/africa/Global/africa/publications/coal/FULL%20SCIENTIFIC%20PAPER%20139%20pages.pdf). If, as an example, this amount is factored into energy planning, it is likely that outcomes would be materially different.

3. Assessment of risk

Risk ultimately should be expressed in Rands and Cents as a risk-adjusted modelling outcome. SAWEA thinks that the present energy modelling doesn’t fully achieve this. We have seen Eskom’s large new-build projects demonstrate this. There have been construction delays at a cost projected to be above ZAR 25 million a day, with negative impacts on the country’s security of supply and economic growth. By contrast, power procured from small private projects such as the REIPPPP imposes no risk to consumers of cost over-runs or significant impact on security of supply if individual projects are delayed. These risks are carried by the IPP’s, who are best placed to manage them.

The SAWEA comments on the Integrated Energy Plan are likely to inform similar, but more detailed observations to the IRP.  This process is on-going and will be finalized in the next six weeks.

A rational and balanced assessment of all important factors clearly shows the integral role that wind power needs to play in our country’s energy mix over the next twenty years and beyond.  Our role is to keep ensuring that key documents like the IEP and IRP fully reflect this.