A practical game plan to resolve load shedding

Insights from recent modelling & analysis related to resolving SA’s power crisis

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Dr Grové Steyn

Meridian Economics

14 July 2022

Presentation outline

• Problem context
• Declining coal fleet availability and implications
• Insights from 2021, SA’s worst load shedding year thus far
• Current load shedding outlook
• SA’s ‘Base Case’
• Resolving load shedding
• Energy resource increases required under the ‘Risk Adjusted Resource Plan’
• A practical game plan: 12 interventions to eliminate load shedding in 2-3 years

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Eskom’s coal plant reliability (EAF) has been consistently declining in recent years, this trend is very likely to continue

• For context, the IRP 2019 assumes Eskom’s coal fleet EAF would have already recovered to above 70% by 2021 – we are a far cry from this reality (low coal EAF is one of the primary drivers of load shedding)
• We cannot only rely on Eskom’s current efforts to improve the coal fleet’s reliability – our focus should be to urgently expedite all possible measures to get new capacity onto the grid

Based on actual Eskom data: 5GW of additional renewables alone would have reduced load shedding by 96.5% in 2021

Modelling shows that without drastic interventions, in most future scenarios load shedding will be 2-3 times worse than in 2021

1% p.a growth in demand

2021

Assumed in this depiction of the ‘Base Case’ outlook:

• Only 60% of BW5 PV projects will reach financial close due to cost increases and local content requirements on PV modules (optimistic).
• Only 80% of wind projects will reach financial close due to cost increases.
• No RMIPPPP projects that utilise imported gas will reach financial close in the near term.
• 32% of the energy from the remaining RMIPPPP projects is curtailed due to the design of the programme (optimistically assuming that all RE dominant projects will close).

2021 loadshedding 1.8 TWh

Rapidly increasing energy resources in line with a ‘Risk Adjusted Resource Plan’ is required to resolve load shedding in 2-3 years

These include to:

• Get as much capacity as possible online from the RMIPPPP and REIPPPP BW5 projects through increasing the likelihood that these projects can close, and minimise further PPA signature delays;
• Expand REIPPPP BW6 by more than double and strengthen incentives for earlier connection;
• Rapidly accelerate the uptake of <1 MW and 100MW projects by increasing market incentives;
• Obtain additional energy from the multitude of existing and new projects (big and small) that are distributed throughout the grid;
• Urgently install additional thermal peaking capacity and expanded diesel storage at existing peakers;
• Procure a large amount of Demand Response (DR) capacity from DR aggregators and a large amount of additional battery storage.

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A practical game plan: 12 key interventions for delivering the Risk Adjusted Resource Plan to resolve load shedding

Bolster the Eskom grid connection process;

DMRE

Clarify and unlock the opportunity for Municipalities to rapidly procure new capacity.

Expedite additional amendments to Schedule 2 of ERA (exempt traders and lift licence limit to 1000MW) + issue new Ministerial determination for remaining IRP capacity;

Fix RMIPPPP design flaws to enable all the projects with PV, wind and storage to proceed and the entire project energy and capacity to be made available to Eskom;

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PRESIDENCY

Establish a dedicated well-resourced power crisis implementation unit inside Presidency to drive and monitor the implementation of the measures below:

Implement across the board price increases for BW5 projects to compensate for large cost escalations;

Expedite the procurement of additional peaking capacity, demand response capacity and battery storage.

Expand REIPPPP BW6 and launch it in time with stronger incentives for early energy;

Accelerate uptake in the distributed generation market by implementing net feed-in tariffs and further tax incentives;

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IPP Office

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Eliminate or drastically reduce local content requirements on PV modules;

DTIC

Eskom

Fix significant institutional problems at the IPP Office and NERSA and implement the first phases of the multi-market model (even before passing the founding legislation).

Urgently implement Eskom’s Just Energy Transition (JET) renewable energy Public-Private Partnership (PPP) projects;

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NERSA

TREASURY

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*These measures should all be implemented alongside urgent and significant Tx and Dx grid strengthening & expansion

Thank you

Kindly refer to the full reports below for the analysis that informs the proposals contained in this presentation:�Resolving The Power Crisis Part A: Insights From 2021 – SA’s Worst Load Shedding Year So Far�Resolving The Power Crisis Part B: An Achievable Game Plan To End Load Shedding

Summary of the suite of additional energy resources required by 2024 in a ‘Risk Adjusted Resource Plan’

Sensitivity: results under a range of EAF assumptions – Risk Adjusted Plan resolves load shedding by 2024

*Table indicates load shedding severity under Base Case, Solution Case, and Risk Adjusted Resource Plan assuming 1% p.a. growth in demand

Eliminating loadshedding would have saved costs in 2021

• Adding 5GW of renewables, 2GW of batteries and 1GW demand response programme to the system would have completely eliminated load shedding in 2021.
• At 2021 energy prices, this would have resulted in a reduction of R2.5Bn of Eskom’s costs for the year, if this saving was passed through to the tariff it would have resulted in a 2.2c/kWh reduction in the sale price of electricity.
• At current fuel cost and renewables prices, such an intervention would likely come at a cost saving in excess of R10Bn per year.

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New Medupi and Kusile units are badly under-performing

Source: recent (May 2022) briefing from Eskom generation