Not so fast on gas, according to Meridian Economics

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If South Africa continues on its current path of installing large-scale gas-fired power generation to replace its aging coal-fired power plants, electricity users would pay a 40% premium over the increased use of wind and solar power, supplemented by gas only for peak demand.

This warning comes from Meridian Economics in its latest report, aptly titled “Hot Air About Gas”.

The report was released Monday, June 20, a week after the think tank published two papers showing how load shedding can be eliminated by 2024 by dramatically increasing renewables, combined with battery storage.

Lily:

It also blows up the country’s gas master plan, which bases the development of a gas economy on electricity generation to provide the anchor demand for the development of the necessary gas infrastructure.

Meridian calls for the revision of the integrated resource plan, which defines the technology mix required for electricity generation until 2030, and the gas master plan, saying both are based on the 2012 national development plan.

Its not getting out of it…

Meanwhile, Eskom announced on Monday afternoon that it would institute phase 2 load shedding every night from Monday to Thursday between 5 p.m. and 10 p.m. this week.

Read: Eskom Stage 2 load shedding is back

The utility said 5,232 megawatts (MW) of its generating capacity is down due to planned maintenance and 14,202 MW due to unplanned outages.

The average availability factor so far this calendar year is only 59.27%, compared to 61.79% in 2021.

Obsolete blueprints

In its report Meridian Economics, led by respected energy expert Dr. Grové Steyn, points out that conditions have changed dramatically in the decade since the publication of the National Development Plan.

The price of wind and solar energy has fallen by around 50% and the imperative to reduce carbon emissions has increased, with the added pressure of possible penalties for users of electricity generated from fuels. fossils.

“An energy policy that does not incorporate these new economic and environmental realities will fill the electricity system with stranded assets and create climate risk for all electricity users,” Meridian says.

It shows that energy demand can be met by wind and solar power supplemented by flexible and dispatchable capacity in the form of turbines or reciprocating engines running on diesel, gas or other combustible substances.

In addition to the 3,000 MW of peak capacity, an additional 5,000 MW will be needed by 2030, operated at a capacity factor of 3 to 5 percent, according to Meridian.

The report points out that liquefied natural gas (LNG) can replace the use of diesel for peaking power plants, but this would require significant infrastructure that must be compensated on large volumes to be financially viable.

The intermittent and low-volume use associated with peaking facilities will furthermore make it difficult to contract LNG import, which is usually done in regular cycles planned well in advance.

Forcing more new gas into the generation mix to provide anchor demand for gas used in other sectors will drive up electricity prices as well as emissions.

According to Meridian’s model, increasing gas use to the 50% stipulated in the Karpowership projects – which form the bulk of the government’s Emergency Risk Mitigation Program for Independent Power Producers (RMIPPPP ) – and up to 60% envisaged in the programs planned by Eskom and the Coega Development Corporation, can increase the cost of electricity by 40% compared to the use of gas only for peak purposes.

Lily:

Under the same conditions, emissions will be multiplied by seven, which will result in penalties on products exported from South Africa.

Meridian estimates that using renewables supplemented with peaking capacity will save the country R6.1 billion a year, compared to using big gas as base load or mid-range supply. deserved.

He says that to justify forcing big gas into the energy mix, the benefits of doing so will have to outweigh this saving as well as:

  • The economic benefit multiplier of energy that does not carry the 40% cost premium;
  • The impact on global competitiveness and South Africa’s GDP that will result from penalties for the sevenfold increase in emissions; and
  • The socio-economic benefits of localized industrial activity of R3.3 billion annualised, compared to R460 million per year of maintenance expenditure on turbine infrastructure.

“We have not seen any convincing analysis to suggest that the upstream benefits of domestic gas use would be able to outweigh these benefits.”

Total cost, emissions and fuel requirements for a set of scenarios designed to achieve 3 gigawatts of additional dispatchable capacity in the South African power system:

Source: Meridian Economics

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