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Wednesday, January 15, 2014

David Lipschitz Comments on the Integration Resource Plan (IRP) 2013 Update to the IRP 2010-2030 Plan

Dear Mr Madingoane

These comments must be in by 7th February 2014. Please see my comments below and also please confirm receipt of this email.

I have the following comments re the IRP 2010-2030 Update 2013:
  1. The extended Transmission network is estimated as being 2.5 times the size it is now. However there are no costings for this upgrade. What is it expected to cost, for each of the 3 scenarios in the IRP? Have agreements been made with landowners re way-leaves (land easements)? What is the environmental impact of these additional cables? What is the visual impact on our beautiful landscape? Who will own this new cable?
  2. The price increase graphs, e.g. on pages 21, 25, etc, show a rapidly increasing price till 2018 (8% per annum and 16% per annum) and then a lowering price till 2023. I believe that these price increases should be smoothed. There isn't any company in the world that can increase prices before service delivery happens, except for government which has done this with Electricity and Water price increases. Why hasn't this been considered? And what effect will this dramatic price increase over the next 5 years have on consumer behaviour and on investment in an already fragile economic recovery?
  3. South Africa's electricity price and petrol price are already higher than those in Texas and other parts of the world. For example on 14th January 2014, the price of petrol in South Africa was R13.20 vs R8.47 in Texas, a 56% difference. Homeowner and SMME electricity prices are already 50% higher in Cape Town as compared with Austin. Texas, known as the Oil State, has dramatically improved efficiencies by using all forms of energy generation. Why isn't South Africa considering all forms of energy generation?
  4. Why isn't the South African government and Department of Energy considering using Private People to fund the Energy Development in South Africa by allowing private Utilities, private Power Stations, etc, at no borrowing cost to the fiscus and with the possibility of massive and quick job creation?
  5. Demand: The IRP update says that the Energy Intensity of South Africa is decreasing and hence fewer power stations are required. It also talks about the path of "least regret" in decision making thus deferring power station build for as long as possible. However, there is no analysis of demand in the IRP. I have heard rumours that a South African smelter wants to spend R30 billion in South Africa expanding activities. As far as I know they use 1 GW today and need another 1 GW by 2016, but they are forecasting only 800 MW in 2016. Therefore instead of a 100% increase in electricity, they are forecasting a 20% drop. Not only is South Africa losing out on massive foreign investment in our country, we are also losing out on job creation opportunities by big business which is moving to countries with cheaper, more sustainable and more reliable electricity. Why is there no demand forecast in the IRP? Why haven't the IRP planners considered that perhaps the reason for the drop in Energy Intensity is because there isn't enough electricity already and because companies are already paying a premium to run their own backup power, mainly generators?
  6. In November 2014, Engineering News said that South Africa had 31.5 GW out of a potential 37 GW available, including peaking power stations. South Africa's grid has decreased from 42 GW 20 years ago to 37 GW today and a friend of mine said there was a particular day in November when there was only 28 GW available. How does the IRP help to rapidly create electricity in South Africa, bearing in mind that we need the electricity now, not in 8 to 12 years time? One should note that Table 16 of the IRP update says that there is 42 GW of Eskom generation and 3 GW of other generation and 2.5 GW of Demand Response (DR) Available. In late 2013, DR was made illegal by NERSA. We cannot rely on foreign capacity anymore, as it is being used more and more for local needs in foreign countries. And of the 42 GW of Eskom capacity, only 37 GW is available, due to power stations which are past "end of life" and which the engineers won't let run at capacity. For example, Koeberg's capacity is 1.8 GW, but my understanding is that it only runs at an available capacity of 1.4 GW which is considered to be safe. Why isn't Table 16 considering the real picture?
  7. Demand Response, a critical part of any Energy System, has now been outlawed by NERSA. Why has the DOE allowed NERSA to remove Demand Response from the South African energy system? Has NERSA considered the effect this is having on business? Why isn't demand response being done with homeowners, which would be at no cost to business?
  8. Nuclear: The IRP update says that the Nuclear decision will be delayed for several years, and specifically until after the new Integrated Energy Plan, last completely revised in 2003, is completed. Why, then, have the government just signed an agreement for Nuclear purchases with a Russian Supplier?
  9. Unemployment and Poverty is only mentioned for the first time on page 24 of the IRP plan. There is no consideration of the National Planning Commission's report that South Africa needs 11 million new jobs by 2030 and that the only way to do this is to consistently grow the economy by 5% or more per annum. Why has this been ignored? How can the IRP help South Africa to increase electricity provision quickly so that South Africa can increase its growth from 2% to 5% per annum?
  10. Why isn't the IRP considering the needs of South Africa in terms of its electricity, job creation, economic, and other potential?
  11. Why does the IRP focus on job creation inside the energy sector, rather than focussing on job creation because of the energy sector? This is the same problem I have with the Western Cape's Green Cape Initiative, which focusses on jobs inside the Green Economy, rather than focussing on jobs because of the green economy. The most jobs South Africa can create in the green economy is about 200,000 permanent jobs. In the meantime, 11 million other people have to remain unemployed until these 200,000 people are employed. Why does this make sense?
  12. The IRP says that even with "Big Gas" and with up to 63 GW of power generation from gas plants by 2029, South Africa will still experience peak demand problems! Why is South Africa intent on building more large scale power stations instead of piping gas to households thus getting rid of the peak demand problem for good?
  13. Why does the IRP consider "learning", i.e. price decreases in renewable energy, which have dropped 90% over the past 2 decades and not consider "learning" in nuclear and coal energy? When Koeberg build started in 1974, its cost was estimated at R500 million. Its final build cost was R1.75 billion, in 1978, and even taking inflation of R250 million into account, its cost was still 233% over budget. The latest Nuclear build has been costed at between R400 million and R1.4 trillion and in November 2013, the government said it will cost R1 trillion. Considering the lateness of Kusile and Medupi coal power stations, the inability to get the boiler welding right, software problems, moving materials around such big power stations, and other problems, why is it that 36 years after Koeberg, our Nuclear and Coal costs are still spiralling out of control, even with massive government subsidies and especially insurance and underwriting subsidies which aren't available to newer energies?
  14. Why are the nuclear power stations being built at the coast when most of the electricity is needed inland? And why is the government intent on building new transmission infrastructure at taxpayers expense when it isn't prepared to pay to connect the new Alternative Energy producers to the grid, at taxpayers expense, as happens in other parts of the world?
  15. Why does South Africa continue with its centralisation approach to energy when 21st Century technology clearly shows that a decentralised grid is cheaper and more efficient, to build and to maintain?
  16. Why does the IRP consider base load as being only available from coal, nuclear and gas, when we know that recently 1/3rd of the current grid's existing capacity is unavailable for various reasons? One could therefore argue that Nuclear, Coal and Gas are only available 66% of the time. As it is, Eskom's own statistics show that its "base load" power stations are available less than 80% of the time against a world norm of over 85%. What is the DOE's definition of "Base Load"? What isn't the DOE ensuring that Eskom keeps up its standards?
  17. Eskom was founded in 1923, when about 60 private electricity producers where combined into a single monopoly, in order to save costs. Eskom therefore has a 91 year head start with information gathering, costing, transmission and distribution, yet it still wants State protection and still wants its monopoly power at the expense of an economy which needs another 11 million permanent jobs by 2030. Why aren't the strategies and policies in the 1998 White Paper on Energy and the 2003 White Paper on Renewable Energy, which call for 30% of generation and transmission to be in private ownership by 2010, in place? Why does Eskom continue to need to be protected, even with its incredible resources, and its inherent and historical ability to provide the world's cheapest source of electricity?
  18. Why do the Energy Plans continue to use PJ (Petajoules) when the Active Citizens, Voters, and "the man in the street" understand kW, MW and GW? I believe that government's documents should reflect the common and modern usages rather than some ancient and archaic way of measuring things, that the general population don't understand.
  19. The IRP says that South Africa's CO2 emissions can be reduced by building new power stations in Botswana and other countries. Is this ethical?
  20. Why isn't regional integration looked at more closely? Electricity from the DRC's Inga project is considered, but that is still at least 10 years away and there will be huge transmission losses, perhaps as much as 50% of the electricity lost as heat over thousands of kilometres. Why isn't a strategy being considered that looks at massive renewable energy developments in Namibia, especially Concentrated Solar Power (CSP) with Storage, and with massive "batteries" in Lesotho, in the form of Pumped Storage, which is estimated at up to 7 GW of power?
  21. I have heard that the new transmission infrastructure from Kusile and Medupi haven't been built yet? Please confirm if this is true and if so how, then, once Kusile and Medupi come online, how will their electricity be dispatched?
  22. I have heard that the Coal Gas Flue Desulphurisation plants at Kusile and Medupi haven't been installed, yet these were critical components in their EIA's and the reason for building these new "clean coal"power stations. What is the DOE doing to correct and enforce these requirements?
  23. Has Kriel Power Station been closed at the end of 2013? Although it can continue generating, Eskom were meant to add Gas Flue Desulphurisation to it by the end of 2013 so that it could continue generating. Why is Eskom being allowed to simply ignore its environmental responsibilities, whilst holding South African electricity users to ransom? What are the government, the DOE, the Department of Public Works and other Government Departments doing to ensure Eskom compliance with Environmental Rules? How can government ethically enforce carbon emission taxes on vehicles, charge transport companies and aircraft companies levies for environmental protection, etc, yet not enforce similar behaviour on itself?
My colleagues and I have spent R30 million over the past 6 years getting an understanding of how these questions can be answered. If the government wish it, they can pay for our time and we will show our strategy to solve South Africa's electricity, job creation, sustainability, and other crises, quickly and cleanly.

I look forward to your replies and to continuing to help doing my Active Citizen part to help make South Africa great.

Yours sincerely,
David Lipschitz

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