Renewable energy has changed everything because renewable energy is the cheapest technology for generating electricity in most parts of the world today. This, according to panelists at a recent seminar held in Johannesburg, will make fossil fuel-fired and nuclear power generation redundant, particularly when coupled with energy storage technologies whose prices are decreasing rapidly too.
As he welcomed more than 220 delegates to the “Flexible power generation: a new paradigm and an alternative to ‘baseloadism’”, the fourth in a series of five Energy Dialogues, Chris Yelland, the MD of EE Publishers which, together with Nedbank, hosted the event, said that the massive price reduction of clean and renewable energy from wind-powered and solar photovoltaic (PV) plants over the last five years has brought about a radical change in the way electricity is generated in many parts of the world.
“There is no economic, technical or other reason for the majority of South Africa’s new generation capacity requirements not to be met by wind and solar PV capacity, backed up by flexible generation capacity,” Yelland said.
Wartsila’s Stefan Nygard, said that because the real cost of renewable energy had fallen sharply in recent years, in two-thirds of the world renewable energy accounts for 20% of the electricity generation mix. As a result, this technology has reached what he called a tipping point, meaning that the penetration of renewable energy in the generation mix will continue to grow.
When it reaches 80%, Nygard told the audience which had filled the Boardman Auditorium at Nedbank’s offices in Sandton, renewable energy will take over as the principal source of energy supplying the majority of the permanent load, which is also known as base load. At this point, thermal power generation, from coal-fired power stations and nuclear power plants will become redundant, leaving power utilities with stranded assets. Water-based pumped storage schemes will give way to battery storage and gas-fired peaking plants, Nygard predicted.
Clyde Mallinson agreed, saying that renewable energy, with energy storage, is the cheapest and cleanest technology to use today and is the only sustainable option available. He said that for storage to work, one must have a surplus of supply. He explained that system operators balance the demand and supply by controlling demand – through curtailment, such as general load-shedding (in extreme cases) or by requesting large energy users to reduce load – or by adding additional generation capacity from so-called peaking plants which operate for short duration, usually at far higher cost to the utility, until the load has reduced.
He showed, graphically, that by generating more electricity than is needed and storing the excess, expensive peakers will be unnecessary. If the electricity is generated by the cheapest method available, i.e. renewable energy, the combined cost, per kWh, of the “over-generation” and storage will be cheaper than using coal-fired power and gas-fired or diesel-powered peaking plant.
Stephan Vermaak, from the IFC, said that financial institutions are not willing to support new fossil-fuel based generation technologies such as coal and heavy fuel oil, and that funding for new gas-fired plant will become more difficult in the future. Financial institutions, he said, want to be able to assure their investors and depositors that they take environmental concerns seriously.
Society, he said is becoming more aware of, and sensitive to, the risk to the environment the use of fossil-fuels for power generation and transportation poses, and that these concerns are behind the development of electric vehicles and renewable energy generation systems.
Vermaak suggested that South Africa accelerate the use of gas in combination with wind, solar and energy storage and minimise the use of coal for electricity generation. To this end, he said, the IFC will fund a gas terminal at Richards Bay.
The audience heard that while some people are concerned that closing coal mines and coal-fired power stations will increase South Africa’s unemployment rate, studies show that multiple, utility-scale renewable energy projects will create more job opportunities than those in the coal industry.
Chris Forlee, the CEO of the National Energy Regulator of South Africa (Nersa), said that the regulator’s task is not to prescribe technologies since it is technology agnostic. Rather, the regulator sets tariffs which ensure that the government’s energy policies are fulfilled cost effectively, while making sure that investors are able to make a fair profit.
Forlee said that modern technologies, working together, have brought us to the fourth industrial revolution (4IR). This development will have dramatic effects in the electricity sector, introducing smart grids in both transmission and distribution networks.
For this reason, Forlee said, the government is setting strict parameters regarding the introduction of privately generated electricity into existing distribution grids. In some cases, a ministerial determination is made, and a generating licence must be applied for. In other cases, one must simply register the generation plant to enable the Department of Energy know how much private generation is in use.
The grid code is to be amended next year, Forlee said, to make allowance for energy storage which will be consider a generator, since, like pumped storage, it is able to supply power to the grid.
The panel agreed that there are many challenges facing South Africa’s energy sector, but many opportunities will arise, particularly in gas-to-power and mini-grid technologies. Renewable energy is here to stay, the panel said, which will ultimately replace older generation technologies. However, for this to occur, the existing grid will need to be strengthen and restructured to accommodate new applications such as electric vehicles which may be charged in one location and discharged elsewhere.
However, the first and most important task the power utilities should address, the panel said, is the collection of payment for electricity consumed. Unless this problem is effectively overcome new investment in the energy sector is at risk, the audience was told.
Nedbank’s Thabang Chiloane chaired the panel discussion and took questions from the audience during the question-and-answer session.
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