Cleaner Energy Cooler Climate - Developing Sustainable Energy Solutions for South Africa potx

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Published by HSRC Press

Private Bag X9182, Cape Town, 8000, South Africa

www.hsrcpress.ac.za

First published 2009

ISBN 978-0-7969-2230-4

© 2009 Human Sciences Research Council

The views expressed in this publication are those of the author. They do not necessarily

reflect the views or policies of the Human Sciences Research Council (‘the Council’)

or indicate that the Council endorses the views of the author. In quoting from this publication,

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Contents

Tables 5

Figures 7

Acknowledgements 9

Abbreviations, acronyms and units 11

1 Introduction 15

Energy, sustainable development and climate change in South Africa 15

Outline of the book 18

2 Sustainable development, energy and climate change 19

Working definition of sustainable development 19

Energy for sustainable development 22

Sustainable development and climate change 23

Sustainable development paths as an approach to mitigation 27

Conclusion 29

3 Starting from development objectives 31

The broader context 31

The policy environment in the energy sector 34

The role of electricity in development 39

Economic and institutional aspects 49

Social dimensions and the residential sector 54

Environmental impacts 58

Conclusions: Comparing and assessing 62

4 Options for energy policy 67

Affordable access to electricity 68

Energy governance – to privatise or not? 72

Managing energy-related environmental impacts 74

Economic development and instruments 77

Securing electricity supply through diversity 87

Conclusion 97

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5 Modelling energy policies 99

Focus of policy modelling 100

Drivers of future trends and key assumptions 104

The base case 114

Overview of policy cases 121

Residential energy policies 123

Electricity supply options 133

Conclusion 142

6 Assessing the implications of policies 144

Residential energy policies 144

Electricity supply options 158

Conclusion 167

7 Indicators of sustainable development 169

Sustainable development indicators 169

Economic 172

Environmental 179

Social 186

Comparisons and conclusions 194

8 Developing sustainable energy for national climate policy 204

Implementing sustainable residential energy policies 204

Choosing electricity supply options for sustainability 213

Options for South Africa’s mitigation policy 221

9 Implications for international climate change negotiations 226

Proposals on the future of the climate regime 226

Sustainable development policies and measures 229

Would SD-PAMs make a difference? 233

The future of the climate change framework 235

10 Conclusion 238

References 243

About the author 271

Index 273

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5

Tables

Table 3.1 South African energy policy priorities and progress 38

Table 3.2 Gap between capacity and peak demand for Eskom 45

Table 3.3 Net electricity sent out (MWh) by fuel type, 2001 48

Table 3.4 Electricity-intensive sectors of the South African economy 52

Table 3.5 Estimated electrification levels of rural/urban households, by income

quintile (%) 56

Table 3.6 Emission from Eskom power stations, 2001 59

Table 3.7 Energy sector CO2

emissions, various measures and time frames 60

Table 3.8 Energy and electricity consumption, 2000 62

Table 3.9 Electrification rates, 2000 63

Table 3.10 National energy intensities, 1993–2000 63

Table 4.1 Changes in mean household expenditure on fuels with poverty tariff 70

Table 4.2 Externalities associated with electricity supply, by class 74

Table 4.3 Summary of external costs of Eskom coal-fired electricity generation

per unit 77

Table 4.4 Potential future savings from energy efficiency and demand-side

management 83

Table 4.5 International cost data for RETs 89

Table 4.6 Estimates of theoretical potential for renewable energy sources in South

Africa 90

Table 4.7 Tools that governments can use to promote renewable electricity 90

Table 4.8 Options for new electricity supply 94

Table 5.1 Action Impact Matrix assessing the impact of policy interventions on

development goals 102

Table 5.2 South African population projections from various sources (millions) 107

Table 5.3 Number and share of households 109

Table 5.4 Fuel prices by fuel and for selected years 111

Table 5.5 Cost deflators based on Gross Value Added 113

Table 5.6 TPES by fuel group in the base case 115

Table 5.7 Energy demand (PJ) by household type and end use, selected years 121

Table 5.8 Summary of policy cases in residential demand and electricity supply

sectors 122

Table 5.9 Income in urban and non-urban areas in 2000 market values 124

Table 5.10 Numbers and % of rural and urban households, electrified and not 124

Table 5.11 Household types, with total numbers in 2000, shares and assumptions 125

Table 5.12 Energy demand (GJ) by household type for each end use 127

Table 5.13 Key characteristics of energy technologies in the residential sector 128

Table 5.14 Characteristics of electricity supply technologies in policy cases 133

Table 5.15 Technically feasible potential for renewable energy technologies 135

Table 5.16 Current capacity, increases and progress ratios for RETs 137

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Table 6.1 Overview of results for residential energy policies 145

Table 6.2 Reduction in monthly expenditure on electricity with efficient houses,

by household type 148

Table 6.3 Energy saved and costs for cleaner water heating 151

Table 6.4 Fuel consumption (PJ) in the residential sector across policy cases,

2014 and 2025 156

Table 6.5 Energy consumption by end use for household types, 2025 157

Table 6.6 Share of households with access to electricity in 2025 for all policy

cases (%) 160

Table 7.1 Indicators of sustainable development for energy policies 171

Table 7.2 Total energy system costs across residential policies 173

Table 7.3 Total cost of energy system for electricity supply options 175

Table 7.4 GWh electricity generated by technology in its policy case 176

Table 7.5 Costs of electricity supply technologies per capacity and unit of

generation 176

Table 7.6 Shadow price in c/kWh of electricity for policy cases, 2025 178

Table 7.7 Diversity of fuel mix from domestic sources for electricity supply

options by 2025 (%) 179

Table 7.8 Local air pollutants in residential policy cases, 2025 180

Table 7.9 GHG emissions in residential policy cases 180

Table 7.10 Local air pollutants in electricity policy cases, 2025 181

Table 7.11 GHG emissions for electricity supply options 184

Table 7.12 Estimate of abatement cost in policy cases 186

Table 7.13 Residential fuel consumption (PJ) by policy case 187

Table 7.14 Shadow prices of electricity and other fuels across policy cases 189

Table 7.15 Initial investment in technology in its policy case 190

Table 7.16 Electricity consumption by household type 191

Table 7.17 Monthly expenditure on electricity, by household type and policy case 192

Table 7.18 Average annual expenditure for various household types 193

Table 7.19 Derived average annual and monthly expenditure, by household type 193

Table 7.20 Share of monthly household expenditure spent on electricity (%) 194

Table 7.21 Evaluation of all policies across three dimensions of sustainable

development 195

Table 8.1 Subsidy required to make efficient housing affordable 207

Table 8.2 Cost of saved energy for SWHs and GBs 208

Table 8.3 Order of magnitude of carbon revenues for different carbon prices 224

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Figures

Figure 2.1 Elements of sustainable development 20

Figure 2.2 Comparison of SRES non-policy emissions scenarios and ‘post-SRES’

mitigation scenarios 26

Figure 2.3 Emissions paths relative to development level and possibility of

‘tunnelling’ 28

Figure 3.1 Energy demand, 1992–2000 40

Figure 3.2 Sectoral contribution to economy, 1967–2003 41

Figure 3.3 Share of total primary energy supply, 1999 42

Figure 3.4 Total saleable production, local sales and exports of South African

coal, 1992–2001 42

Figure 3.5 Share of final energy consumption, 2000 43

Figure 3.6 Percentage changes in Eskom electricity sales and changes in real GDP

at market prices 44

Figure 3.7 Eskom licensed capacity and peak demand (MW) 46

Figure 3.8 South Africa’s power stations by fuel and ownership 47

Figure 3.9 Energy flow through the electricity supply industry in South Africa 48

Figure 3.10 Share of final energy demand by energy carrier 50

Figure 3.11 Electricity demand, 1986–2000 51

Figure 3.12 Final industrial energy consumption by sub-sector, 2001 53

Figure 3.13 Final residential energy demand by energy carrier, 2001 55

Figure 3.14 Employment in coal-based electricity generation in South Africa,

1980–2000 57

Figure 3.15 South Africa’s GHG inventory by sector, 1994 61

Figure 3.16 Changes in energy intensity, 1993–2000 64

Figure 4.1 Welfare economic basis for poverty tariff 71

Figure 5.1 Trends in GDP, 1946–2000 105

Figure 5.2 Population projections based on the ASSA model 108

Figure 5.3 Learning curves for new and mature energy technologies 110

Figure 5.4 Electricity generation (GWh) in the base case, grouped by fuel 116

Figure 5.5 Electricity capacity (GW) in the base case 117

Figure 5.6 Projected energy demand by sector in the base case 118

Figure 5.7 Trends in electrification of households in South Africa, 1995–2002 119

Figure 5.8 Projected changes of household numbers in the base case,

2001–2025 120

Figure 5.9 Trends in fuel shares in the residential sector in the base case 126

Figure 5.10 Schematic description of assumed PBMR costs in reference and policy

cases 138

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Figure 6.1 Implications of efficient houses on demand for space heating in UHE

households 147

Figure 6.2 Changes in lighting technologies in the CFLs policy and base cases 149

Figure 6.3 Investment costs for SWHs and GBs, by household type 151

Figure 6.4 Equivalent of fossil fuel use for solar water heating, by household type

(PJ) 152

Figure 6.5 Energy used for water heating by urban low-income electrified

households 153

Figure 6.6 Fuel switch to LPG for three household types 154

Figure 6.7 Renewable energy for electricity generation, by policy case 158

Figure 6.8 Contribution of RETs to meeting the target by 2013, and beyond 159

Figure 6.9 Nuclear energy (PBMR) for electricity generation, by policy case 161

Figure 6.10 Unused capacity of the PBMR in the policy case 162

Figure 6.11 Marginal investment required for more PBMR capacity 162

Figure 6.12 Imports of hydroelectricity and import costs in the policy and base

cases 163

Figure 6.13 Annualised investment in combined cycle gas in the policy and base

cases 164

Figure 6.14 Electricity generation without FBC 165

Figure 7.1 Undiscounted total investment in technologies, supply and demand 172

Figure 7.2 Investment required for residential policies in the policy cases 174

Figure 7.3 Annualised investments in electricity supply technologies, by policy

case 177

Figure 7.4 Sulphur dioxide emissions in electricity policy cases over time 182

Figure 7.5 Carbon dioxide emissions for all cases over time 185

Figure 7.6 Renewable energy use in residential policy cases 188

Figure 7.7 Shadow prices of energy carriers over time 190

Figure 7.8 Electricity supply options ranked by economic, social and environmental

indicators 201

Figure 7.9 Electricity supply options ranked against more indicators 202

Figure 7.10 Residential policies ranked by economic, social and environmental

indicators 203

Figure 8.1 Marginal investments required for efficient houses at 30% and 10%

discount rates 207

Figure 8.2 Diversity of fuel mix from domestic sources for electricity supply

options by 2025 218

Figure 8.3 Total capacity for electricity generation and additions per year 220

Figure 8.4 Wedges of electricity capacity equivalent to one ‘six-pack’ each over

20 years 221

Figure 8.5 GHG emissions avoided in residential policy cases 222

Figure 8.6 GHG emissions avoided in electricity policy cases 223

Figure 9.1 Alternative global CO2

emission pathways for 400 ppmv 234

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9

Acknowledgements

The support of my colleagues at the Energy Research Centre, the broader academy at

the University of Cape Town and the progressive energy community in Cape Town

and South Africa was crucial to shaping and refining my thinking. The interaction

with all, in debate and in the quest to make a difference, is much appreciated. Many

friends and colleagues from other African countries have taught me much about

development and what climate might mean in that context. Many colleagues in

other developing countries have been an inspiration, and the Munasinghe Institute

for Development in Sri Lanka deserves special mention – allowing me a place and

time for reflection. We all are part of a global community of peoples working to

fight climate change. It is a privilege to work among so many brilliant and dedicated

people, facing together one of the foremost challenges of our times. I would like

to acknowledge the debt I owe to all: from my home in the NGOs to the business

community that engages in the challenge, to the many negotiators seeking to make a

fair and effective deal for climate and development.

Finally, the contribution by the European Commission, Development Cooperation

Ireland and the United Nations Institute for Training and Research in supporting the

publication of this book is gratefully acknowledged.

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Abbreviations, acronyms and units

A Ampere

AIM Action Impact Matrix

Annex I Annex to the Convention listing industrialised and transitioning

countries

AsgiSA Accelerated and Shared Growth Initiative for South Africa

ASSA Actuarial Society of South Africa

CDM Clean Development Mechanism

CFL Compact fluorescent light

CGE Computable general equilibrium

CH4

Methane

CO Carbon monoxide

CO2

Carbon dioxide

DBSA Development Bank of Southern Africa

DEAT Department of Environmental Affairs and Tourism

DME Department of Minerals and Energy

DSM Demand-side management

EBSST Electricity basic support services tariff (poverty tariff)

EDI Electricity distribution industry

EJ Exajoules, 1018 joules, or a billion billion joules

FBC Fluidised bed combustion

FGD Flue gas desulphurisation

GB Geyser blanket

GDP Gross domestic product

Gear Growth, Employment and Redistribution (macroeconomic strategy)

Gg Gigagram, 109

grams, a billion grams

GHG Greenhouse gas

GJ Gigajoules, 109

joules, a billion joules

Gt C Gigatons of carbon

GW Gigawatts (109W)

GWe

Gigawattelectric

GWh Gigawatt-hour

HIV/AIDS Human immunodeficiency virus/acquired immunodeficiency syndrome

HVAC Heating, ventilation and air conditioning

IEA International Energy Agency

IPCC Intergovernmental Panel on Climate Change

IPP Independent power producer

IRP Integrated resource planning

kg Kilogram

kl Kilolitre

kt Kilotons, a thousand tons

kW Kilowatts (power measurement)

kWh Kilowatt-hour

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LMRC Long-run marginal cost

LNG Liquefied natural gas

LPG Liquefied petroleum gas

Markal Market allocation (modelling framework)

MDG Millennium Development Goal

MJ Megajoule, 106 joules, a million joules

Ml Megalitre, 106

litres, a million litres

Mt Megatons, 106

tons, a million tons

Mt CO2

Megatons of carbon dioxide, a million tons CO2

MW Megawatt (106

W)

MWe

Megawattelectric

MWh Megawatt-hour, 106

Watt-hours, a million Wh

N2O Nitrous oxide

NAI Non-Annex I (countries that are not Parties listed in Annex I)

Nepad New Partnership for Africa’s Development

NER National Electricity Regulator

NGO Non-governmental organisation

NIRP National Integrated Resource Plan

NMVOC Non-methane volatile organic compounds

NOx

Nitrogen oxides (plural, since they refer to nitrogen dioxide [NO2

] and

nitric oxide [NO])

O&M Operation and maintenance

OECD Organisation for Economic Cooperation and Development

PBMR Pebble Bed Modular Reactor

PJ Petajoules, 1015 joules

ppmv Parts per million by volume

PPP Purchasing power parity

PWR Pressurised water reactor

RDP Reconstruction and Development Programme

RED Regional electricity distributor

RET Renewable electricity/energy technology

SADC Southern African Development Community

SAPP Southern African Power Pool

SD-PAMs Sustainable development policies and measures

SHS Solar homes system

SO2

Sulphur dioxide

SRES Special Report on Emission Scenarios (of the IPCC)

SWH Solar water heater

T&D Transmission and distribution (power lines)

t C Tons of carbon

t CO2

Tons of CO2

TJ Terajoule, 1012 joules

Toe Tons of oil equivalent

TPES Total primary energy supply

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TSP Total suspended particulates

TWh Terawatt-hours, 1015 watt-hours

UNFCCC United Nations Framework Convention on Climate Change (the

Convention)

VAT Value added tax

W Watt (a unit of power, or capacity, one joule per second)

WEPS Wholesale electricity pricing system

Wh Watt-hour

Household types as defined in this book:

RHE Rural higher-income electrified

RLE Rural lower-income electrified

RLN Rural lower-income non-electrified

UHE Urban higher-income electrified

ULE Urban lower-income electrified

ULN Urban lower-income non-electrified

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