Developing Nations’ Carbon Conundrum

by on December 18, 2008 at 10:09 am

World leaders have reached consensus on the need to go on a carbon diet to combat climate change, and most are acting to reduce their respective greenhouse gas emissions. Global emissions are expected to continue to rise, however, with much of the net increase coming from developing nations that are not subject to the landmark Kyoto Protocol agreement.

While G-8 nations may want developing countries to follow their lead in pledging to cut emissions within the next decade, the distinctive energy environments in South Africa and other growing nations make it much more challenging to make similar commitments.

Like its developing counterparts of China and India, South Africa, from where I recently returned after a 10-day tour, wants a first world standard of living, and therefore a first-class power grid that encompasses the entire nation. Unlike the U.S.’ patchwork of utilities, South Africa has one major utility, Eskom, that is wholly-owned by the government.

You might think that having a single entity providing more than 95 percent of its power would make it easy for a nation to transition to renewable power and to introduce energy-efficient technologies. However, the economics of cheap energy from coal, a lack of competition, and government inaction are impeding South Africa’s desire to cut carbon emissions.

Eskom is expanding service to many of South Africa’s rural communities that have little to no power for homes. According to a 2006 report by the Ministry of Environment and Tourism, 41.9 percent of South African households were “unelectrified” in 2001.

The utility is having trouble meeting existing demand, which has been increasing by approximately 3 percent per year. Providing power to new customers, many which are great distances from the coal-rich areas where power is produced, requires not only more coal power plants, but also significant investments in transmission infrastructure to reach them.

In January 2008, Eskom resorted to rolling blackouts because it could not produce enough power. “We effectively shut down the South African economy because of concerns about a national blackout,” said Steve Lennon, Eskom’s managing director of corporate services.

Keeping the power on and affordable for the industries that are driving South Africa’s surging economy — gold, diamond, and platinum mining, telecommunications and auto manufacturing — is a federal priority, even if it means further tapping into the nation’s abundant coal reserves. To meet the expected demand, Eskom is building additional coal power plants and bringing shuttered plants back online.

More than 90 percent of South Africa’s electricity comes from coal, and that energy mix (which includes one nuclear power plant) is highly unlikely to change anytime soon. The country has among the cheapest energy in the world, with customers paying about one-fifth as much as those in developed nations, and the government has no intention of derailing the country’s hard fought economic progress by substantially raising the cost of power.

However, keeping the price low, and therefore limiting Eskom’s revenue stream, means there’s less money to invest in clean energy projects.

Even with the rapid advancements in energy efficiency and recent mass production of wind and solar power components, renewables can’t come close to competing with coal’s average price of 2 cents per kilowatt hour, according to Lennon.

Only a hefty carbon tax could help to tilt the playing field towards clean energy. The South African government is taking its first steps in that direction, as Environmental Affairs and Tourism Minister Marthinus van Schalkwyk announced a “small” carbon tax this summer that would likely begin in early 2009 and increase in size over time.

The South African government is also expected to pass feed-in tariff legislation in 2009 that would pay producers of renewable energy an incentive for delivering power to the grid. While Eskom will receive wind and solar power from these “independent power producers,” the company is not likely to develop its own wind or solar farms in the immediate future, according to Lennon. He does not believe in subsidies, saying that clean power needs to “stand on its own two feet” and only be undertaken when it is cost-competitive with coal power. Lennon expects several years of lag between when the feed-in tariffs are passed and when any renewable resources go online.

First Steps Towards Improving Sustainability

Because of South Africa’s continued industrialization and expansion of residential electrification, Eskom expects to double power production by 2025, which because of the country’s use of coal, makes a reduction in carbon emissions impossible. After that time, Eskom, which is among the top 20 entities in greenhouse gas emissions, expects to slowly start reducing emissions, according to environmental manager Dave Lucas. For now the focus is on reducing demand and the carbon intensity of electricity generation, he said.

However, South Africa has a relatively modest carbon footprint compared to developed nations, according to data from the United Nations. The country ranks 41st in the world in per capita CO2 emissions, with less than half (9.19 metric tons per year) the output of the U.S. However, its reliance on coal for both electricity and transportation (through coal to liquids fuel that powers a majority of vehicles) places the country well ahead of China (91st) and India (133rd).

Eskom, which has more than 500 people working in its climate change group, is working to clean up its coal operations and to change customer behavior to be more energy efficient. Lucas said the company can shave off about 3000 megawatts of demand by 2011 by working with customers.

Instead of preemptory climate change tactics that would begin to reduce emissions by phasing in renewable energy, Eskom and the government are focusing on “long term mitigation strategies” to prepare for the anticipated fluctuations in temperature and water availability in areas that are often starved of precipitation.

While richer nations are aggressively building renewable energy plants despite the higher cost, in South Africa, the coal economy will likely give way to a nuclear era, according to Lucas. As cheap coal reserves dwindle in future years, Eskom anticipates expanding its nuclear power program as a “carbon-free” alternative. Eskom recently put on hold plans to build a nuclear reactor because of the global financial situation, but that is expected to be a short term delay.

Barry Macoll, Eskom’s technology manager, said his personal opinion is that the country will be powered “by coal for the next 50 years, then by nuclear for 50 years, and then switch to renewables.”

Therefore, with Eskom and the South African government’s philosophy of maintaining cheap electricity rates and the need for clean power to be cost-competitive, it is not surprising that Eskom has no wind or solar plants delivering electricity to the national grid. Its functioning renewable power assets are limited to hydro-power plants, which currently provide less than 2 percent of its overall electricity.

Eskom is taking its first steps towards a goal of building up to 1,600 MW of renewable power by 2025. South Africa currently has just two small wind farms — an Eskom pilot plant of three wind turbines totaling 3 MW in Klipheuvel in the Western Cape, and a privately run 5 MW wind farm in Darling.

However, ample wind resources are available to South Africa. A 2003 study concluded that up to 5,000 MW of wind energy could be added to the national grid, and rural and small off-grid wind farms could add up to another 27,000 MW of power.

Eskom is currently studying the feasibility of installing a pilot 100 MW concentrating solar power (CSP) plant in the Northern Cape Province. The company is preparing an environmental impact study for the plant, which would use a series of heliostat mirrors to focus solar energy on a central tower, which transfers the heat to molten salt that is used to create steam to power a turbine. The CSP plant could be in operation by 2012.

Another as yet untapped renewable resource in South Africa is geothermal power. Lennon said Eskom has not yet “seriously looked at it.”

Eskom is more likely to reduce its carbon footprint by increasing the energy efficiency of its coal power operation. The company is hopeful that by burning coal where it lies underground it can cut CO2 emissions by up to 30 percent. Eskom’s Lennon said the underground coal gasification technology (UCG) “can revolutionize the way we produce energy around the world.”

The UCG process sets fire to coal seams, and uses the escaping gas to power a turbine and produce electricity. This also saves money because it eliminates the steps of mining the coal, bringing it to the surface, and then crushing it before burning it to produce power. Another benefit of UCG is that the fly ash resulting from the burning would also be kept underground, reducing the overall environmental impact.

UCG technology has been tested elsewhere, but Eskom engineers are “perfecting the process,” according to Lennon. Safety studies are still underway, but Lennon said the fires can quickly be put out by controlling the flow of oxygen. If all goes well, the plan is to begin an initial UCG project in the city of Majuba with a 1,200 MW capacity.

Going Forward

While action on climate change within the country may be limited so far, both the South African government and Eskom profess urgency in reducing global greenhouse gas emissions.

Earlier this month government minister van Schalkwy urged world leaders to proceed with combating climate change despite the global financial crisis. Eskom’s 2008 annual report highlights the need for reducing carbon emissions, and outlines the plan for gradually reducing the amount of emissions relative to energy output during the next two decades.

Eskom also acknowledges that it has work to do to become a sustainable organization. An independent study of corporate sustainability for 2008 found that Eskom failed in all four areas of evaluation (technical, economic, environmental, and social) with the scores falling across the board relative to 2007.

South Africa may have good intentions for becoming more sustainable as it modernizes, but the internal economic forces and a lack of impetus to immediately embrace renewables indicates there will be no significant shift in energy policy in the coming years. Developed nations shouldn’t expect South Africa to reduce its carbon footprint, unless they provide significant financial resources (such as investing in wind and solar IPP projects), or unless they can exert sufficient international political pressure.

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