IRP draft 27-8-18

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38. INTEGRATED RESOURCE PLAN 2018 Page 36 of 75 Figure 12 : Scenario Analysis Results for the Period 2031 – 2040 Figure 13 : Scenario Analysis Results for the Period 2041 – 2050

68. INTEGRATED RESOURCE PLAN 2018 Page 66 of 75 Figure 32: Annual Total Capacity Decommissioning (GW) Figure 33 depicts the total cumulative capacity decommissioned by 2050 and the total cumulative capacity decommissioned per decade. Figure 33: Annual Wind Capacity Decommissioning (GW)

66. INTEGRATED RESOURCE PLAN 2018 Page 64 of 75 Figure 29: Annual OCGT Decommissioning  Wind Decommissioning Figure 30 reflects annual wind capacity decommissioning. Wind capacity signed under REIPP Bid Window 1 will be decommissioned by 2035. Figure 30: Annual Wind Capacity Decommissioning (GW)

2. MICROSOFT INTEGRATED RESOURCE PLAN 2018 AUGUST 2018 Final Draft_ 22 / 8 /2018 For Public Input

65. INTEGRATED RESOURCE PLAN 2018 Page 63 of 75 Figure 28: Annual Nuclear Decommissioning Fifty  per  cent  of  Eskom’s  nuclear  power  plant  will  reach  end - of - life by 2045 and the balance by 2047.  OCGT Decommissioning Current OCGT plants in South Africa are operating on diesel and about 3GW is expected t o be decommissioned by 2025 as depicted in Figure 29.

67. INTEGRATED RESOURCE PLAN 2018 Page 65 of 75  PV Decommissioning Figure 31 shows solar PV capacity decommissioning. Close to 1GW of PV capacity will be decommissioned by 2040. Figure 31: Annual PV Capacity Decommissioning (GW)  Total Generation Decommissioning Figure 32 depicts the total annual capacity decommissioning by plant type up to 2050. It is important to take note of the total capacity that will be decommissioned by 2041.

58. INTEGRATED RESOURCE PLAN 2018 Page 56 of 75 Figure 19 : New Build Capacity for the Period Ending 2030 Figure 2 4 : New B uild C apacity for the P eriod 2031 – 2040

60. INTEGRATED RESOURCE PLAN 2018 Page 58 of 75 6.2 APPENDIX B – INSTALLED CAPACITY, MINISTERIAL DETERMINATIONS AND DECOMISSIONING SCHEDULE 6.2.1 Municipal, Private and Eskom Generators Tables 8 and 9 below provide information on installed municipal, private and Eskom generators. Table 8 : Municipal and Private Generators

11. INTEGRATED RESOURCE PLAN 2018 Page 9 of 75 “Variable  costs” refer to costs incurred as a result of the production of the generation plant.

15. INTEGRATED RESOURCE PLAN 2018 Page 13 of 75 The significant change in energy mix post 2030 indicates the sensitivity of the results observed to the assumptions made. A slight change concerning the assumptions can therefore change the path chosen. In - depth analysis of the assumptions and the economic implications of the electricity infrastructure development path chosen post 2030 will contribute to the mitigation of this risk.

59. INTEGRATED RESOURCE PLAN 2018 Page 57 of 75 Figure 25 : New B uild C apacity for the P eriod 2041 – 20 5 0

64. INTEGRATED RESOURCE PLAN 2018 Page 62 of 75 Figure 27: Annual Existing Coal Decommissioning It is evident that close to 75% (just under 30 GW) of the current Eskom coal fleet would have reached end - of - life by 2040.  Nuclear Decommissioning Eskom’s  existing  nuclear  power  station  (Koeberg)  is  expected  to  reach  end - of - life by mid - to late 2040, ba sed on a normal 60 - year life span . This is discounting the envisaged steam generator replacement that is expected to extend  Koeberg’s  life  by  an  additional  20  years.  Figure  28  below  reflects   Koeberg’s  annual  decommissioning.

54. INTEGRATED RESOURCE PLAN 2018 Page 52 of 75 Figure 19 : Comparison of Tariffs for the Scenarios in 2017 (C ents per K ilo w att H our ) Figure 20 : Cumulative Comparison of Tariff Paths for the Scenarios There is a marginal difference in the projected price path for the period up to 2030. This is to be expected , since technical analysis resulted in the observation that the energy and capacity mix for the period differs marginally between the five scenarios. Beyond 2030, and driven by the difference in the energy and capacity mix, the price paths are significantly different. The scenario where annual build limits on RE is

76. INTEGRATED RESOURCE PLAN 2018 Page 74 of 75 6.5 APPENDIX E – EMBEDDED GENERATION CATEGORIES The following activities constitute the embedded generation allocation for own use reflected in table 7 of this IRP Update. 1. The operation of a generation facility with an installed capacity of between 1MW and 10MW that is connected to the national grid wh en ─

63. INTEGRATED RESOURCE PLAN 2018 Page 61 of 75 6.2.4 Emission Abatement Retrofit Programme a nd 50 - y ear Life Decommissioning Figure 26: Emission Abatement Retrofit Programme and 50 - year Life Decommissioning 6.2.5 Detailed Decommissioning Analysis  Coal Decommissioning The full impact of decommissioning the existing Eskom fleet was not fully studied in the IRP Update. This includes the full costs related to coal and nuclear decommissioning and waste management. The impact of security of supply versus de - carbonization of the economy is something that must be understood fully and requires comprehensive investigation. Figure 27 below depicts decommissioning of coal - fired plants over the IRP Update planning period.

37. INTEGRATED RESOURCE PLAN 2018 Page 35 of 75  The projected unit cost of electricity differs significantly between the scenarios tested. It must be noted that a change in fuel cost (gas , for example) can affect the projected co st significantly .  The scenario without RE annual build limits provides the least - cost option by 2050.  Overall, the installed capacity and energy mix for scenarios tested for the period post 2030 differs significantly for all scenarios and is highly impacted / influenced by the assumptions applied . Figure 11 : Scenario Analysis Results for the P eriod Ending 2030

73. INTEGRATED RESOURCE PLAN 2018 Page 71 of 75 Window 1 to Bid Window 3.5 instead of the average cost from Bid Window 4 expedited. The Ingerop Report to determine nuclear costs has since been published. With regard to costs relevant to RE, revised costs based on average costs from Bid Window 4 expedited are now bei ng used. The EPRI report, which forms the basis for all other costs, was revised with the latest costs and the exchange rate has been pegged at January 2017. o Exchange rate During the first public workshop in December 2016, there was general outcry about the use of R11.55 to $1(USD), instead of the prevailing December 2016 rate of R16 to a $1. The Update uses R13.57 to $1, which is the January 2017 average exchange rate. Scenario analysis is a comparative excersice and the exchange rate affects all scenarios almost equally. The impact of exchange rate comes in when developing the final price path, which may be used as an indication of future tariffs, especially in the sho rt term. o Demand - side options Issues raised on the demand side included energy efficiency, embedded generation and fuel switching. The general comments were around the need to incorporate these into future plans and to test them as scenarios. Because of limited or lack of data to develop credible assumptions, the issues above were considered as potential drivers for low demand in the IRP Update. The assumption was that the impact of these would be

57. INTEGRATED RESOURCE PLAN 2018 Page 55 of 75 Figure 22 : Illustration of C apacity and E nergy D river  New Build Capacity per D ecade Figure 19 to 25 show new build capacity across the five scenarios during the study period. Only the m arket - l inked g as p rice and the combination of c arb on b udget and m arket - l inked g as p rice scenarios introduce imported hydro capacity by 2030.

52. INTEGRATED RESOURCE PLAN 2018 Page 50 of 75 under 10%. More than 80% of the energy produced will be from renewables and gas. The c arbon b udget (IRP6) and c arbon b udget plus m arket - l inked g as p rice (IRP7) scenarios are the only scenarios with a higher share of coal and nuclear in energy produced. 6.1.4 Least Cost Plan Capacity by year 2030 Table 7 and Table 8 below show Least Cost Plan capacities by year 2030. Table 7 : Capacities for Least Cost Plan (IRP1) by Year 2030 Table 8 : Capacities for Least Cost Plan by Year 2030 with Annual Build Limits on RE (IRP3)

47. INTEGRATED RESOURCE PLAN 2018 Page 45 of 75 This was not a decision on Ministerial Determinations but a reference point. Full consideration of and decisions on issued Ministerial Determinations are included in the section on the policy adjustment stage later on in this document. 6.1.3 Scenario Analysis Results The comparison of the scenarios in this section must be understood in the context of the drivers of the energy system and capacity requirements discussed later on in this document in sub - section 6.1.5 . Comparison of the results from the analysis of scenari os looks at the energy share, capacity share and the projected price path.  Observations from the Growth Scenarios Figure 15 : Installed Capacity (GW) for the High - (IRP2), Median - (IRP3) and Low - g rowth (IRP4) Scenarios

74. INTEGRATED RESOURCE PLAN 2018 Page 72 of 75 lower demand with reference to the median forec ast demand projection.  Preliminary Base Case In planning studies, a base case can be defined as a reference case or starting point. In the case of the IRP Update, a preliminary base case was developed, based on the assumptions the DoE had compiled. It was called a preliminary base case because the assumptions were still subject to public comment and adjusment. While the preliminary base case was published to provide context to the assumptions, the general public focused more on the reference case than o n the assumptions. The main issues raised in relation to the preliminary base case included the following: o Constraints on RE As this is an IRP Update, certain considerations from the IRP 2010 were maintained in the preliminary base case, with the underst anding that they may have to be reviewed during scenario analysis. The promulgated IRP 2010 – 2030 imposed 1000 MW and 1600 MW annual build limits on PV and wind power, respectively. These limits were imposed to minimize the exposure to risk associated with delays in these projects resulting from circumstances unknown at the time of planning or implementation, as well as technology glitches, since the technology was new in South Africa. The concern was that the DoE, in taking this approach, was trying to make a case for nuclear and it was suggested that the limits should be completely removed. As explained in the IRP Update, detailed studies indicated that that concern was unfounded, si nce there is a marginal difference in the amount of RE and gas required when annual build limits are imposed or relaxed.

75. INTEGRATED RESOURCE PLAN 2018 Page 73 of 75 o Missing technologies A number of associations and project developers raised concern about the fact that the technologies they were dev eloping or investing in did not appear on the preliminary base case results. These include CSP, biomass, fuel cells and others. This concern is addressed through a policy position in the IRP Update. The position is that all new technologies identified an d endorsed for localisation will be enabled through determinations utilising existing allocations. o Treatment of Determinations already issued by the Minister of Energy Questions were raised about the Ministerial Determinations issued based on the promulgated IRP 2010 – 2030 . These were the first considerations when the IRP Update process started. A number of test cases were run to consider these determinations. Future de mand forecast indicated that the projected demand up to 2030 was below that of the promulgated IRP 2010 – 2030 . When policy is adjusted, the Determinations will be revised to reflect the changed assumptions and capacity resquirements. o Price path Following o n  the  CSIR’s  cost  comparison  between  its  own  scenario   and the DoE preliminary base case, the DoE was critisised for not publishing the price path for the preliminary base case. However, it was put forward that, since it was a preliminary base case, and bec ause there was no other scenario that could be used for comparison, there was no need to publish the price path. This Update contains price path analysis for the scenarios tested.

70. INTEGRATED RESOURCE PLAN 2018 Page 68 of 7 5 procured, as was the case in the past. In the long run this will imply accelerating or bringing forward capacity proposed in the plan.  Variable Capacity from Renewable Sources impacting on System Security and Stability At low levels of penetration, fluctuating renewable capacity will have only marginal impact on the system. However, considering the South African energy generation mix and demand profile, there is a point at which an isolated system would have to make adju stments to system and network operations if not configured to cater for the variability of this capacity. The level at which this will become necessary is still being debated and additional research will be required before it can be identified for inclusio n in the next IRP version.  Fuel Costs o South Africa has generally been in the very privileged position of having access to coal that is priced well below world - market prices and locked in via long - term  contracts.  Based  on  Eskom’s  coal  procurement,  indicat ions are that this is no longer the case. However, the coal IPP procurement prices indicate that  Eskom’s  current  situation  is  not  necessarily  a  trend  and  therefore  there  is   still space for Power Purchase Agreements based on long - term coal price certainty. o The risk associated with increasing gas volumes to support RE is real unless gas becomes available locally. Exposure to currency fluctuations and the impact of that on electricity prices must be assessed and understood prior to any commitment. The importa tion of gas and the impact of that on the balance of payments must also be assessed.  Import hydro options The main risks associated with import hydro options are delays in the construction of both the necessary grid extension and the power plants themselves. There is also a cost risk in that the assumptions used in the IRP Update  are  based  on  a  ‘desktop  study’  and  do  not  reflect  any  commitment  on  the   part of potential developers.

49. INTEGRATED RESOURCE PLAN 2018 Page 47 of 75  P eriod 2041 – 2050 For this period , the energy and capacity mix also remain s similar for the three load - growth scenarios. The n ew capacity continues to be dominated by RE and gas. A significant change in this period, which is applicable to all scenarios, is the assumed decommissioning of the Koeberg nuclear plant. Renewables and gas are now the dominant energy suppliers in the mix, with 25% of energy coming from wind power.  Observat ions from Key Input Scenarios Figure 17 provides a graphical representation of the key input energy (TWh) scenarios and capacity outputs (GW). Figure 17 : Installed Capacity (GW) for the No RE Annual Build Rate (IRP1), Median - g rowth (IRP3), Mar ket - lin ked Gas Price (IRP5), Carbon Budget (IRP6 ) and Carbon Budget plus Market - l inked Gas Price (IRP7) Scenarios

69. INTEGRATED RESOURCE PLAN 2018 Page 67 of 75 6.3 APPENDIX C – RISKS The IRP Update increases the exposure to imported commodities (gas) and electricity (regional hydro), but reduces the risk of coal price increases . The current average coal price reflects the historic cost - plus pricing for the local power market, whereas a stronger link to global coal prices is expected in future. The following risks have been identified in relation to the IRP Update:  Demand Forecast The risk is that actual demand may turn out to be lower or higher than forecasted. Current indications are t hat demand is more likely to be lower than forecasted as a result of increasing grid electricity prices, grid deflections and a move to substitutes such as LPG. It is therefore safe to assume the effect would be limited to over - investment in capacity, with out any risk concerning general security of supply. This can be mitigated by managing the pace and scale of new capacity implementation through regular reviews of the IRP.  Technology Costs If any of the assumed technology costs should turn out to be high er than assumed, the expected price of electricity could increase. Similarly, should the costs of some of the technologies be lower than assumed, the plan will not be the least - cost plan. As in the case of demand, this risk can be mitigated by managing the pace and scale of new capacity implementation through regular reviews of the IRP. Instituting feasibility studies to inform any procurement in line with New Generations Regulations will also help mitigate against this risk.  Existing Plant Performance If the performance of existing Eskom coal plants does not improve to the levels assumed, there will be an increase in the total costs because other plants such as diesel or gas plants will have to be run to make up for the shortfall. This can be mitigated by implementing a threshold and monitoring plant performance trends for decisions. In the short term, emergency power will have to be

72. INTEGRATED RESOURCE PLAN 2018 Page 70 of 75 o Constraints on RE o Missing technologies o Treatment of Determinations already issued b y the Minister of Energy o Price path The following issues were raised under each category:  Policy and process o The start of the consultation process, namely December 2016, was critisised. This was resolved by the DoE agreeing to extend the closing date for written comments from 26 February 2017 to 31 March 2017. o The link between the IRP and Integrated Energy Plan (IEP) and which one comes first. It was explained to the pubic that the IEP does not necessarily come first and that the two plans feed into each other.  Assumptions o Demand forecast Concerns and comments raised about the electricity demand forecast were that the forecast was outdated and that it did not take into account current GDP projections and declining electricity consumption. The critism was correctly placed, since the forecast had been developed in March 2015, while the consultations started in December 2016. The demand forecast has since been revised to reflect actual 2016 electricity consumption as a starting point. The relationship between GDP, electricity growth and electricity intensity has also been detailed in the detailed demand - fore cast report. o Technology costs Concerns and comments on technology costs were mainly around the publication of the cost - assumptions report used to come up with the nuclear  overnight  capital  costs  and  the  DoE’s  use  of  average  cost  from  Bid  

77. INTEGRATED RESOURCE PLAN 2018 Page 75 of 75  the generation facility supplies electricity to a single customer and there is no wheeling of that electricity through the national grid; and  the generator or single customer has entered into a connection and user - of - system agreement with, or obtained approval from, the holder of the relevant distribution licence. 2. The operation of a generation facility with an installed capacity of between 1MW and  10MW  that  is  connected  to  the  national  grid  when  ─  the generation facility is operated solely to supply a single customer/related customers by wheeling electricity through the national grid; and  the generator or single/related customers has/ve entered into a connection and use - of - system agreement with the holder of the distribution or transmission licence i n respect of the power system over which the electricity is to be transported. 3. The operation of a generation facility with an installed capacity of between 1MW and 10MW that is not connected to the national grid or in the case of which there is no interconnection  agreement  when  ─  the generation facility is operated solely to supply electricity to the owner of the generation facility in question;  the generation facility is operated solely to supply electricity for consumption by a customer who is related to the generator or owner of the generation facility; or  the electricity is supplied to a customer for consumption on the same property on which the generation facility is located. Notwithstanding the applicable circumstances, all activities listed above must still comply with licensing requirements as regulated and administered by NERSA.

43. INTEGRATED RESOURCE PLAN 2018 Page 41 of 75 Table 7 : Proposed Updated Plan for the P eriod Ending 2030 The following must be noted with regard to the plan in Table 7 above:  Coal Installed Capacity is less the 12 000 MW capacity to be decommissioned between years 2020 and 2030  Existi ng and c ommitted Coal, Nuclear, Hydro and Pumped Storage Capacity is less auxiliary power. Stated numbers are therefore based on sent out capacity not rated capacity.  Two additional units at Medupi have since been commissioned earlier than previously assumed.  Total installed generation f or own use regardless of installed capacity is unknown as these installations were exempted from holding a generation license or were not required to be registered.  The timing of new additional capacity as indicated in Table 7 can change ( move back or for ward ) depending on what happens with the projected electricity demand and or Eskom ’s existing pla nt per formance.

48. INTEGRATED RESOURCE PLAN 2018 Page 46 of 75 Figure 16 : Consumed Energy (T Wh) for the High - (IRP2), Median - (IRP3) and Low - g rowth (IRP4) Scenarios Observations from the growth scenarios in line with Figure 15 and 16 can be summarised as follows:  P eriod 2021 – 2030 The energy and capacity mix between the three load - growth scenarios is fairly comparable for the period up to 2030 . The share of coal red uces as power plants are decommissioned, with the share of renewables and gas increasing while maintaining the GHG emission constraints imposed. The high - growth scenario sees the full import of hydro capacity ( 2500 MW) coming on line earlier than 2030, c ompared with 1000 MW for the median - growth and nothing for the low - growth scenarios.  P eriod 2031 – 2040 The energy and capacity mix remain s fairly comparable for the three load - growth scenarios. The n ew capacity continues to be dominated by RE and gas.

45. INTEGRATED RESOURCE PLAN 2018 Page 43 of 75 consideration of Determinations was adjusted to include only procured projects up to Bid Window 4. Following the development of the reference case , a n umber of scenarios was studied to understand the impact of key technical and policy inputs, specifically the low - and high - demand trajectories ; the climate change mitigation strategies ; the renewable build rate ; and market - based gas prices. S cenario analys e s and observations were then used as input into the finalisation of the IRP Update . 6.1.2 Treatment of Ministerial Determinations issued in line with the Promulgated IRP 2010 – 2030 Taking into account changes in other key assumptions such as demand , the impact of Ministerial Determinations issued in line with the promulgated IRP 2010 – 20 30 was tested with the utilisation of existing assets as an indicator of over - or under - capacity. Figure 14 d epicts the process followed in the evaluation of the impact of Ministerial Determinations as contained in Appendix B .

46. INTEGRATED RESOURCE PLAN 2018 Page 44 of 75 Figure 14 : Ministerial Determinations Testing Process for the IRP Update Reference Case To arrive at an acceptable utilisation factor and taking into account the latest demand forecast, the following scenarios relating to Ministerial Determinations issued under the promulgated IRP 2010 – 20 30 were tested.  The inclusion of a ll Ministerial Determinations with commissioning dates in line with the promulgated IRP 2010 – 20 30 .  The inclusion of a ll Ministerial Determinations with commissioning dates updated to reflect the likely realistic date for commissioning .  The i nclusion of a ll Ministerial Determinations where r equest s for p roposal s had been issued or binding commercial process had commenced . The test case with Ministerial Determinations where a request for proposal had been issued showed acceptable existing plant utilisation levels, which was an indication of reasonable supply - and - demand balance. This consideration regarding Determinations was then adopted for the reference case and subsequent scenario analyses. Following the 0 1 September 2017 announcement of the Minister of Energy regarding the signing of procured IPP projects for Bid Windows 3.5 and 4 , the consideration of Determinations was adjusted to include only procured projects up to Bid Window 4.

71. INTEGRATED RESOURCE PLAN 2018 Page 69 of 75 6.4 APPENDIX D – INPUT FROM PUBLIC CONSULTATIONS ON THE ASSUMPTIONS The DoE undertook public consultations on input assumptions from 07 December 2016 to 31 March 2017. Consultations included presentations as well as written submissions. Bilateral discussions at the request of organisations such as Business Unity South Afric a and the South African Banking Association also took place. The consultation statistics can be summarised as follows:  From December 2016 to February 2017, nine public workshops were held in nine provinces.  In total, 63 public presentations were made during the workshops.  In total, 640 people attended the workshops.  In total, 190 comments were received via 115 submissions. These comprised: o 89 submissions from companies, including government departments an d entities; and o 26 submissions from private individuals. Addressing Public Comments Comments received from the public varied from opinion statements to substantive inputs with supporting data. Most opinion statements were in support of a least - cost plan, which is mainly based on RE as presented by the CSIR. Substantive comments received during the workshops, as well as written submissions, can be grouped into the following categories:  Policy and process  Assumptions o Demand forecast o Technology c osts o Exchange rate o Demand - side options  Preliminary base case

19. INTEGRATED RESOURCE PLAN 2018 Page 17 of 75 3.1.1 Electricity Demand from 2010 – 20 16 Reported Gross Domestic Product (GDP) for the period 2010 – 20 16 was significantly lower than the GDP projections assumed in the promulgated IRP 201 0 – 2030 . This is depicted in Figure 2 . The compound average growth rate for the years 2010 to 2016 was 2 , 05%. This lower GDP growth compared with the expectation s in 2010 had an impact on the resulting electricit y demand as depic ted in Figure 3 . Figure 2 : Expected GDP G rowth from IRP 2010 vs Actual (Sources: Stat istic s S A & Promulgated IRP 2010 – 2030 ) Figure 3 : Expected Electricity Sent - out from IRP 2010 – 2030 vs Actual (Sources: Stat istics S A & Promulgated IRP 2010 – 2030 )

50. INTEGRATED RESOURCE PLAN 2018 Page 48 of 75 Figure 18 : Consumed Energy ( T Wh) for the No RE Annual Build Rate (IRP1), Median - g rowth (IRP3), Mar ket - linked Gas Price (IRP5), Carbon Budget (IRP6) and Carbon Budget plus Market - l inked Gas Price (IRP7) Scenarios Observations from the key input scenarios from Figure 17 and 18 can be summarised as follows:  Period 2021 – 2030 The energy and capacity mix between the three load - growth scenarios is fairly comparable for the period up to 2030. The share of coal red uces as power plants are decommissioned, with the share of renewables and gas increasing in adherence to the GHG emission constraints imposed. The application of the market - linked gas price scenario combined with carbon budget as a GHG emission constrain t (IRP7) s ees the full import of hydro capacity (2500 MW) coming on line earlier than 2030 com pared with 1000 MW for the m arket - l inked g as p rice scenario (IRP5) . Higher gas prices and stringent carbon emission limits could be the reason for full hydro capacity and the slight increase in renewables.

33. INTEGRATED RESOURCE PLAN 2018 Page 31 of 75 4. S CENARIO ANALYSIS RESULTS Table 6 below outline s the seven scenarios considered and the key assumptions for each scenario. These assumptions can be grouped into projected demand growth scenarios and key input scenarios , which look at some of the key considerations , such as using carbon budget for a GHG reduction strategy , variation in assumed gas price s to analyse the impact of high gas prices on the energy mix and the removal of annual build limits imposed on RE . Table 6 : Key Scenarios Key assumptions and considerations included in the scenarios studied include d , among others:  The demand forecast for various growth trajectories;  Maintenance of the RE annual build rate as previously a ssumed in t he promulgated IRP 2010 – 20 30 . The P lan assume d 1000MW for PV and 1600MW for w ind per annum;

30. INTEGRATED RESOURCE PLAN 2018 Page 28 of 75 also expected that 1800MW of n u clear power generation (Koeberg) will reach end - of - life between 2045 and 2047. The decommissioning schedule is linked to Eskom complying with the m inimum emission s tandards in the Air Quality Act N o . 39 of 2004 in line with the postponements granted to them by the Department of Environmental Affairs (DEA) . A number of Eskom power plants (Majuba, Tutuka, Duvha, Matla, Kriel and Grootvlei) require s extensive emission abatement retrofits to ensure compliance with th e law . Failure to comply is likely to result in these p lants becoming unavailab le for production , which could lead to the early retirement of some of the units at these plants. Figure 8 : Cumulative Eskom Coal Generation Plants Decommissioning 3.4 CO 2 EMISSION CONSTRAINTS In line  with  South  Africa’s  commitments  to  reduce  emissions , the promulgated IRP 2010 – 20 30 imposed CO 2 emission limits on the electricity generation plan. The Plan

55. INTEGRATED RESOURCE PLAN 2018 Page 53 of 75 removed (IRP1) provides the lower - tariff path , with the scenario where c arbon b udget as e mission mitigation strategy is imposed and m arket - l inked g as prices are assumed (IRP7) resulting in the highest tariff path. A further observation was that the adoption of c arbon b udget as emission mitigation strategy , with the targets as currently suggest ed , results in the tariff path of this scenario being the second highest by 2050 (see IRP6). There is therefore no difference in tariff path for the different scenarios up to 2030, while the choice of technologies and their associated costs, taking emissi on mitigation requirements and capacity building into account, will drive the price path beyond 2030. Cumulative by 2030 deviation from the least cost case (IRP1) will results in additional costs to the consumer. Hence, it makes no difference for this version of the IRP Update which scenario is adopted up to 2030. The huge difference between scenarios beyond 2030 will, however, make it necessary to undertake a detailed energy path study that will inform a next upda te of the IRP. The policy adjusted scenario will result in about 5% higher tariff by year 2030 compared to the least cost scenario. This is the results of the smooth ing out RE rollout plan which commissions plants earlier than they are actually required by the system as well as the introduction coal and hydro power. It must be noted this financial analysis does not take into account the economic benefits of a consistent and predictable RE rollout, the likely regional economic benefits of Inga hydropower a s well as the economic benefits of continued beneficiation from coal. 6.1.6 Additional Analys i s of a nd Observations concerning t he Scenarios  Drivers of new capacity

10. INTEGRATED RESOURCE PLAN 2018 Page 8 of 75 “Levelised  cost  of  energy” refers to the discounted total cost of a technology option or project over its economic life, divided by the total discounted output from the technology option or project over that same period, i.e. the levelised cost of energy provides an indication of t he discounted average cost relating to a technology option or project. “Operating  and  maintenance  (O&M)  costs”   refer to all non - fuel costs such as direct and indirect costs of labour and supervisory personnel, consumable supplies and equipment and outside support services. These costs are made up of two components, i.e. fixed costs and variable costs. Outage  rate”   refers to the proportion of time a generation unit is out of service. The nature of this outage could either be scheduled on unscheduled. “Overnight  capital  cost” refers to capital cost (expressed in R/MW) of a construction project if no interest was incurred during construction, assuming instantaneous construction. “Peaking  plant” refers to energy plants or power stations that have very lo w capacity factors, i.e. generally produce energy for limited periods, specifically during peak - demand periods, with storage that supports energy on demand. “Planned  outage  rate  (POR)”   refers to the period in which a generation unit is out of service becau se of planned maintenance. “Policy  instrument” refers to an option that when implemented is assured to achieve a particular government objective. “Present   value” refers to the present worth of a stream of expenses appropriately discounted by the discount rate. “Reference  Case  (Base  Case)” refers to a starting point intended to enable, by means of standardization, meaningful comparisons of scenario analysis results based on sets of assumptions and sets of future circumstances. “Reserve  margin” refers to the excess capacity available to serve load during the annual peak. “Scenario” refers to a particular set of assumptions and set of future circumstances providing a mechanism to observe outcomes from these circumstances. “Sent - out  capacity” corresponds to ele ctricity output measured at the generating unit outlet terminal having taken out the power consumed by the unit auxiliaries and losses in transformers considered integral parts of the unit. “Sensitivity” refers to the rate of change in the model output rel ative to a change in inputs, with sensitivity analysis considering the impact of changes in key assumptions on the model outputs. “Steps” refer to the gradual change in assumptions, specifically in those adopted in IRP 2010, and the effect these changes ha ve on model outputs. “Strategy” is used synonymously with policy, referring to decisions that, if implemented, assume that specific objectives will be achieved. “Supply  side” refers to the production, generation or supply of electricity.

21. INTEGRATED RESOURCE PLAN 2018 Page 19 of 75 Figure 4 : Electricity I ntensity H istory 1990 – 2016 (Source: Own C alculations based on Stat i s tics SA D ata ) T he expected electricity demand as forecasted in the promulgated IRP 2010 – 20 30 did therefore n ot materialise and the forecast was updated accordingly to reflect this. 3.1.2 Electricity Demand Forecast for 2017 – 20 50 The electricity demand forecast was developed using statistical models. The models are data - driven and based on historical quantitative patterns and relationships. H istorical data on electricity consumption was key and information in this regard was obtained from various sources in the public domain. Overa ll consistency between sources was maintained by ensuring sector breakdowns correspond ed with totals from Statistics SA data . Using r egression models per sector , sector forecasts were developed using sourced data. Sectoral totals were aggregated a nd adjusted for losses to obtain total forecasted values. A djustments were also made to account for electricity energy imports and exports.

35. INTEGRATED RESOURCE PLAN 2018 Page 33 of 75 Figure 10 : IRP Study Key Periods The period up to 2020 is mainly covered through the Medium - t erm System Adequacy Outlook compiled annually by Eskom and published by NERSA in line with the Grid Code requirements . The period 2021 – 2030 is termed a  “medium - to - high”   period of certainty , with new capacity requirements driven by the decommissioning of old Eskom power plants and marginal demand growth. While demand and technology costs are likely to change, the decommissioning of old plants w ill definitely result in the requirements for additional capacity. The period 2031 – 2040 is termed an  “ indicative period ” , as the uncertainty regardin g the assumptions begin s to increase. The output for this period is relevant to the investment decisions of the 2021 – 2030 period because it provides information needed to understand various future en ergy mix paths and how they m ay be impacted by the decisi ons made today. The period 2041 – 2050 is even more uncertain than the period before 2040. The results were analysed in line with the objectives of the IRP , which are to balance cost, water usage, emission reduction and security of supply. Detailed results from the technical analysis are contained in Appendix A .

9. INTEGRATED RESOURCE PLAN 2018 Page 7 of 75 GLOSSARY “Baseload  plant” refers to energy plants or power stations that are able to produce energy at a constant, or near constant, rate, i.e. power stations with high - capacity factors. “Capacity  factor” refers to the expected output of the plant over a specific time period as a ratio of the output if the plant operated at full - rated capacity for the same time period. “Comparative   prices” refer to calculated prices that can be used only to compare outcomes arising from changes to input assumptions, scenarios or test cases. These p rices do not indicate what future prices may be (indicative prices). “Cost  of  unserved  energy  (COUE)” refers to the opportunity cost to electricity consumers (and the economy) from electricity supply interruptions. “Demand  side” refers to the demand for, or consumption of, electricity. “Demand  side  management  (DSM)” refers to interventions to reduce energy consumption. “Discount  rate” refers to the factor used in present value calculations that indicates the time value of money, thereby equating current a nd future costs. “Energy  efficiency” refers to the effective use of energy to produce a given output (in a production environment) or service (from a consumer point of view), i.e. a more energy - efficient technology is one that produces the same service or output with less energy input. “Fixed  costs” refer to costs not directly relevant to the production of the generation plant. “Forced  outage  rate  (FOR)” refers to the percentage of scheduled generating time a unit is unable to generate because of unplanned outages resulting from mechanical, electrical or other failure. “Gross  Domestic  Product  (GDP)” refers to the total value added from all economic activity in the country, i.e. total value of goods and services produced. “Heat  rate”   refers to the amount of e nergy expressed in kilojoules or kilocalories required to produce 1kWh of energy. “Integrated  Energy  Plan” refers to the over - arching, co - ordinated energy plan combining the  constraints  and  capabilities  of  alternative  energy  carriers  to  meet  the  country’s   energy needs. “Integrated  Resource  Plan  (IRP)” refers to the co - ordinated schedule for generation expansion and demand - side intervention programmes, taking into consideration multiple criteria to meet electricity demand. “Lead  time” refers to a time peri od taken to construct an asset from scratch to production of first unit of energy. “Learning  rates”   refer to the fractional reduction in cost for each doubling of cumulative production or capacity of a specific technology.

8. INTEGRATED RESOURCE PLAN 2018 Page 6 of 75 MW Megawatt NDP National Development Plan NERSA National Energy Regulator of South Africa; alternatively the Regulator NOx Nitrogen Oxide OCGT Open Cycle Gas Turbine O&M Operating and Maintenance ( c ost ) PM Particulate Matter POR Planned Outage Rate PPD Peak - Plateau - Decline PPM Price Path Model PV Present Value; alternatively Photo - v oltaic RE Renewable Energy REIPPP Renewable Energy Independent Power Producers Programme SOx Sulphur Oxide TW Terawatt ( o ne million m egawatts ) TWh Terawatt h our

17. INTEGRATED RESOURCE PLAN 2018 Page 15 of 75  Under the Eskom build programme, the following capacity has been commissioned : 1332MW of Ingula pumped storage, 1588MW of Medupi, 800MW of Kusile and 100MW of Sere W ind Farm .  Commissioning of the 1005MW Open Cycle Gas Turbine ( OCGT ) peak ing plant. In total, 18000MW of new generation capacity has been committed to. Besides capacity additions, a number of assumptions have also changed since the promulgat ed IRP 2010 – 2030 . Key assumptions that changed include electricity demand projection, Eskom ’s existing plant performance , as well as new technology costs. T he se changes necessitated the review and update of the IRP . 2. THE IRP UPDATE PROCESS The IRP U pdate process undertaken consist ed of four key milestones as depicted in Figure 1 below . These were the development of input assumptions ; the development of a credible base case ( reference case ) and scenario analysis ; the production of a balanced plan ; and policy adjustments. Figure 1 : IRP Update Review Process

29. INTEGRATED RESOURCE PLAN 2018 Page 27 of 75 bulk of the South African electricity supply mix . The performance of these plants is therefore critical for e lectric ity supply planning and security. Medium plant performance projection is assumed for the IRP U pdate as it is in line with Eskom’s  Shareholder  Compact  of  2017  and  Corporate  Plan  target s. Figure 7 shows the plant performance projection scenarios compiled by Eskom . Figure 7 : Eskom Plant Performance (Source: Eskom) 3.3.2 Existing Eskom Plant Life (Decommissioning) Decommissioning of plants is a major consideration in the IRP Update . Eskom coal plants were designed and built for 50 - year life , which falls within the 2050 study period of the IRP Update . The full impact of decommissioning the existing Eskom fleet was not studied fully as part of the IRP U pdate . Th at include d the full costs related to coal and nuclear decommissioning , rehabilitation and waste management. The socio - economic impact of the decommissioning of these plants on the communities who depend on them for economic activity was also not quantified. In line with the decommissioning schedule in A ppendix B , Figure 8 shows that about 12600MW of electricity from coal generation by Eskom will be decommissioned cumulatively by 2030 . That will increase to 34400 MW by 2050. It is

4. INTEGRATED RESOURCE PLAN 2018 Page 2 of 75 6.2 APPENDIX B – INSTALLED CAPACITY, MINISTERIAL DETERMINATIONS AND DECOMISSIONING SCHEDULE ................................ ................................ ........... 58 6.2.1 Municipal, Private and Eskom Generators ................................ ............................. 58 6.2.2 Eskom Generators ................................ ................................ ................................ ..... 59 6.2.3 Ministerial Determinations issued in line with the IRP 2010 – 2030 ..................... 60 6.2.4 Emission Abatement Retrofit Programme and 50 - year Life Decommissioning ................................ ................................ ................................ ....... 61 6.2.5 Detailed Decommissioning Analysis ................................ ................................ ....... 61 6.3 APPENDIX C – RISKS ................................ ................................ ................................ ...... 67 6.4 APPENDIX D – INPUT FROM PUBLIC CONSULTATIONS ON THE ASSUMPTIONS ................................ ................................ ................................ ................. 69 6.5 APPENDIX E – EMBEDDED GENERATION CATEGORIES ................................ ..... 74

51. INTEGRATED RESOURCE PLAN 2018 Page 49 of 75 The share of renewables and gas in the energy mix is fairly similar among all options, including the scenario without annual build limits, the reason being that a combination of these technologies is best suited for load following . Imposing annual build limits does not disadvantage renewables for the period ending 2030. It can therefore be concluded that varying input assumptions do not materially alter the energy mix for this period.  Period 2031 – 2040 This period sees the installed capacity from renewables and gas increasing to just over double that of the period up to 2030. The scenario comprising removal of annual bui ld limits on renewables sees renewables and gas capacity tripling. The reference case (IRP3), the m arket - l inked g as p rice (IRP5) and the c arbon b udget plus m arket - l inked g as p rice (IRP7) scenarios commission new coal capacity of about 5250 MW, 8250 MW and 1500 MW , respectively. The carbon budget GHG emission mitigation strategy and the removal of annual build limits on renewables imply that no new coal units will be commissioned up to 2040. The carbon budget (IRP6) and c arbon b udget plus m arke t - l inked g as p rice (IRP7) scenarios commission additional nuclear capacity of about 4200 MW and 5600 MW, respectively. From an energy - production perspective, the contribution of coal to energy produced is significantly reduced compared with the reference case (IRP3) – from about 60% in the 2021 – 2030 period to about 30% in this period, with corresponding installed capacity sitting at about 18% versus 40% in the previous study period.  Period 2040 – 2050 All scenarios indicate a complete transition from the capacity and e nergy mix of today. Installed capacity will be mainly from renewables and gas with coal and nuclear making up less than 50% of the mix. The n o RE a nnual b uild r ate (IRP1) scenario leads to a path where more than 90% of installed capacity will be from renew ables and gas by 2050, with coal

42. INTEGRATED RESOURCE PLAN 2018 Page 40 of 75 the NDP to partner with regional neighbou rs, The P roject has the potential to energise and unlock regional industrialisation.  R enewable energy technologies identified and endorsed for localisation and promotion will be enabled through Ministerial Determinations utilising the existing PV, Wind and Gas allocations in the IRP Update Table 7 . Technologies reflected in Table 7 are therefore a proxy for technologies that provide similar technical characteristics at similar or less cost to the system. The Electricity Regulations on New Genera tion Capacity enables the Minister of Energy to undertake or commission feasibility studies in respect of new generation capacity taking into account new generation capacity as provided for in the IRP Update . Such feasibility studies are, among others, is expected to consider the cost of new capacity, risk s (technical, financial and operational) and value for money (economic benefits).  Made annual allocations of 200MW for generation - for - own - use between 1MW to 10MW , starting in 2018. Th ese allocations will not be discounted off the capacity allocations in the Table 7 initially , but will be considered during the issuing of Ministerial D eterminations taking into account generation for own use filed with NERSA. See Appendix E for categories of plants included in the se allocation s . With these adopted policy adjustments, t he recommended updated Plan is as depicted in the table below . Associated price paths are discussed under Appendix A .

31. INTEGRATED RESOURCE PLAN 2018 Page 29 of 75 assum 9 ed that emissions would p eak between 2020 and 2025, plateau for approximately a decade and decline in absolute terms thereafter . Figure 9 shows the emission reduction trajectory in line with the peak - plateau - decline ( PPD ) constraints for electricity generation adopted in the promulgated IRP 2010 – 2030 . Figure 9 : Emission Reduction Trajectory ( PPD ) The other emission constraint approach is to impose carbon budget target for a specified period. A carbon budget is generally defined as a tolerable quantity of GHG emissions that can be emitted in total over a specified time. Carbon budget targets approach as proposed for the electricity sector divide d into 10 - year intervals , a re contained in Table 5 . The proposal suggests that the total emission reduction budget for the entire electricity sector up to 2050 must b e 5470 Mt CO 2 cumulatively . Table 5 : Emission - r eduction Constraints (Carbon Budget) Decade Budget in M t CO 2 E quivalent 2021 – 20 30 2750 2031 – 20 40 1800 2041 – 20 50 920

39. INTEGRATED RESOURCE PLAN 2018 Page 37 of 75 4.2 CONCLUSIONS FROM ANALYSIS OF THE SCENARIOS The following conclusions are drawn from the results of the analyses :  The review of the IRP implies that the pace and scale of new capacity developments needed up to 2030 must be curtailed compared with that in the promulgated IRP 2010 – 20 30 projections. This is the case on the back of assumed electricity demand and or existing Eskom plant performance.  M inisterial Determinations for capacity beyond B id W indow 4 (27 signed projects) issued under the promulgated IRP 2010 – 20 30 must be reviewed and revised in line with the projected system requirements (updated plan) .  The s cenario without RE annual build limits provides the least - cost electricity path to 2050.  Without a policy intervention, all technologies included in the promulgated IRP 2010 – 20 30 where prices have not come down like in the case of PV and wind, cease to be deployed because the least - cost option only contain s PV, w ind and g as .  The significant change in the energy mix post 2030 indicates the sensitivity of the results observed to the assumptions made. A slight change in the assumptions can therefore change the path chosen. Th is considered with the low degree of certainty of the assumptions post 2030 requires a n i n - depth analysis of the assumptions , technical and the economic implications of the electricity infrastructure development path cho ices for the period post 2030.

56. INTEGRATED RESOURCE PLAN 2018 Page 54 of 75 The capacity potential ly installed by 2020 is used as a departure point. The capacity step change from 2020 to 2030 is mainly as a result of increasing load growth , new capacity resulting from Ministerial Determination s and Eskom new build and decommissioning of existing plant s, as illustrated in Figure . Different technology types provide different requirements for the system. Figure 21 : Change in I nstalled C apacity Figure below is an illustration of both system - generic capacity and energy requirement drivers. The additional capacity and energy requirements are contrasted against increase in demand versus decom missioning of the existing fleet. Up to the end of the first decade (2030) , the new capacity requirement is driven primarily by the decommissioning of existing coal - fired plant s. The total installed capacity around 2020 will be about 50 GW . Assuming there will be no commissioning of new plants or decommissioning of existing plants, the earliest need for new capacity will be post 2030, based on high load growth . With decommissioning in line with the information in Appendix B , the earliest need for new capacity will be around 2025. This is a clear indication that the new capacity requirement driver in this decade will be decommissioning. Installed 2020 Capacity 2030 Examine the Change in I nstalled Capacity Energy ( TWh ) Capacity (GW) Energy ( TWh ) Capacity (GW) Separate technologies can supply Capacity or Energy Kimberly (96 MW) Jeffrey Bay (138 MW) Koeberg Majuba Ankerlig Nuclear Coal Gas Solar Wind Decommissioning Coal = = Solar Wind Gas Installed 2020 Capacity 2030 Committed Build New Build Decommissioning Examine the Path of Change in I nstalled Capacity

22. INTEGRATED RESOURCE PLAN 2018 Page 20 of 75 Figure 5 below depicts the total energy demand forecast as contained in the demand forecast report. Figure 5 : Expected E lectricity D emand Forecast to 2050 The u pper forecast 1 wa s based on an average 3,18% annual GDP growth , but assuming the current economic sectoral structure remain ed. This forecast result ed in an average annual elec tricity demand growth of 2,0% by 2030 and 1,66% by 2050. The m edian forecast 2 was based o n an average 4,26% GDP growth by 2030 , but with significant change in the structure of the economy . This forecast result ed in an average annual elec tricity demand growth of 1,8% by 2030 and 1,4% by 2050 . The median forecast electricity intensity drop ped extensively over the study period ( from the current 0,088 to 0,04 in 2050 ) . Th at reflects the impact of the assumed change in the structure of the economy where ene rgy - intensive industries make way for less intensive industries. The resultant electricity forecasts were such that, even though the median forecast reflected high er average GDP growth than the upper forecast, the average electricity growth forecast associated with the upper forecast was relatively lower than the average electricity growth forecast for the median forecast . 1 T he CSIR m oderate forecast in its detailed forecast report . 2 T he CSIR h igh l ess i ntense forecast in its detailed forecast report .

32. INTEGRATED RESOURCE PLAN 2018 Page 30 of 75 While the reference case for the IRP U pdate applie d PPD as an emission constraint , as was the case in the promulgated IRP 2010 – 20 30 , applying c arbon budget as a constraint instead of PPD was tested as a scenario . 3.5 TRANSMISSION NETWORK COSTS The technical models in the promulgated IRP 2010 – 2030 did not explicitly include the cost of the transmission network in their analyses . The IRP U pdate does include the cost of the transmission network for scenario comparison. The t ransmission network was incorporated by including the estimated , direct transmission infrastructure costs, including collector station and substation costs in the total overnight generation technology costs. The costing was based on a high - level estimate from recent average costs for transmission infrastructure. For R E technologies (wind and solar PV) , the transmission infrastructure costs entail ed collector stations and the associated lines connecting to the main transmission substation , as well as the transmission substation costs. For conventional technologies , the costs entail ed only the main transmission substation costs. Imported hydro CSP transmission costs were treated the same as conventional technology costs. The transmission infrastructure costs considered different capacity increments/penetration per techn ology in different parts of the country. Transmission corridor costs and ancillary costs required for network stability, particularly inertia, were not included as these are not directly associated with any technology but are part of strengthening the transmission backbone. A d etailed transmission network costs report can be downloaded from the D oE website ( http://www.energy.gov.za/files/irp_frame.html ).

20. INTEGRATED RESOURCE PLAN 2018 Page 18 of 75 The actual net electricity energy sent - out for the country declined at an average compound rate of - 0,6% over the past years . Th at was in stark contrast with the expectation of an average growth rate of 3,0% in the promulgated IRP 2010 – 20 30 . The result was that the actual net sent - out in 2016 was at 244TWh in comparison with the expected 296TWh (18% difference) . The underlying causes of the reduced electricity demand were many - sided , including:  General economic conditions as shown in Figure 2 above, which specifically impacted energy - intensive sectors negatively .  The constraints imposed by the supply situation between 2011 and 2015 with the strong potential for suppressed demand by both industrial and domestic consumers. It was expected that suppressed demand would return once the supply situation had been resolved, but factors attributed to electricity pricing and commodity price issues might have delayed, or permanently removed , th at potential.  Improved energy efficiency, partly as a response to the electricity price increases.  Increasing embedded generation. There is evidence of growing rooftop Photo - voltaic ( PV ) installations. Current installed capacity is still very small . H owever , this is likely to increase in the medium to long term .  Fuel switching from electricity to LPG for cooking and space heating . Further a nalysis of the historic electricity intensity trend indicate d that electricity intensity also contin ued to decl ine over the past years, exceeding the decline expectation in the promulgated IRP 2010 – 2030 forecast. See Figure 4 below. Figure 4 also points to possible decoupling of GDP growth from electricity int ensity , which generally indicates a change in the structure of the economy.

44. INTEGRATED RESOURCE PLAN 2018 Page 42 of 75 6. APPENDICES 6.1 APPENDIX A – DETAILED TECHNICAL AND COST ANALYSIS RESULTS 6.1.1 IRP Update Approach a nd Methodology In accordance with assumptions discusse d ea rlier in this IRP Update, there has been a number of developments and changes in the electricity sector since the promulgation of IRP 2010 – 20 30 , both domestically and in the international energy sector. These have impacted not onl y on the starting position of the IRP U pdate , but also on the expectation of future demand and supply options. These key changes can be summarised as follows :  Additional generation capacity in the form of RE (REIPP P ), baseload coal (Medupi and Kusile), pumped storage (Ingula) and gas peaking plant s (Avon and Dedisa) , has come on line .  Domestic electricity demand is significantly lower than the expectation in 2010 because of the reduction in energy demand and a significant reduction in electrici ty intensity. The expectation of future demand has had to shift to account for these changes .  The cost of some technology options ha s followed the trends expected in 2010 (especially the learning rates assumed) while others have not, requiring an update of the outlook concerning technology costs, as well as potential for new technologies and fuel. The promulgated IRP 2010 – 20 30 considered PPD as a GHG emission mitigation strategy, but the re is now a proposal to a pply carbon budget as a GHG mitigation strat egy . PPD is based on annual celling for emissions whilst carbon budget is based on a periodic target. The development of the reference case followed the process outlined in the Figure 1 . Following the 0 1 September 2017 announcement of the Minister of Energy regarding the signing of procured Independent Power Producer (IPP) projects, the

7. INTEGRATED RESOURCE PLAN 2018 Page 5 of 75 ABBREVIATIONS AND ACRONYMS CCGT Closed Cycle Gas Turbine CO 2 Carbon Dioxide COD Commercial Operation Date COUE Cost of Unserved Energy CSIR Council for Scientific and Industrial Research CSP Concentrating Solar Power DEA Department of Environmental Affairs DoE Department of Energy DSM Demand Side Management EPRI Electric Power Research Institute FBC Fluidised Bed Combustion FOR Forced Outage Rate GDP Gross Domestic Product GHG Greenhouse Gas IEP Integrated Energy Plan GJ Gigajoules GW Gigawatt ( o ne t housand m egawatts ) Hg Mercury IPP Independent Power Producer IRP Integrated Resource Plan kW Kilowatt ( o ne thousandth of a m egawatt ) kWh Kilowatt hour kWp Kilowatt - Peak (for Photo - voltaic o ptions ) LNG Liquefied Natural Gas LPG Liquefied Petroleum Gas Mt Megaton

25. INTEGRATED RESOURCE PLAN 2018 Page 23 of 75 This IRP U pdate includes the costs as contained in the EPRI report , except for the following technologies : PV , wind, coal and sugar bagasse for which average actual costs achieved by the South African REIPPP were used . The n uclear technology costs were based on the DoE - commissioned study aimed at updating the cost of nuclear power based on available public and private information . T he study expanded the analysis by EPRI to include a technology cost analysis from projects in the East ( Asia ) . A d etailed technology costs assumptions report ( Ingerop Report) can be downloaded from the DoE website ( http://www.energy.gov.za/files/irp_frame.html ). The pumped storage costs were based on the recently commissioned Eskom Ingula pumped stora ge scheme. The new combined cycle gas engine costs were based on information provided by Wartsila as part of public inputs . A c opy of the technology costs submission by Wartsila can be downloaded from the DoE website ( http://www.energy.gov.za/files/irp_frame.html ). 3.2.1 Economic Parameters For economic parameters, t he following assumptions were applied :  Exchange rate as at the beginning of January 2017 , which was R13.57 to $1 (USD);  t he social discount rate of 8.2% net, real and post - tax as calculated by National Treasury; and  t he COUE of R87.85/kWh as per the National Energy Regulator of South Africa ( NERSA ) study. 3.2.2 Technology , Learning and Fuel Costs

26. INTEGRATED RESOURCE PLAN 2018 Page 24 of 75 The overnight capital costs 6 associated with the technologies are summarised in Figure 6 . Some of the technolog y costs, such as coal , nuclear and concentrating solar power ( CSP ) , show ed much higher costs in 2017 relative to the assumed values in the promulgated IRP 2010 – 20 30 . Th at was mainly due to the higher exchange rate in 2017 , which impacted all technologies with the exception of some of the R E technologies as a result of learning - related reduction in costs experienced over the last few years . Figure 6 : Technology Overnight Cap ital Costs in January 2017 ( Rand s ) Learning rates used in the promulgated IRP 2010 – 20 30 are maintained in the IRP U pdate , with PV and wind technology learning rates adjusted to reflect the steep decline in prices experienced in South Africa. These are reflected in Table 1 . Table 1 : Technology L earning Rates Technology Overnight Costs Year 2015 (R/kW) Year 2050 (R/ k W ) PV (fixed tilt) 16860.6 13425.0 PV (tracking) 17860.6 14221.4 Wind 19208.1 17287.4 Nuclear 55260.0 53768.8 Table 2 below show s assumed fuel costs as contained in the EPRI report . Table 2 : Fuel Cost Assumptions 6 Overnight cost is the cost of a construction project if no interest was incurred during construction, as if the project was completed ‘ ove rnight ’.

53. INTEGRATED RESOURCE PLAN 2018 Page 51 of 75 6.1.5 Scenario Analysis of Electricity Tariff Path Comparison Tariff path analysis was done for the five key input scenarios , namely n o RE a nnual b uild r ate (IR P1), median growth (IRP3), market - linked gas price (IRP5), carbon budget (IRP6 ) and c arbon b udget plus m arket - l inked g as p rice (IRP7) . D ata for the P rice Path Model (PPM) used for the analysis came from Eskom ’s Financial Statements and Revenue Application of April 2017 , and output of the scenarios from tec hnical models. The PPM simulates the regulatory pricing methodology for South Africa . The model forecasts  Eskom’s  total  costs , including generation, transmission, purchases and distribution . The PPM does not forecast municipal costs . Key assumptions in the Model can be summarised as follows:  from financial year 2017/18 , the tariffs will immediately move  to  ‘cost - reflective’   levels as per the NERSA methodology .  N o  change  in  Eskom’s  current  level  of  performance  and  efficiency .  Eskom will build nuclear and the rest of the capacity will be built by another party.  Eskom will be responsible for developing new transmission and distribution networks . Figure 19 below shows the comparative tariff projections for each of the five input scenarios and Figure 0 shows the cumulative difference between the sc enarios 8 by 2030. 8 No RE a nnual b uild r ate (IRP1), m edian - g rowth (IRP3), m arket - l inked g as p rice (IRP5), c arbon b udget (IRP6) and c arbon b udget plus m arket - l inked g as p rice (IRP7) s cenarios .

36. INTEGRATED RESOURCE PLAN 2018 Page 34 of 75 The results of the scenario analyses for the period ending 2030 are as contained in Figure 11 . From the results of the scenario analys e s , the following are observed for the period ending 2030:  Committed REIPPP (including the 27 signed projects) and Eskom capacity rollout ending with the last unit of Kusile in 2022 will provide more than sufficient capacity to cover the projected demand and decommissioning of plants up to around 2025.  The installed capacity and energy mix for scenarios tested for the period up to 2030 does not differ materially. This is driven mainly by the decommissioning of about 12GW of Eskom coal plants.  Imposing annual build limits on RE will not affect the total cumulative installed capacity and the energy mix for th e period up to 2030. See Table 7 and Table 8 for details.  Imposing c arbon b udget as a strategy for GHG emission reduction or maintaining the PPD approach used in 2010 will not alter the energy mix by 2030.  The projected unit cost of electricity by 2030 is similar for all scenarios , except for m arket - linked gas prices where market - linked increase s in gas prices were assumed rather than inflation - based increase s .  The scenario without RE annual build limits provides the least - cost option by 2030. The resul ts of the scenario analys e s for the period post 2030 are as contained in Figure 12 and Figure 13 . For the period post 2030 , the following are observed:  The decommissioning of c oal plants (total 28GW by 2040 and 35GW by 2050) , together with emission constraints imposed , imply coal will contribute less than 30% of the energy supplied by 2040 and less than 20% by 2050.  Imposing annual build limits on RE wil l restrict the cumulative renewable installed capacity and the energy mix for this period.  Adopting no annual build limits on renewables or imposing a more stringent GHG emission reduction strategy implies that no new coal power plants will be built in th e future unless affordable cleaner forms of coal to power are available.

27. INTEGRATED RESOURCE PLAN 2018 Page 25 of 75 Parameter Value used in the M odel Fuel c ost (R/GJ) Coal pulverised 31 (~R558/t) Coal FBC (discard coal) 15.5 (~R279/t) LNG 135.70 Nuclear fuel cost 9.10 3.2.3 Emissions Externality Costs With regard to externality costs associated with GHG emissions, the IRP U pdate considers the negative externalities - related air pollution cause d by pollutants such as nitrogen oxide (NOx), sulphur oxide (SOx), particulate matter (PM) and mercury (Hg). These externality costs reflect the cost to society because of the activities of a third part y resulting in social, health, environm ental, degradation or other costs. For all these externalities the cost - of - damage approach was used to estimate the externality costs. The overall cost to society is defined as the sum of the i mputed monetary value of costs to all parties involved. The costs are indicated in Table 3 . The c osts associated with carbon dioxide (CO 2 ) are not included as the C O 2 emissions constraint imposed during the technical modelling indirectly imposes the costs to CO 2 from electricity generation. Table 3 : Local E mission and P M C osts NO x (R/kg) SO x (R/kg) Hg (Rm/kt) PM (R/kg) 2015 – 2050 4.455 7.6 0.041 11.318 3.3 INSTALLED AND COMMI T TED CAPACITY Installed capacity assumed in the IRP Update includes both Es kom and private generation ( generation for own use and municipal generation) as filed and licen s ed with NERSA. A l ist of Eskom and private and municipal generators , as licens ed with NERSA , is included in A ppendix B .

14. INTEGRATED RESOURCE PLAN 2018 Page 12 of 75  The projected unit cost of electricity by 2030 is similar for all scenarios except for m arket - linked gas prices , in the case of which a market - linked increase in gas prices was assumed instead of an inflation - based increase.  The scenario without renewable energy annual build limits provides the least - cost option by 2030. For the period post 2030 the following were observed:  The decommissioning of c oal plants (total 28GW by 2040 and 35GW by 2050) , together with emission constraints imposed , imply that coal will contribute less than 30% of the energy supplied by 2040 and less than 20% by 2050.  Imposing annual build limits on renewable energy will restrict the cumulative renewable installed capacity and the energy mix for this period.  Adopting no annual build limits on renewables or imposing a more stringent strategy to reduce greenhouse gas emissions implies that no new coal power plants will be built in the future unless affordable cleaner forms of coal - to - power are available.  The projected unit cost of electricity differs significantly between the scenarios tested. It must be noted that a change in fuel cost (gas , for example) can significantly affect the projected cost.  The scenario without renewable energy annual build limits provides the least - cost option by 2050.  Overall, the installed capacity and energy mix for scenarios tested for the period post 2030 differ significantly for all scenarios and are highly impacted/influenced by the assumptions used. In conclusion, t he review and outcome of the Integrated Resource Plan U pdate impl y the following:  That the pace and scale of new capacity developments needed up to 2030 must be curtailed compared with that in the Integrated Resource Plan 2010 – 20 30 .  Ministerial Determinations for capacity beyond B id W i ndow 4 (27 signed projects) issued under the Integrated Resource Plan 2010 – 20 30 must be reviewed and revised in line with the new projected system requirements for the period ending 2030 .

6. INTEGRATED RESOURCE PLAN 2018 Page 4 of 75 Figure 22: Illustration of Capacity and Energy Driver ................................ ......................... 55 Figure 23: New Build Capacity for the Per iod Ending 2030 ................................ ................ 56 Figure 24: New Build Capacity for the Period 2031 – 2040 ................................ .................. 56 Figure 25: New Build Capacity for the Period 2041 – 2050 ................................ .................. 57 Figure 26: Emission Abatement Retrofit Programme and 50 - year Life Decommissioning .. 57 Figure 27: Annual Existing Coal Decommissioning ................................ ............................ 57 Figure 28: Annual Nuclear Decommissioning ................................ ................................ .... 60 Figure 29: Annual OCGT Decommissioning ................................ ................................ ...... 61 Figure 30: Annual Wind Capacity Decommissioning (GW) ................................ ............... 61 Figure 31: Annual PV Capacity Decommissioning (GW) ................................ .................... 62 Figure 32: Annual Total Capacity Decommissioning (GW) ................................ ................ 63 Figure 33: Annual Wind Capacity Decommissioning (GW) ................................ ............... 63 Tables Table 1: Technology Learning Rates ................................ ................................ ................... 24 Table 2: Fuel Cost Assumptions ................................ ................................ ......................... 24 Table 3: Local Emission and PM Costs ................................ ................................ ............... 25 Table 4: CODs for Eskom New Build ................................ ................................ .................. 26 Table 5: Emission - reduction Constraints (Carbon Budget) ................................ .................. 29 Table 6: Key Scenarios ................................ ................................ ................................ ....... 31 Table 7: Capacities for Least Cost Plan (IRP1) by Year 2030 ................................ ............. 50 Table 8: Capacities for Least Cost Plan by Year 2030 with Annual Build L imits on RE (IRP3) .. 50

24. INTEGRATED RESOURCE PLAN 2018 Page 22 of 75 covered in the low - demand scenario. The assumption was that the impact of these would be lower demand in relation to the median forecast demand projection. 3.2 TECHNOLOGY , FU EL AND EXTERNALITY COSTS The IRP analys e s mainly entailed balancing supply and demand at least - possible cost. Costs of technology, fuel and externalities 4 were therefore major input assumption s during option analyses . As part of the development of the promulgated IRP 2010 – 20 30 , t he DoE, through Eskom, engaged the Electric Power Research Institute 5 (EPRI) in 2010 and 2012 to provide technology data for new power plants that would be included in the IRP. Th at resulted in an EPRI report, which was revised in 2015 , taking into account technical update s of the cost and performance of technologies , market - factor influences and additional technology cases . Following the public consultations on the IRP U pdate assumptions, the above report was updat ed again to show the costs based on the January 2017 ZAR / US dollar exchange rate. For this IRP U pdate, the 2015 baseline cost for each technology was adjusted to January 2017 US dollar , using an annual escalation rate of 2.5%. The baseline costs were then converted to ZAR based on the currency exchange rate on 01 January 2017. Th e EPRI report incorporates cost and performance data for a number of power - generation technologies applicable to South African conditions and environments. It presents the capital cost s ; operating and maintenance (O &M ) cost s ; and performance data, as well as a comprehensive discussion and description of each technology. A d etailed EPRI technology costs assumptions report can be downloaded from the DoE website ( http://www.energy.gov.za/files/irp_frame.html ). 4 In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit. 5 EPRI is an independent, non - profit organi s ation that conducts research and development related to the generation, delivery and use of electricity to help addre ss challenges in electricity, including reliability, efficiency, affordability , health, safety and the environment .

40. INTEGRATED RESOURCE PLAN 2018 Page 38 of 75 5. R ECOMMENDED PLAN Drawing from the conclusions of the scenario s analys ed , the scenario of RE without annual build limits provides the least - cost path up to 2050. The significant change in the energy mix post 2030 and the sensitivity of the energy mix to the assumptions are key point s to note . It is therefore recommended that the post 2030 path not be confirmed , but that detailed studies be undertaken to inform the future update of the IRP. These studies should, am ong other s , include the following:  Detailed analysis of gas supply options (international and local) to better understand the technical and financial risks and required mitigations for a n RE and gas - dominated electricity generation mix post 2030.  Detailed analysis of the appropriate level of penetration of RE in the South African national grid to better understand the technical risks and mitigations required to ensure security of supply is maintained during the transition to a low - carbon future. Some work has been done on the impact of increasing shares of variable generation on system operations in South Africa (Flexibility Study) . There is a need to expand this work to include an in - depth analysis of technical options such as reduced inertia, re duced synchronizing torque, reduced voltage support and reduced contribution to short - circuit currents to overcom e s tability issues resulting from non - synchronous generation and distributed generation. There is also a need to determine whether the stabilit y issues will become relevant in the near, mid and long t erm . The ab o ve - mentioned technical options are most suitable to overcome the challenge. This part of work is already under consideration.  Detailed analysis of other clean energy supply options ( coal , hydro , nuclear and others) , including their associated costs and economic benefits. The NDP Update acknowledges the potential to increase the efficiency of coal conversion and calls for any new coal - power investments to incorporate the latest technology. The NDP Update calls for c leaner coal technologies to be supported through research and development , and technology transfer agreements in ultra - supercritical coal power plants ; fluidised - bed combustion ; underground coal gasification ; integrated

18. INTEGRATED RESOURCE PLAN 2018 Page 16 of 75 3. INPUT PARAMETER ASSUMPTIONS Key input assumptions that change d from the promulgated IRP 2010 – 2030 include , among others, technology costs, electricity demand projection, fuel costs and Eskom ’s existing fleet performance and additional commissioned capacity. These key input assumptions are dealt with in detail below. The assumptions below were updated , taking into account comments from the public consultation process undertaken between December 2016 and March 2017 . Submissions received from the public varied from opinion statements to substantive inputs with supporting data. The comments were mostly adv ocating for a least - cost plan, mainly based on renewable energy ( RE ) and gas in accordance with the scenario presented by the Council for Scientific and Industrial Research ( CSIR ) at the time . Other issues covered in the submissions included , among other s, p olicy and p rocess issues ; a ssumptions published ( d emand f orecast , t echnology c osts , e xchange r ate , and d emand - s ide o ptions ) ; and p reliminary b ase c ase ( c onstraints on RE , t echnologies missing in the preliminary bas e case, t reatment of d eterminations already issued by the Minister of Energy, p racticality of the plan and the p rice p ath ) . A detailed report on comments received and how t hey were addressed is included as Appendix D . 3.1 ELECTRICITY DEMAND Electricity demand as projected in the promulgated IRP 2010 – 20 30 did not realise. A number of factors resulted in lower demand . These include , among others, lower economic growth ; improved energy efficiency by large consumers to cushion against rising tariffs ; fuel switching to l iquefied p etroleum g as (LPG) for cooking and heating ; fuel switching for hot water heating by households ; and the closing down or relocation to other countries of some of the energy intensive smelters.

12. INTEGRATED RESOURCE PLAN 2018 Page 10 of 75 EXECUTIVE SUMMARY The National Development Plan identifies the need for South Africa to invest in a strong network of economic infrastructure designed  to  support  the  country’s  medium - and long - term economic and social objectives. Energy infrastructure is a critical component that underpins economic activity and growth across the country; it needs to be robust and extensive enough to meet industr ial, commercial and household needs. The National Development Plan envisages that, by 2030, South Africa will have an energy sector that provide s reliable and efficient energy service at competitive rates, is s ocial ly equitable through expanded access to energy at affordable tariffs and e nvironmental ly sustainable through reduce d pollution. The Integrated Resource Plan 2010 – 20 30 was promulgated in March 2011. At the time, i t was envisaged t hat it should   be   a   “living   plan”   to be revised by the Department of Energy frequently. The National Development Plan requires the development of additional electricity capacity . It provide s a path to meet electricity needs over a 20 - year planning horizon to 2030 and is being used to roll o ut electricity infrastructure development in line with Ministerial Determinations issued in terms of Section 34 of the Electricity Regulation Act No. 4 of 2006. The Plan , together with Ministerial Determinations , are policy signals  investors  use  to  plan  their  investments  in  the  country’s  energy  sector.   A number of assumptions used in the Integrated Resource Plan 2010 – 20 30 ha s since changed , which necessitate d its review. Key assumptions that have changed include electricity demand projection that did not increase as envisaged , existing Eskom plant performance that is way below the 80% availability factor , additional capacity committed to and commissioned , as well as technology costs that have declined significantl y . The Integrated Resource Plan U pdate process , as was the case in the Integrated Resource Plan 2010 – 20 30 development process , aim ed to balance a number of objectives , namely to ensure security of supply, to minimize cost of electricity, to minimize negative environmental impact (emissions) and to minimize water usage.

34. INTEGRATED RESOURCE PLAN 2018 Page 32 of 75  T he GHG emission reductions constrain t using the PPD mitigation strategy , except for one scenario that tested the c arbon b udget mitigation strategy;  T he performance of the Eskom coal plants as per the ir performance undertakings;  T he d ecommissioning dates of existing generation plants;  T he cost associated with the dedicated t ransmission infrastructure costs for that energy and capacity mix; and  Committed planned generation plants , such as Medupi , Kusile and RE (up to Bid Window 4) . Following the development of the reference case taking into account the assumptions , the scenarios listed were analysed. Technical modelling of the reference case and scenar ios was performed us ing PLEXOS . T he objective function of PLEXOS is to minimi z e the cost of investments and electricity dispatch u sing complex mathematical models . The cost function is determined by the operational costs, start - up costs, fuels cost and penalty costs for unserved energy or for not meeting the reserve requirements. The  constraints  that  can  be  applied  in  the  model  include ,   among  others :   energy   balanc es ;;   emission  constraints ;;   operational  constraints  (limits  on  generation,  reserve   provision,  up  and  down  times,  ramp  rates   and   transmission  limits) ;;   regional  capacity   reserve  margins  and  ancillary  services ;;   maximum  number  of  units  built  and  retired ;;   fuel  av ailability  and  maximum  fuel  usage ;;   minimum  energy  production ;;   and   RE   targets.   4.1 RESULTS OF THE SCENARIOS Because of the extent of the IRP U pdate study period and the level of certainty of the assumptions into the future, the reference case and the scenarios were analysed in three periods, namely 2017 – 20 30, 2031 – 20 40 and 2041 – 20 50 . Figure 10 below depicts these periods .

41. INTEGRATED RESOURCE PLAN 2018 Page 39 of 75 gasification combined cycle plants; and carbon capture and storage, among others. The NDP Update further a c knowledges the role of n uclear in the energy mix and calls for a thorough investigation of the implications of nuclear energy, including its costs ; f inancing options ; institutional arrangements ; safety ; environmental costs and benefits ; localisation and employment opportunities ; and uranium - enrichment and fuel - fabrication possibilities. Such an analysis would therefore be in line with and in support of commitments in the NDP Update .  Detailed socio - economic impact analysis of the communities impacted by the decommissioning of old , coal - fired power plants that would have reached their end - of - life. Such an analysis would go a long way in ensuring that communities buil t on the back of the coal - to - power sector are not left behind during the transition. For the period ending 2030, a number of policy adjustments are proposed to ensure a practical plan that will be flexible to accommodate new , innovative technologies that are not currently cost competitive , the minimization of the impact of decommissioning of coal power plants and the changing demand profile. Applied policy adjustment and considerations in the final proposed plan are as follow s:  A least - cost plan with the retention of annual build limits (1000MW for PV and 1600MW for w ind ) for the period up to 2030. This provides for smooth roll out of RE , which will help sustain the industry.  Inclusion of 1000MW of c oal - to - p ower in 2023 – 20 24 , based on two already procured and announced projects. . Jobs created from the projects will go a long way towards minimi z ing the impact of job losses resulting from the decommissioning of Eskom coal power plants and will ensure continue d utilis ation of skills developed for the Medupi and Kusile projects.  Inclusion of 2500MW of h ydro p ower in 2030 to facilitate the RSA - DRC treaty on the Inga Hydro Power P roject in  line  with  South  Africa’s  commitments  contained  in  

16. INTEGRATED RESOURCE PLAN 2018 Page 14 of 75 1. INTRODUCTION South  Africa’s  National  Development  Plan  (NDP)  2030  offers  a  long - term plan for the country. It defines a desired destination where inequality is reduced and poverty is eliminated so that all South Africans can attain a decent standard of living . Electricity is one of the core elements of a decent standard of living identified in the Plan . The NDP envisages that, by 2030, South Africa will have an energy sector that provide s reliable and efficient energy service at competitive rates, is s ocial ly equitable through expanded access to energy at affordable tariffs and that is e nvironmental ly sustainable through reduce d pollution. In formulating its vision for the energy sector, the NDP took as point of departure the Integrated Resource Plan ( IRP ) 2010 – 2030 , which was promulgated in March 2011. The IRP is an electricity infrastructure development plan based on least - cost supply and demand balance taking into account security of supply and the environment (minimize negative emissions and water usage). At the time of promulgation , i t was envisaged that the IRP w ould be  a  “living  plan”   to be revised by the Department of Energy ( DoE ) frequently. The promulgated IRP 2010 – 20 30 identified the preferred generation technology required to meet expected demand growth up to 2030. The promulgated IRP 2010 – 20 30 incorporated government objectives such as affordable electricity, reduced greenhouse gas ( GHG ) , reduced water consumption, diversified electricity generation sources, localisation and regional development . Following the promulgation of the I RP 2010 – 20 30 , the DoE implemented the IRP by issuing Ministerial Determinations in line with Section 34 of the Electricity Regulation Act No. 4 of 2006 . These Ministerial Determinations give effect to the planned infrastructure by facilitating the procurement of the required electricity capacity. Since the promulgat ed IRP 2010 – 20 30 , the following capacity developments have taken place:  A total 6422 MW under the Renewable Energy Independent Power Producers Programme ( REIPPP ) has been procured, with 3272 MW operational and made available to the grid.

23. INTEGRATED RESOURCE PLAN 2018 Page 21 of 75 The l ower forecast 3 ha d a 1,33% GDP growth to 2030 , which result ed in a 1,21% average ann ual electricity demand growth by 2030 and 1,24% by 2050 . The l ower forecast assumed electricity intensity initially increase d before dropping all the way to 2050. In developing the forecast, the main assumption was that mining output would conti nue to grow while other sectors of the economy would suffer as a result of low investment . This scenario was developed when the country faced possible down grading decision s by the rating agencies . A d etailed demand forecast assumptions report , including electricity intensity , can be downloaded from the DoE website ( http://www.energy.gov.za/files/irp_frame.html ). 3.1.3 Impact of Embedded Generation , Energy Efficiency and Fuel Switching on Demand With the changing electricity landscape and advancements in technology, there is an i ncreasing number of own - generation facilities in the form of rooftop PV installations in households. There is also an increasing number of commercial and industrial facilities that are installing PV installations to supplement electricity from the grid. High electricity prices , as well as technology advancements (improved equipment efficiency) , are also resulting in inc reased energy efficiency among consumers . Equally , there is increasing use of LPG for cooking and space heating that will impact on both energy (kWh) and peak demand (kW) . In line with municipal bylaws on building, new developments are installing solar water heaters instead of full electric geysers. Voluntarily, consumers are also increasingly replacing electric geysers with solar water geysers to reduce their electricity b ills. These developments impact on overall electricity demand and intensity and must therefore be considered when projecting future demand and supply of electricity . Due to the limited dat a at present and for the purpose of this IRP U pdate, these developments were not modelled as standalone scenarios , but considered to be 3 T he CSIR j unk status forecast in its detailed forecast report

13. INTEGRATED RESOURCE PLAN 2018 Page 11 of 75 The U pdate process consist ed of four key milestones that include d the development of input assumptions ; the development of a credible base - case and scenario analysis ; the production of a balanced plan ; and policy adjustment. Whereas the Integrated Resource Plan 2010 – 20 30 covers a study period up to 2030, the Integrated Resource Plan U pdate study period was extended to the year 2050. Following the finalisation of the assumptions, various scenarios as outline d below were modelled and analysed using the PLEXOS Integrated Energy Model, which is commercial power system modelling tool / simulation software used for electricity supply demand optimisation studies based on a least - cost path. The scenarios studied include d demand - growth scenarios where the impact of projected load demand on the energy mix was tested. Other key scenarios were based on varying the key inp ut assumptions . T hese included the use of c arbon b udget instead of p eak - p lateau - d ecline as a strategy to reduce g reenhouse g as emissions in electricity, the removal of annual build limits on renewable energy (unconstrained renewables) and varying the price of gas for power. From the results of the scenario analys e s , the following were observed for the period ending 2030:  The c ommitted Renewable Energy Independent Power Producers Programme , including the 27 signed projects and Eskom capacity rollout ending with the last unit of Kusile in 2022 , will provide more than sufficient capacity to cover the projected demand and decommissioning of plants up to approximately 2025.  The installed capacity and energy mix for scenarios tested for the period up to 2030 wil l not differ materially. Th at will be driven mainly by the decommissioning of about 12GW of Eskom coal plants.  Imposing annual build limits on renewable energy will not affect the total cumulative installed capacity and the energy mix for the period up to 2030.  Applying c arbon b udget as a constraint to reduce greenhouse gas emissions or maintaining the p eak - p lateau - d ecline constraint as in IRP 2010 – 2030 will not alter the energy mix by 2030.

28. INTEGRATED RESOURCE PLAN 2018 Page 26 of 75 In line with the planned capacity in the promulgated IRP 2010 – 20 30 and in accordance with Section 34 of the Electricity Regulation Act No. 4 of 2006 , t he Minister of Energy has , to date , d etermined that 39 730MW of new generation capacity must be developed . A l ist of Ministerial Determinations is included in A ppendix B . Of the 39730MW determined , about 18000MW has been committed 7 to date . This new capacity is made up of 6422MW under the REIPPP with a total of 3772MW operational on the grid. Under the committed Eskom build, the following capacity has been commissioned : 1332MW of Ingula pumped storage, 2172MW of Medupi ( out of the 4800MW planned), 800MW of Kusile ( out of the 4800MW planned) and 100MW of Sere W ind F arm. 1005MW from OCGT for peaking has also been commissioned . For the IRP Update analys i s , the remaining units at Medupi and Kusile were assumed to come on line as indicated in Table 4 . Table 4 : C ODs for Eskom New Build Medupi Kusile Unit 6 Commercial o peration Unit 1 Commercial o peration Unit 5 Commercial o peration Unit 2 2019 , Apr Unit 4 2017 , Dec Unit 3 2020 , May Unit 3 2019 , Jun Unit 4 2021 , Mar Unit 2 2019 , Dec Unit 5 2021 , Nov Unit 1 2020 , May Unit 6 2022 , Sep 3.3.1 Existing Eskom Plant Performance The existing Eskom plant availability was assumed to be 86% in the promulgated IRP 2010 – 20 30 . The actual plant availability at the time was 85%. Since then , Eskom plant availability declined steadily to a low of 71% in the 2015/16 financial year before recovering to over 77.3% in the 2016/17 financial year. This drop in availability was a major contributor to the constrained capacity situation between 2011 and 2015. For the foreseeable future , the existing Eskom fleet remain s the 7 Committed refers to the capacity commissioned or contracted for development.

62. INTEGRATED RESOURCE PLAN 2018 Page 60 of 75 6.2.3 Ministerial Determinations issued in line with the IRP 2010 – 2030 The table below outlines Ministerial Determinations together with their status as at 30 September 2016. Table 10: Summary of Ministerial Determinations issued in line with the IRP 2010 – 2030 Programme Applicable S 34 Minister ial Determination Status (as at 30 Sep 2017) RE Determination dated 11 August 2011 – 3725 MW (including 100 MW for small projects) 3772.04 MW in commercial operation. RE Determination dated 19 December 2012 – 3200 W (including 100 MW for small projects) RE Determination dated 18 August 2015 – 6300 MW (including 200 MW for small projects) Co - g eneration Determination dated 19 December 2012 - 800 MW Determination dated 18 August 2015 – 1000 MW 11.5 MW procured No contracts signed Nuclear Determination dated 17 December 2013 and Revised Determination dated 05 December 2016 – 9600 MW Not yet implemented Gas/Diesel peaking plants Determination dated 25 May 2012 – 1020 MW 1005 MW in commercial operation. Coal Baseload IPP Programme (domestic) Determination dated 19 December 2012 - 2500 MW 900 MW procured No contracts signed Coal Baseload IPP Programme (cross border) Determination dated 20 April 2016 – 3750 MW Not yet implemented Gas (including CCGT/natural gas) and OCGT/diesel Determination dated 18 August 2015 – 3126 MW Not yet implemented Additional gas Determination dated 27 May 2016 – 600 MW Not yet implemented Hydro ( i mported h ydro) Determination dated 19 December 2012 – 2609 MW Treaty signed with DRC for 2500 MW Solar park Determination dated 27 May 2016 – 1500 MW Not yet implemented Ankerlig Diesel (Eskom b ackup for Koeberg) Determination dated 27 May 2016 – 100 MW Construction not started

5. INTEGRATED RESOURCE PLAN 2018 Page 3 of 75 Figures Figure 1: IRP Update Review Process ................................ ................................ ............. 15 Figure 2: Expected GDP Growth from IRP 2010 vs Actual (Sources: Statistics SA & Promulgated IRP 2010 – 2030) ................................ ................................ .......... 17 Figure 3: Expected Electricity Sent - out from IRP 2010 – 2030 vs Actual (Sources: Statistics SA & Promulgated IRP 2010 – 2030) ................................ .................. 17 Figure 4: Electricity Intensity History 1990 – 2016 (Source: Own Calculations based on Statistics SA Data) ................................ ................................ ............................ 19 Figure 5: Expected Electricity Demand Forecast to 2050 ................................ ................. 20 Figure 6: Technology Overnight Capital Costs in January 2017 (Rands) ......................... 24 Figure 7: Eskom Plant Performance (Source: Eskom) ................................ ..................... 27 Figure 8: Cumulative Eskom Coal Generation Plants Decommissioning .......................... 28 Figure 9: Emission Reduction Trajectory (PPD) ................................ ............................... 29 Figure 10: IRP Study Key Periods ................................ ................................ ..................... 33 Figure 11: Scenario Analysis Results for the Period ending 2030 ................................ ...... 35 Figure 12: Scenario Analysis Results for the Period 2031 – 2040 ................................ ........ 36 Figure 13: Scenario Analysis Results for the Period 2041 – 2050 ................................ ........ 36 Figure 14: Ministerial Determinations Testing Process for the IRP Update Reference .......... Case ................................ ................................ ................................ ................. 44 Figure 15: Installed Capacity (GW) for the High - (IRP2), Median - (IRP3) and Low - growth (IRP4) Scenarios ................................ ................................ ........... 45 Figure 16: Consumed Energy (TWh) for the High - (IRP2), Median - (IRP3) and Low - growth (IRP4) Scenarios ................................ ................................ ........... 46 Figure 17: Installed Capacity (GW) for the No RE Annual Build Rate (IRP1), Median - growth (IRP3), Market - linked Gas Price (IRP5), Carbon Budg et (IRP6) and Carbon Budget plus Market - linked Gas Price (IRP7) Scenarios ...... 47 Figure 18: Consumed Energy (TWh) for the No RE Annual Build Rate (IRP1), Median - growth (IRP3), Market - linked Gas Price (IRP5), Carbon Budget (IRP6) and Carbon Budget plus Market - linked Gas Price (IRP7) Scenarios ...... 48 Figure 19: Comparison of Tariffs for the Scenarios in 2017 (Cents per Kilowatt Hour) ....... 52 Figure 20: Cumulative Comparison of Tariff Paths for the Scenarios ................................ . 52 Figure 21: Change in Installed Capacity ................................ ................................ ............ 54

61. INTEGRATED RESOURCE PLAN 2018 Page 59 of 75 6.2.2 Eskom Generators Table 9: Eskom Generators as at 01 September 2017 Power station capacities at 01 September 2017 Name of station Location Years commissioned - first to last unit Number and installed capacity of generator sets MW Total installed capacity MW Total nominal capacity MW Generation Group power stations Base-load stations Coal-fired (14) 40 141 37 878 Arnot Middelburg Sep 1971 to Aug 1975 1x370; 1x390; 2x396; 2x400 2 352 2 232 Camden 1, 2 Ermelo Mar 2005 to Jun 2008 3x200; 1x196; 2x195; 1x190; 1x185 1 561 1 481 Duvha 6 Emalahleni Aug 1980 to Feb 1984 6x600 3 600 3 450 Grootvlei 1 Balfour Apr 2008 to Mar 2011 4x200; 2x190 1 180 1 120 Hendrina 2 Middelburg May 1970 to Dec 1976 4x200; 3x195; 2x170; 1x168 1 893 1 793 Kendal 3 Emalahleni Oct 1988 to Dec 1992 6x686 4 116 3 840 Komati 1, 2 Middelburg Mar 2009 to Oct 2013 4x100; 4x125; 1x90 990 904 Kriel Bethal May 1976 to Mar 1979 6x500 3 000 2 850 Lethabo Vereeniging Dec 1985 to Dec 1990 6x618 3 708 3 558 Majuba 3 Volksrust Apr 1996 to Apr 2001 3x657; 3x713 4 110 3 843 Matimba 3 Lephalale Dec 1987 to Oct 1991 6x665 3 990 3 690 Matla Bethal Sep 1979 to Jul 1983 6x600 3 600 3 450 Tutuka Standerton Jun 1985 to Jun 1990 6x609 3 654 3 510 Kusile 3 Ogies Aug 2017 to 6x800 799 720 Medupi 3 Lephalale Aug 2015 to 6x794 1 588 1 437 Nuclear (1) Koeberg Cape Town Jul 1984 to Nov 1985 2x970 1 940 1 860 Peaking stations Gas/liquid fuel turbine stations (4) 2 426 2 409 Acacia Cape Town May 1976 to Jul 1976 3x57 171 171 Ankerlig Atlantis Mar 2007 to Mar 2009 4x149.2; 5x148.3 1 338 1 327 Gourikwa Mossel Bay Jul 2007 to Nov 2008 5x149.2 746 740 Port Rex East London Sep 1976 to Oct 1976 3x57 171 171 Pumped storage schemes (3) 4 2 732 2 724 Drakensberg Bergville Jun 1981 to Apr 1982 4x250 1 000 1 000 Palmiet Grabouw Apr 1988 to May 1988 2x200 400 400 Ingula Ladysmith June 2016 to Feb 2017 4x333 1 332 1 324 Hydroelectric stations (2) 5 600 600 Gariep Norvalspont Sep 1971 to Mar 1976 4x90 360 360 Vanderkloof Petrusville Jan 1977 to Feb 1977 2x120 240 240 Total Generation Group power station capacities (24) 47 839 45 471 45 471 Renewables power stations Wind energy (1) Sere Vredenburg Mar 2015 46x2.2 100 100 Solar energy Concentrating solar power Upington Under construction 100 ─ ─ Other hydroelectric stations (4) 61 61 Colley Wobbles Mbashe River 3x14 42 42 First Falls Umtata River 2x3 6 6 Ncora Ncora River 2x0.4; 1x1.3 2 2 Second Falls Umtata River 2x5.5 11 11 Total Renewables power station capacities (5) 161 161 Total Eskom power station capacities (29) 48 000 45 632 Available nominal capacity - Eskom owned 95.07% IPP capacity Hydroelectric energy Wind energy Solar energy Gas/liquid fuel energy Total nominal capacity available to the grid - Eskom and IPPs 45 632 1. Former moth-balled power stations that have been returned to service. The original commissioning dates were: Komati was originally commissioned between Nov 1961 and Mar 1966. Camden was originally commissioned between Aug 1967 and Sep 1969. Grootvlei was originally commissioned between Jun 1969 and Nov 1977. 2. Due to technical constraints, some coal-fired units at these stations have been de-rated. 3. Dry-cooled unit specifications based on design back-pressure and ambient air temperature. 4. Pumped storage facilities are net users of electricity. Water is pumped during off-peak periods so that electricity can be generated during peak periods. 5. Use restricted to periods of peak demand, dependant on the availability of water in the Gariep and Vanderkloof dams. 6. Duvha unit 3 is under extended temporary inoperability. The difference between installed and nominal capacity reflects auxiliary power consumption and reduced capacity caused by the age of plant.

1. GOVERNMENT NOTICE DEPARTMENT OF ENERGY No.R 2018 REQUEST FOR COMMENTS: DRAFT INTEGRATED RESOURCE PLAN 2018 I, Jeff Radebe, Minister of Energy, under section 4 (1) of the Electricity Regulations on New Generation Capacity, hereby publish the draft Integrated Resource Plan 2018 for public comments. Interested persons and organisations are invited to submit within 60 days of this publication, written comments on the draft Integrated Resource Plan 2018 to the Director - General of the Department of Energy for the attention of Mr Tshepo Madingoane: B y Post: Private Bag X 96, Pretoria, 0001 Or b y hand: Matimba House, 192 Corner Visagie and Paul Kruger Street, Pretoria Or b y email: I RP . Queries@energy.gov.za Kindly provide the name, address, telephone number, fax number and e - mail address of the person or organisation submitting the comment. Please note that comments received after the closing date may be disregarded. JEFF RADEBE, MP Minister of Energy

3. INTEGRATED RESOURCE PLAN 2018 Page 1 of 75 TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS ................................ ................................ ............................... 5 GLOSSARY ................................ ................................ ................................ ................................ ........... 7 EXECUTIVE SUMMARY ................................ ................................ ................................ .................. 10 1. INTRODUCTION ................................ ................................ ................................ ........................ 14 2. THE IRP UPDATE PROCESS ................................ ................................ ................................ . 15 3. INPUT PARAMETER ASSUMPTIONS ................................ ................................ .................. 1 6 3.1 ELECTRICITY DEMAND ................................ ................................ ................................ .. 16 3.1.1 Electricity Demand from 2010 – 20 16 ................................ ................................ ....... 17 3.1.2 Electricity Demand Forecast for 2017 – 2050 ................................ .......................... 19 3.1.3 Impact of Embedded Generation, Energy Efficiency and Fuel Switching on Demand ................................ ................................ ................................ .................. 21 3.2 TECHNOLOGY, FUEL AND EXTERNALITY COSTS ................................ ................. 22 3.2.1 Economic Parameters ................................ ................................ ............................... 23 3.2.2 Technology, Learning and Fuel Costs ................................ ................................ .... 23 3.2.3 Emissions Externality Costs ................................ ................................ ..................... 25 3.3 INSTALLED AND COMMITTED CAPACITY ................................ ................................ . 25 3.3.1 Existing Eskom Plant Performance ................................ ................................ ......... 26 3.3.2 Existing Eskom Plant Life (Decommissioning) ................................ ...................... 27 3.4 CO 2 EMISSION CONSTRAINTS ................................ ................................ ..................... 28 3.5 TRANSMISSION NETWORK COSTS ................................ ................................ ............ 30 4. SCENARIO ANALYSIS RESULTS ................................ ................................ .......................... 31 4.1 RESULTS OF THE SCENARIOS ................................ ................................ .................... 32 4.2 CONCLUSIONS FROM ANALYSIS OF THE SCENARIOS ................................ ....... 37 5. RECOMMENDED PLAN ................................ ................................ ................................ ........... 38 6. APPENDICES ................................ ................................ ................................ ............................. 42 6.1 APPENDIX A – DETAILED TECHNICAL AND COST ANALYSIS RESULTS ......... 42 6.1.1 IRP Update Approach and Methodology ................................ ................................ 42 6.1.2 Treatment of Ministerial Determinations issued in line with the Promulgated IRP 2010 – 2030 ................................ ................................ ................... 43 6.1.3 Scenario Analysis Results ................................ ................................ ........................ 45 6.1.4 Scenario Analysis of Electricity Tariff Path Comparison ................................ ...... 50 6.1.5 Additional Analysis of and Observations concerning the Scenarios .................. 53

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