Opening Address By Hon Jeff Radebe, Minister of Energy of the Republic of South Africa at the South Africa Energy Storage Conference held at Emperors Palace, Johannesburg, South Africa on 22 October, 2018 Programme Director: Mr Chris Yellend, Dr. Fereidoon Sioshansi, Menlo Energy Economics, USA Executives representing respective organisations in the energy and economic sector, Members of the Diplomatic Corp, Senior Government Officials, International Partners, Distinguished guests, Ladies and Gentlemen. Good Morning, 1
It is a great honour and pleasure to address this meeting, which seeks to discuss the role of energy storage in our changing electricity supply landscape. South Africa should position herself to benefit from the impact in economic growth and development that will be brought about by this changing landscape. Let me take this opportunity to commend the organisers and minds behind bringing us to these deliberations. We cannot overemphasise the importance of battery storage in addressing the intermittency of renewable energy and minimizing the need to invest in expansions of the electricity transmission and distribution network. Many of you are aware that government released the review of the Integrated Resource Plan in August 2018 for public comments until the 25 th of October. I trust that each one of you has taken some effort to look at the draft plan as we looking forward to a collective effort in finalising it. The Integrated Resource Plan (IRP 2018), projects that the changing electricity landscape and advancements in technology will increase the number of owngeneration facilities in the form of solar rooftop PV installations. Commercial and industrial facilities are currently installing solar PV to supplement electricity from the grid and offset their electricity bills. This will enhance the need Energy Storage Systems which form a key part of this two day conference. Distinguished Guests, Industrial and commercial sectors are regarded as the highest consumers of electricity in South Africa notwithstanding the building sector in the main. The 2
adoption of Small Scale Embedded Generation within these demand sectors comes as no surprise therefore because, as I indicated earlier, it is an alternative means to meet electricity needs, reducing energy costs, and reducing the greenhouse gas (GHG) emissions thus contribute towards addressing climate change impacts. Effectively, small scale embedded generation contributes towards an increase in energy security which all consumers need. Market uptake of solar PV may further accelerate as technology prices continue to drop. Embedded generation and the so-called grid defection (consumers opting not to utilise the electricity grid) has been rising sharply in South Africa. There is therefore a need for responsive regulation to ensure that this market potential provides maximum economic benefits for South Africa. Regulation is also important to ensure that our planning processes through the Integrated Resource Plan provide an accurate account of the national electricity demand and supply. It is for this reason that the National Energy Regulator of South Africa (NERSA) has taken the responsibility to register these projects and municipalities are putting in place systems to assist applicants within their respective jurisdiction areas. Small scale embedded generation also comes with other additional requirements, such as the need for battery storage or access to the grid whereby customers can feed back any excess electricity. As many of you would know, while there have been some pilot initiatives on net metering where customers are able to feedback their excess generation to the grid, this is still another policy or regulatory gap at a national level. 3
Ladies and gentlemen, having noted these gaps, let me share with you what we have already achieved on the regulatory environment. As government we have confirmed, through a notice of exemption published in 2017, that small scale embedded generators are limited to facilities with the capacity of 1 MW according to Schedule 2 of Electricity Regulations Act No.4 of 2006, this sort to provide some certainty and guidance to this fledgling market. Further, government has directed that these facilities are exempted from holding a license but are only required to register with the National Energy Regulator of South Africa (NERSA). As the Department of Energy, we also reaffirm the growth potential of this sector as such we seek to promote it in the future as reflected in the revised Integrated Resource Plan. We have anticipated that a total of 2 600 megawatts (MW) of small scale embedded generation technologies might be installed by 2030. In this regard, we await feedback from all South Africans, particularly those of you in this room who have an interest on small scale embedded generation on this IRP view. Energy Storage System As part of our energy transition, we have to address energy access at all times in particular, the ability to store electrical energy to overcome the variability and intermittency associated with renewable energy, such as solar and wind, and the stability issues this can cause in the electric grid. Energy Storage can enable the grid owners to avoid or defer investments in electricity production and supply infrastructure and alleviate congestion in transmission and distribution lines. 4
Energy Storage System is able improve the quality and performance of the renewable energy power as well as providing a dependable means of supporting utility grids during peak hours without costly enhancements to power generation facilities. Battery energy storage is undergoing particularly rapid techno-economic advancements with costs declining significantly. According to Bloomberg New Energy Finance, lithium-ion battery prices have declined by around 80% since 2010 and are set to decline further over the next couple of years. The cost factor remains a key consideration for utility companies. We anticipate that large-scale uptake of battery energy storage will accelerate the implementation of renewable energy technologies as well as accelerate the decentralisation of our energy system in South Africa. Batteries storage will further stimulate small scale embedded generation and the development of smart grids. It is time that both government and private sector invest adequately in energy storage systems starting with Research and Development (R&D). We need to align the reliability of Supply and Demand to the storage requirements while considering different technologies that may require unique network environments. Overall the cost and safety of the Energy Storage Systems should be at the centre of our plans during product development and commercialisation as we look to create jobs and grow the economy. Due to growing use of new technologies for high energy and power applications, where there is not a great deal of experience to rely upon, it is vital that ESS 5
stakeholders, that is, utilities, manufacturers, regulators, installers, users, insurers stay on top of current development to manage the risks involved. The development of technical standards will remain the key point on charting the way to ensure that all those across the value chain participate in the sector with the common understanding. Ladies and Gentlemen, we are delighted to note World Bank Group s $1 billion investment on accelerating battery storage for development in middle-income and developing countries including some fastest growing economies in the world. We hope that this will certainly have some positive impact in bringing the high costs down. Smart Grid Initiatives Although the deployment of smart grids in South Africa is still in its infancy, the Department of Energy in collaboration with the South African National Energy Development Institute (SANEDI) has been working with the Electricity Distribution Industry through the South African Smart Grid Initiative (SASGI) to develop a smart grid vision for the sector. This relationship with SASGI enabled the Department to create policy input platform and address the gaps in standards and in the implementation and application of smart grid technology. Furthermore, the Department together with SANEDI have been piloting some aspects of smart grids in South Africa. The programme in the main focused on, Technology as an enabler for Change within the municipal environment. 6
While we acknowledge that municipalities, are currently under huge financial pressure largely as a result of poor revenue collection and incorrect tariff designs, we believe that the success of this pilot will ultimately enhance Revenue Management approach within municipalities. I am advised that the results from the pilot have shown that technology plays a key role in improving revenue collection and making municipal systems highly effective and efficient. With best thought designs, there is a potential of returning these municipalities to financial sustainability and would later serve as evidence based in informing the development future policies on smart grids. Ladies and gentlemen, as with most things, energy storage systems, embedded generation and smart grids are all interconnected, necessary and unavoidable. In conclusion, for South Africa to achieve its energy transition vision, we require significant investment in: People through appropriate skills development and training; Research, development and demonstration; Localisation, advancement and employment creation; Policy certainty being responsive; Adopting collective and integrated approach in working together by all key players all the time; and Forging the necessary partnerships between both national and international partnership as a developing and growing country. With these few words I wish you all the best on these deliberations. I thank you. 7