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Released November 30, 2012 | JOHANNESBURG
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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The profile of South Africa's power sector is undergoing a long-awaited transformation with the announcement by Energy Minister Dipuo Peters that 7,761 megawatts (MW) of baseload power capacity will be purchased from independent power producers (IPPs). The National Energy Regulator has concurred with this move.
The baseload capacity will comprise 2,500 MW of operational coal-fired power by 2024; 2,652 MW of gas-fired power by 2025; and 2,609 MW of hydropower by 2024. The baseload initiative also includes the prospect of expanded power imports, which would primarily come from hydropower schemes in the southern African region.
South Africa's Department of Energy is also committed to contracting with IPPs for 3,725 MW of renewable energy by 2016 in a $5.5 billion program. Other decisions confirmed by the minister include a further 3,200 MW of renewable energy, and an initiative that includes the purchase of 800 MW from companies' cogeneration projects and 474 MW from natural gas by 2020.
The government and the state-owned power utility Eskom are ready to sign the necessary agreement for the construction of the first tranche of 28 renewable energy projects, which are being set up under the Renewable Energy Independent Power Producer Program, and details will be published in a government gazette in November.
The new baseload initiative was aligned with the government's "Integrated Resource Plan (IRP) 2010-30." This envisages coal's contribution to the energy mix falling from more than 90% to about 45.9% by 2030. But then 16,300 MW of coal-fired generation would be needed as additional capacity by 2030. The IRP is likely to be revised during the course of 2013.
Under the current version of the IRP, which covers the period up to 2030, 9,200 MW of wind power would be introduced, as well as 1,200 MW of concentrated solar power; 8,400 MW of solar photovoltaic; 9,600 MW of new nuclear power capacity; 4,930 MW of open-cycle gas turbine power capacity; the 1,332-MW Ingula pumped storage scheme; 2,659 MW of imported hydropower; and 465 MW of other technology, mostly renewables.
Department of Energy Deputy Director General Ompi Aphane said that the primary aim of the process was to leverage IPP investments to deal with South Africa's current electricity supply/demand imbalances. He added that it was possible that Eskom could emerge as a co-developer of hydropower schemes outside South Africa, while possibly playing a role in the development of the regional transmission networks required to evacuate power.
Eskom CEO Brian Dames said recently that the utility had finalized a draft Africa strategy, which could result in it taking equity and operational positions in generation and transmission projects in other parts of the continent. He indicated that Eskom was particularly interested in some of the near-term hydropower prospects in Mozambique, such as Mphanda-Nkuwa and Cahora Bassa North Bank.
The Independent Power Producers Association had strong reservations about the proposed process, as it still retains Eskom as the single buyer of power. The IPPS want an independent grid and open competition with Eskom. But it is likely that the first tranche of renewable projects will have contractual agreements signed next week. The minister asked all parties to honor their commitments.
In the current power supply scenario, the two 4,800-MW mega-thermal projects Medupi and Kusile are experiencing delays and major cost creep, plus labor problems. Medupi is at least 20 months behind schedule due to supply chain and project management problems. The late commissioning of what will be the fourth- and fifth-largest power stations in the world is causing continuing power supply fragility. Eskom has had the 4,100-MW Majuba plant in operation since 2001.
The 9,600-MW nuclear power program is still awaiting a final decision, and further delays could confuse the IRP as nuclear projects have a long-lead time, from the go-ahead to commissioning.
The biggest factor in meeting the country's power requirements is that the baseload IPP program moves to the construction phase with grid management and supply problems successfully resolved. It is inevitable that consumers will pay increased tariffs for the "new" energy additions, but the trade-off is that adequate power supplies means the country has the unfettered ability to develop, and that means jobs will be created. No "blue sky" thinking about major job creation has a chance without the security of adequate baseload power supply.
For related information, see October 30, 2012, article - Eskom Plans to Secure Transmission Network with $17 Billion Investment, and October 22, 2012, article - South Africa Will Purchase 90% of Output from Second Zambezi Hydropower Dam.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
The baseload capacity will comprise 2,500 MW of operational coal-fired power by 2024; 2,652 MW of gas-fired power by 2025; and 2,609 MW of hydropower by 2024. The baseload initiative also includes the prospect of expanded power imports, which would primarily come from hydropower schemes in the southern African region.
South Africa's Department of Energy is also committed to contracting with IPPs for 3,725 MW of renewable energy by 2016 in a $5.5 billion program. Other decisions confirmed by the minister include a further 3,200 MW of renewable energy, and an initiative that includes the purchase of 800 MW from companies' cogeneration projects and 474 MW from natural gas by 2020.
The government and the state-owned power utility Eskom are ready to sign the necessary agreement for the construction of the first tranche of 28 renewable energy projects, which are being set up under the Renewable Energy Independent Power Producer Program, and details will be published in a government gazette in November.
The new baseload initiative was aligned with the government's "Integrated Resource Plan (IRP) 2010-30." This envisages coal's contribution to the energy mix falling from more than 90% to about 45.9% by 2030. But then 16,300 MW of coal-fired generation would be needed as additional capacity by 2030. The IRP is likely to be revised during the course of 2013.
Under the current version of the IRP, which covers the period up to 2030, 9,200 MW of wind power would be introduced, as well as 1,200 MW of concentrated solar power; 8,400 MW of solar photovoltaic; 9,600 MW of new nuclear power capacity; 4,930 MW of open-cycle gas turbine power capacity; the 1,332-MW Ingula pumped storage scheme; 2,659 MW of imported hydropower; and 465 MW of other technology, mostly renewables.
Department of Energy Deputy Director General Ompi Aphane said that the primary aim of the process was to leverage IPP investments to deal with South Africa's current electricity supply/demand imbalances. He added that it was possible that Eskom could emerge as a co-developer of hydropower schemes outside South Africa, while possibly playing a role in the development of the regional transmission networks required to evacuate power.
Eskom CEO Brian Dames said recently that the utility had finalized a draft Africa strategy, which could result in it taking equity and operational positions in generation and transmission projects in other parts of the continent. He indicated that Eskom was particularly interested in some of the near-term hydropower prospects in Mozambique, such as Mphanda-Nkuwa and Cahora Bassa North Bank.
The Independent Power Producers Association had strong reservations about the proposed process, as it still retains Eskom as the single buyer of power. The IPPS want an independent grid and open competition with Eskom. But it is likely that the first tranche of renewable projects will have contractual agreements signed next week. The minister asked all parties to honor their commitments.
In the current power supply scenario, the two 4,800-MW mega-thermal projects Medupi and Kusile are experiencing delays and major cost creep, plus labor problems. Medupi is at least 20 months behind schedule due to supply chain and project management problems. The late commissioning of what will be the fourth- and fifth-largest power stations in the world is causing continuing power supply fragility. Eskom has had the 4,100-MW Majuba plant in operation since 2001.
The 9,600-MW nuclear power program is still awaiting a final decision, and further delays could confuse the IRP as nuclear projects have a long-lead time, from the go-ahead to commissioning.
The biggest factor in meeting the country's power requirements is that the baseload IPP program moves to the construction phase with grid management and supply problems successfully resolved. It is inevitable that consumers will pay increased tariffs for the "new" energy additions, but the trade-off is that adequate power supplies means the country has the unfettered ability to develop, and that means jobs will be created. No "blue sky" thinking about major job creation has a chance without the security of adequate baseload power supply.
For related information, see October 30, 2012, article - Eskom Plans to Secure Transmission Network with $17 Billion Investment, and October 22, 2012, article - South Africa Will Purchase 90% of Output from Second Zambezi Hydropower Dam.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
