Business

Can untapped power ease crisis?

Lynley Donnelly

Eskom could ease its energy woes by setting up a proper procurement process for more cogeneration

Proponents argue that more power from cogeneration could add much-needed capacity to the grid relatively quickly. (Samantha Reinders)

The case for procuring more energy from independent power producers became even more attractive after Eskom's latest round of countrywide load-shedding last week.

Proponents argue that more power from cogeneration could add much-needed capacity to the grid relatively quickly. It would also be cheaper than running Eskom's peaking open-cycle gas turbines.

A number of industries in South Africa are capable of cogenerating power for use in their own operations, which could take the strain off the electricity grid or potentially supply the grid with additional power.

Andrew Carr, managing director of the consultancy firm Sebenzana, said industry players estimate that there are between 800 and 2 000 megawatts worth of cogeneration opportunities available.

Cogeneration projects, however, are diverse and vary considerably in size and scope. The basket of potential projects ranges from companies in the sugar, paper and pulp industries to large smelters, refineries and industrial manufacturers.

The sugar and pulp industries in particular are keen to incorporate cogeneration as part of their business models, Carr noted.

Despite efforts by industry since 2008 to develop cogeneration projects, the uptake has been relatively poor because there is no effective long-term procurement process in place.

The variety of providers, technologies and processes to produce power and the varying size of projects make it difficult to create a uniform procurement process, Carr said. Unlike technologies such as wind or solar power where one tariff can be determined, a wider range of tariffs is required for cogeneration, he added.

According to Carr, the department of energy is working to improve things. Last year it released a request for registration and information relating to ministerial determinations for power from baseload independent power producers (IPPs), including cogenerators. Under its medium-term risk mitigation programme, the department plans to procure 800MW from industrial cogeneration sources.

Developers are anxiously awaiting the outcome of this process, said Carr.

According to South African Sugar Association (Sasa) executive director Trix Trikam, South Africa's 14 sugar mills are capable of converting the biomass produced during sugarcane processing into steam and electricity for their internal needs.

"These factories can be modified to maximise the biomass energy available for electricity generation and in doing so produce significant quantities of renewable energy that could be supplied to the national energy grid," she said.

In a presentation to Parliament's portfolio committee on energy, Sasa said cogeneration from renewable sugarcane fibre could potentially add 712MW to the grid.

In a bid to alleviate the current power crisis, Eskom has renewed contracts with independent producers, including cogenerators and municipal providers, even though this is "out of line with regulatory approvals" granted by the National Energy Regulator (Nersa), Eskom spokesperson Andrew Etzinger said.

Previous contracts to procure up to 600MW from these independent producers came to a halt in December.

This cash could be clawed back through the regulatory clearing account held with Nersa, as this spending was deemed "prudent".

The cost of emergency power from these contracts is substantially cheaper than running Eskom open- cycle gas turbines, at roughly 90c per kilowatt-hour versus R3/kWh, he noted. Eskom is also considering buying early power from its renewable energy IPPs, on the proviso that safety and protection equipment are installed.

The introduction of an independent system and market operator, to encourage new providers and manage regulatory constraints, is seen as key to addressing the country's ongoing reliance on Eskom. A Bill to establish such an operator floundered in Parliament last year, to the frustration of industry players.

South Africa's power crisis is as a result of lack of capacity, not a failure of the market model, said Etzinger.

The introduction of a competitive market "tomorrow" would not address capacity constraints, he said. In addition, Eskom is already contracting IPPs without a market mechanism.

The current crisis is partly thanks to a decision in the 1990s to allow IPPs to add new generation plants, which never materialised because they were unwilling to make the capital investment, Etzinger said.

Sleeping giants: The sugar and pulp industries are potential

powerhouses of electricity generation. Photo: Sappi

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