Projects and Energy Weekly Snippets
20 February 2015
Energy a “challenge”, not a crisis – Zuma
South Africa's energy woes are a "challenge", but not a crisis and the government knows how to address it, said President Jacob Zuma on Friday. "I think we have a challenge, not a crisis," Zuma told a breakfast meeting in Cape Town the morning after he announced a ZAR23 billion cash injection for Eskom.
The president again blamed the scheduled blackouts, in part, on the apartheid regime's failure to expand the electricity supplier's capacity. "If you look at energy, energy has a history in this country, it has never been enough. It was believed to be because the powers that be at the time said 'we have enough'. So the demand has just rocketed after 1994, and therefore undermined the capacity we have."
Zuma added that he was concerned about shortcomings in the running of the power grid and the government wanted to establish whether this was due to negligence. But he said the government believed it could resolve the capacity constraints that had seen Eskom increase load shedding in recent weeks.
Asked to forecast how the South African economy would be faring in a decade, Zuma said he believed it would be robust because the government was investing "trillions" in infrastructure development and the country had remained attractive to foreign investors. "The South African economy is moving forward and we are being recognised, by the way, by international institutions that we are doing very well."
Engineering News, 13 February 2015
World Bank gives $1bn in risk financing for African gas
The World Bank has set aside more than $1 billion in risk financing to back the use of flared gas from oil fields across Africa to generate power, a senior official said on 13 February. The bank said it was looking at gas projects in Nigeria, Cameroon, Mauritania and Ghana.
About two thirds of people do not have electricity in sub-Saharan Africa and the continent is hopeful new gas finds along the east coast can boost power projects. Power shortages are a big impediment to economic growth, and many businesses provide their own power using costly diesel generators.
Anita George, senior director of energy at the bank, said about 700 billion KW hours of power – equivalent to 80 000 MW running the whole year – could be produced from all the gas flared routinely around the world.
Nigeria, Africa's top oil producer and worst flarer of gas found when extracting oil on the continent, received its first partial risk guarantee from the bank of $145 million in 2013 to support the country's gas-to-power industry. Under the ten-year deal, Chevron Nigeria will supply the gas-fired Egbin plant near Lagos to generate electricity in a bid to increase supply in the populous nation where around three quarters of the country's power comes from gas. The bank's guarantees cover private lenders against the risk of a power utility failing to honour its financial obligations. Another two Nigerian projects will bring the total risk financing to $400 million.
Flaring around 14.7- billion cubic meters (bcm) of gas annually, Nigeria is ranked second on the global list of worst flaring nations behind Russia, bank officials said. Nigeria has signalled the intention to curb flaring at its oil fields. However, policies that outlaw the practice have yet to be passed by parliament.
Engineering News, 13 February 2015
India places electricity hopes in Modi
Daily load shedding has angered South Africans who, for the past 40 years, have taken reliable power for granted. But SA is by no means the only country in the world suffering acute power shortages. Some countries, such as India, are even more energy constrained. Unlike Eskom, India's power sector is not moving backwards. It has just never moved forward fast enough.
At the IHS Energy South African Coal Exports Conference in Cape Town earlier this month, speakers described some of the imbalances in the Indian power sector, which the private sector has high hopes will be reformed under Prime Minister, Narendra Modi.
India, with a population of 1.27 billion, has about 243 000 MW of installed capacity, against SA's 43 000 MW for a population of about 50 million. PwC said in a recent report that India needed to double its power capacity by 2034 to meet projected demand.
About 69% of India's electricity is derived from coal but despite India having very large coal deposits, state-owned Coal of India does not produce enough to meet demand from coal-fired power stations, so the country has to import coal, including from SA.
The MD of Venerable Energy Solutions, Mayank Garg, told the Cape Town conference that there was "complete policy paralysis" in India's power sector. The country has an estimated 45 000 MW of stranded thermal power, he said, while "rampant" load shedding was taking place around the country. He said there was an estimated 90 000 MW of diesel-fired backup power in the country, which costs considerably more that coal-fired power. Diesel was imported, so this resulted in an outflow of forex and the state-owned distribution companies were effectively financially bankrupt. As a result of this situation, the private thermal power sector in India was at risk and the banks had considerable exposure to these companies. The country was losing manufacturing capacity and international competitiveness.
The power situation in SA could also fit Mr Garg's description of "complete policy paralysis". The Independent Systems and Market Operator Bill, which would have created an independent buyer of electricity from both state-owned Eskom and the private sector was withdrawn last month. Eskom is owed about ZAR4 billion by residents in Soweto and lesser amounts by a few other municipalities. Eskom is now buying renewable energy from private sector operators, but this is a small proportion of its total capacity and it is battling to connect new projects to the grid. There is an independent coal-fired power station in the planning stage, but no decision in sight yet, and the same is true for new nuclear-power generation. Finally, updated policy documents on long-term energy planning have been in the pipeline for some time, but there is no indication of when they will be released.
Business Day, 16 February 2015
Enel Green Power sees SA renewables programme as a global “case study”
Enel Green Power (EGP) country manager for South Africa, Lamberto Dai Pra, has described government's Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) as a case study for the industry, which is capturing the attention of other countries.
Speaking during a panel discussion at the Africa Energy Indaba, Dai Pra indicated that the state's guarantee for the REIPPPP projects had improved the attractiveness of the programme, adding that the company remained keen on pursuing additional projects in the country.
Government procured the capacity through competitive bidding rounds and backed Eskom, which committed itself to connecting and buying all the electricity produced, with a guarantee. Following three bid windows, government was in the process of procuring around 4 000 MW from more than 60 projects and the DoE indicated recently that details of the fourth bidding round will be released in the not-too-distant future.
Government has also announced that 32 projects, with a capacity of just over 1 500 MW, had already been connected to the grid and that the programme had attracted around ZAR140 billion in private investment.
EGP, the clean-energy unit of Italian energy multinational Enel, is building solar photovoltaic and wind projects with a combined capacity of around 500 MW in SA. Dai Pra indicated that, under the DoE-managed programme, developments had moved ahead "relatively easily compared with other countries".
Engineering News, 17 February 2015
Department plans to tap new power sources
The DoE is working to secure 16 000 MW of new power supply for SA in the medium term. Plans included accelerating private sector bids for co-generation, gas and coal-fired power, obtaining hydroelectric power from the Grand Inga Dam in the Democratic Republic of Congo, and signing up renewable energy projects, acting director- general of energy Wolsey Barnard said on 17 February.
He was delivering the keynote address at the Africa Energy Indaba in Sandton in the midst of SA's acute power shortages and load shedding. Of about 43 000 MW of installed capacity, SA has only 28 000 MW–35 000 MW available at any time because of planned and unplanned outages. Dr Barnard said that it would take 20-30 months to address Eskom's maintenance backlog and restore full availability of installed capacity.
Dr Barnard said the DoE was finalising key policy documents including the integrated resource plan (IRP), integrated energy plan, gas utilisation master plan and liquid fuels strategy. But in the meantime, it was focusing on developing energy infrastructure – putting in place the infrastructure for gas supply was one of its priorities.
Asked about rumours that SA had signed a special deal on procuring nuclear power from Russia, Dr Barnard said no binding agreements had been signed with any country. SA has invited countries to offer nuclear technology solutions and show what economic development would accompany it. So far five countries had shown interest and two or three more were expected to come forward. He said no tender had been issued. This year, the next steps would be taken towards finalising a procurement process, then a decision would be made by Cabinet.
Asked if the hefty cost of nuclear energy was affordable for SA, especially with the weakening of the rand-dollar rate, North West University nuclear engineering lecturer, Dawid Serfontein, said it would not be affordable to buy technology from a dollar-based company. But the rouble had depreciated more than the rand, which was in Russia's favour.
Business Day, 18 February 2015
Water – energy nexus key uncertainty in Africa
With both the African water and energy sectors being under high levels of stress, while being pressured by climate change, the water–energy nexus has become a key uncertainty on the continent.
"It is necessary for [countries] to zoom in on the relationship, linkages and interaction between these two critical sectors," Global Water Partnership Africa senior programme officer Andrew Takawira told delegates at the African Energy Indaba in Sandton. He continued to argue that we need to address social equity, in order to ensure economic efficiency and water resource management as well as needing to assist existing institutions to promote cross-sectoral planning and quantity trade-offs. In addition to this, Takawira says that we should be looking at the environmental integrity of the systems already in place.
Also speaking at the event, Department of Science and Technology (DST) director-general Phil Mjwara said countries needed to think about the impact if the water-energy nexus was not managed properly. "We have a reason, at global level, to move towards investing in energy technologies that require minimum water." He explained using a US study that although a lot of the water used in coal-fired power plants is recovered, the majority is lost. The water demand for coal-fired power plants also competes with other areas that need water such as agriculture and municipal supply, he noted.
Mjwara said the DST was working on a number of initiatives to drive SA toward introducing technologies that would positively impact this water-energy relationship. He cited Medupi power station, which was implementing dry-cooling methods to reduce water use, as a prime example. He added that the department was also looking into ways of reducing water use in the sanitation sector, as well as the introduction of fuel cells to reduce the demand on energy supply.
Engineering News, 18 February 2015
The above reflects a summary of certain news articles published during the preceding week. It is not an expression of opinion in respect of each matter, nor may it be considered as a disclosure of advice by any employee of Hogan Lovells.