May 16, 2008
Generation investments to feed South Africa’s power hungerBack
Bethlehem|Cape Town|DURBAN|Natal|Africa|CoAL|Cogeneration|Eskom|Friedenheim|Gas|Generators|Hydropower|Independent Power South Africa|IPP|Karbochem|Nuclear|Paper|PROJECT|Projects|Sasol|Tongaat Hulett|TSB Sugar|Africa|South Africa|Durban Paper Mill|Kelvin Power Station|Cogeneration|Electricity|Electricity Producer|Electricity Production Capacity|Energy|Energy Crisis|Nuclear|Power Generation|Power Group|Power-generation|Rubber|Department Of Minerals And Energy|Cogeneration|Power
© Reuse this
The company’s project pipeline includes new coal-fired baseload facilities, gas-fired and pumped-storage peaking facilities, nuclear and renewable possibilities, as well as the refurbishment and recommissioning of existing plants.
For years South Africa’s electricity production capacity was in excess of the country’s requirements, owing to a period of overinvestment by Eskom, which eliminated the need to build new power plants, and also saw the company achieving the position of the world’s lowest-cost electricity producer.
However, the time of possessing excess generating capacity has passed, and South Africa is in urgent need of additional power generating capacity. Already, the country has faced large-scale power outages and load-shedding events, and forecasts indicate that South Africa’s power situation will remain tight for the next five to eight years if immediate interventions are not made.
Nevertheless, owing to long lead times for new baseload capacity, many of Eskom’s investments will only start contributing to the national grid in the longer term and, as a result, a number of alternative solutions to the energy crisis are also being pursued.
One such alternative is the involvement of independent power producers (IPPs). In an effort to facilitate such involvement, the Department of Minerals and Energy (DME) is spearheading an IPP project, and Eskom has invited tenders for small-scale IPP projects and is expected to issue a tender for large-scale IPP capacity in the coming months. Cross-border IPP oppor- tunities are also under investigation, and Eskom is pursuing the development of independent cogeneration facilities. Additionally, power group Independent Power South Africa (Ipsa) is investi- gating the development of additional power generation projects.
While Eskom is the source of about 95% of the electricity used in the country, and about 60% of the electricity consumed on the African continent, the private sector is set to play an increasingly important role in the generation of electricity in South Africa in coming years. IPPs are expected to generate 30% of the additional power capacity required by the country going forward.
South Africa already has several licensed IPPs, the most substantial of which is Gauteng’s Kelvin power station, which has a 600-MW capacity, although currently less than 150 MW of this capacity is available. Other licensed IPPs include the Darling Independent Power Producer (Darlipp), which is in the process of establishing a commercial wind farm, which will ultimately have a capacity of 13 MW, to be developed over two phases, with first production starting in 2008; and Bethlehem Hydro, which is installing 7 MW of hydropower capacity, in the Free State. Power produced by Darlipp will be sold to the City of Cape Town, in terms of a power purchase agreement (PPA), while the power produced by Bethlehem Hydro will be sold to the town of Bethlehem, also under a PPA.
There are also several IPPs operating in South Africa in the production of power for particular private companies. For example, the first IPP licensed in South Africa was intended to develop a small power station in KwaZulu-Natal to supply power to paper company Mondi’s Durban paper mill, and Ipsa supplies power to rubber manufacturer Karbochem.
Other companies that make use of privately generated power are Sasol, Tongaat Hulett, Friedenheim and TSB Sugar.
In addition, South Africa has about 16 municipal power generators, with a combined capacity of 1 841 MW.
The availability of significant IPP capacity, however, is a number of years away, and it seems that, in the short term, one of the best options for alleviating the electricity crisis lies not in the supply of additional generation capacity but in limiting the demand for existing capacity.
As a result, Eskom has rolled out a demand-side management and energy efficiency programme, including the pursuit of significant demand- reduction targets through strategies such as power rationing and the development of regulations to prohibit wasteful practices. In addition, Eskom has indicated that it will delay the signing of new electricity supply contracts for projects over a certain size for a period of four to six months from March this year.
The South African government has long been cognisant of the fact that the country would face an electricity supply shortage. Policy uncertainty and planning confusion contributed to the fact that the situation was not avoided.
Despite the fact that government was aware of the impending situation, the extent and timing of the problem that unfolded in early 2008 was unexpected, and was largely a consequence of the fact that a large percentage of Eskom’s existing capacity was unavailable for supply, owing to planned maintenance, unplanned breakdowns and reduced output linked to coal- supply problems.
The crisis has also been attributed to demand growth, and, certainly, gross domestic product (GDP) growth has been higher than the 4% on which many of Eskom’s expansion plans were based. However, the fact that government was aware of the problem as far back as 1998 shows that demand growth alone has not caused the crisis.
The potential impact of the crisis on the South African economy is significant, with the situation having the ability to damage consumer, business and foreign investor confidence, with implications for GDP growth, employment, capital formation, capital inflows, the rand, inflation and interest rates.
Edited by: Laura Tyrer© Reuse this Comment Guidelines (150 word limit)
Other Electricity News
In the last three years, gas generator-sets have risen in prominence in Europe and the US, owing to stricter emission laws and lower gas prices. The shale gas boom in the US and increasing adoption of biogas in Europe have kept the gas generator-sets market in the...
Updated 1 hour 9 minutes ago Electrical and lighting product distributor ARB Holdings CEO Byron Nichles has resigned, effective October 31, to take up “another career opportunity”. ARB on Friday said it would initiate the process of identifying and appointing a successor.
Updated 1 hour 43 minutes ago The key to the development of South Africa lay in mineral beneficiation and industrialisation in joint development with its regional neighbours, South Africa’s new Finance Minister Nhlanhla Nene told the Centre for Education In Economics and Finance (CEEF)....
Updated 2 hours 21 minutes ago The DA has called on Auditor General Kimi Makwetu to investigate allegations of irregularities in the awarding of tenders worth more than R200-million by the defence department. "The dodgy defence force air transport tender must be investigated," said Democratic...
Recent Research Reports
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
Real Economy Insight: Road and Rail 2014 (PDF Report)
This six-page brief covers key developments in the road and rail industries over the past 12 months, including details of South Africa’s road and rail network and prospects for both sectors.
This Week's Magazine
South African State-owned defence industrial group Denel has announced its fourth consecutive year of profits. The group's results for the financial year 2013/2014 were recently announced at its head office in Centurion, south of Pretoria. Revenues grew by 17%, net...
There is little opportunity for JSE-listed infrastructure company Group Five to grow shareholder value in the domestic market, says CEO Mike Upton. He says value can still be found in the private sector, in the renewable and industrial power sector, as well as in...
The National Association of Automobile Manufacturers of South Africa (Naamsa) has announced the event dates of the 2015 Johannesburg International Motor Show (JIMS). The event will take place from October 14 to October 25, 2015, at the Johannesburg Expo Centre, Nasrec.
UK engineering support services provider Babcock is set to deliver the largest order of global truck manufacturer DAF’s truck tractors in Southern Africa to bulk carrier road-based logistics company Ngululu Bulk Carriers (NBC), with 133 trucks to be delivered in...
Digital radio communications in the African local government space can open up the world, but have many challenges to overcome, notes integration and migration of legacy radio communications infrastructure with digital mobile radio company Emcom Wireless head of...