May 16, 2008
Generation investments to feed South Africa’s power hungerBack
Bethlehem|Cape Town|DURBAN|Natal|Africa|CoAL|Cogeneration|Eskom|Friedenheim|Generators|Hydropower|Independent Power South Africa|IPP|Karbochem|Nuclear|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|Maintenance|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
Article contains comments
Updated 1 hour 5 minutes ago Information and communication technology services group Gijima on Tuesday announced that it would undertake a rights offer and restructure its existing trade receivables securitisation funding programme to ensure that it had sufficient working capital to underpin the...
Updated 1 hour 43 minutes ago Public Enterprises Minister Lynne Brown has urged that the best candidates be nominated to serve on the boards of State Owned Entities (SOEs). “Help me identify your brightest and our best,” said Minister Brown as she launched an initiative to obtain the best pool of...
Updated 1 hour 48 minutes ago The Square Kilometre Array (SKA) has brought art and science together in an exhibition celebrating ancient humanity’s appreciation of the night sky. In a first for the SKA Organisation, indigenous and local artists from South Africa and Australia have collaborated in...
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 road...
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
The South African new vehicle market is likely to reach around 630 000 units in 2014, down from the 650 000 units recorded in 2013, says Toyota South Africa Motors (TSAM) president and CEO Dr Johan van Zyl. Van Zyl is also president of the National Association of...
Efforts by the Kenya government to increase energy generation by 5 000 MW over the next three years received a major boost following the award of a $2-billion contract to build a coal power plant in Lamu. Despite allegations of irregular tendering process, the...
Using crafty wordplay on a well-known Internet meme, brilliant South African-born US entrepreneur and businessperson Elon Musk announced that Tesla Motors would not initiate patent lawsuits against anyone who, in good faith, wanted to use its technology. Instead,...
August new vehicle sales declined by 1.4%, to 55 722 units, compared with the same month last year. Assisted by the car rental market, the South African new passenger car market, at 37 953 units, contracted by 1 047 units, or 2.7%, compared with August last year.
With South Africans facing the challenge of reducing electricity consumption, the biennial Eskom Energy Efficient Lighting Design Competition, to encourage the integration of energy efficient lighting in architectural, engineering and interior design, received a...