Public Enterprises Minister Barbara Hogan on Monday said that cogeneration was expected to feature prominently in the second integrated resources plan (IRP2010), which was scheduled for release later this year.
She reiterated that cogeneration had an important role to play in diversifying the future energy mix of the country, in particular, as the electricity supply situation became critical as demand increased going forward.
Cogeneration under IRP2010 would give an indication of how much power cogeneration would contribute to the national grid beyond 2013. Until 2013, cogeneration power would be procured under the medium-term power purchase programme (MTPPP), by Eskom.
Hogan said that the IRP2010 developed different scenarios and had to weigh up issues of cost, emissions, water usage, locality and regional development as important aspects for decision making.
The Minister stated that the cogeneration industry in South Africa had grown from a few megawatts, to hundreds of megawatts, and she expected the industry to expand significantly over the next few years.
Six cogeneration projects, amounting to some 380 MW, were already signed under the MTPPP, which sought to stimulate the procurement of private power. These included the Ipsa project in Newcastle, a Sasol project, a Sappi project, and Transvaal Sugar, which have been awarded licences by the National Energy Regulator of South Africa (Nersa).
Independent consultancy IES Energy director Dave Long noted that the 380 MW of cogeneration power was less than 10% of the original expectations for cogeneration under the programme.
The procurement of cogeneration power beyond 2013 would be done under a cogeneration feed-in tariff (Co-fit). Nersa regulatory reform head Lucky Ngidi said that draft cogeneration regulatory rules and feed-in tariff phase one have been drawn up, and were currently under review internally.
Initially, the regulator said that this review would take six months, but it was overdue and Ngidi could not clarify when the revised version would be published.
Long estimated that, realistically, it would take at least three or four years for a meaningful Co-fit process to emerge. However, he said that there was no reason for private companies not to go ahead with ‘wheeling power' on a willing seller, willing buyer model.
"We will have to do it for ourselves, rather than waiting for some national entity to do it for us," said Long.
This was provided for in legislation, and Department of Energy director-general Nelisiwe Magubane stated that it was conceivable that private companies could generate power for their own needs, or selling to a third party.
Hogan said that government had identified the challenges in the cogeneration and work on these issues was being pursued.
One of the major challenges was the electricity market structure, and the fact that there was no clear strategy in place for the procurement of power from private players.
Hogan also said that there was a perceived reluctance by cogenerators to make investments in their operations to generate power for their own needs as well as feeding excess power into the national grid. This was owing to expensive technical and safety standards that would need to be met. There was an idea that Eskom would always supply cheap power, which was a disincentive to spend money on cogeneration plants.
There was also the perception that process of cogeneration contracts was overly bureaucratic and not transparent, and Hogan said that government was tackling this issue.
She added that the government was exploring whether it would be prudent to have a standard power purchase agreement, which would make things quicker and minimise risk.
Hogan said that cogeneration could assist in overcoming the challenges of increasing electricity tariffs owing to increasing inputs cost inputs, as well as environmental challenges, which were an increasing concern of government.
Cogeneration often made use of waste heat and energy streams to generate power.