The case for gas as South Africa prepares way for gas-to-power procurement

12th April 2016

The case for gas as South Africa prepares way for gas-to-power procurement

Sabine Dall’Omo

By Sabine Dall’Omo

The Department of Energy (DoE) says development of South Africa’s gas industry could be anchored on the demand from its imminent gas-to-power programme.

That makes Gas-to-Power a milestone not just for power generation, but also for South African industry to access a natural, cleaner and cheaper fuel with which to drive economic growth and industrialisation. It could position the country as an African gas leader, ready to take advantage of the continent’s rapid discovery and adoption of gas.

The DoE’s gas-to-power Independent Power Producer Programme plans to procure 3 126 MW of energy, and says it is an opportunity for the private sector to partner with government. Consortia of bidders will have the opportunity to bid for the programme in the ports of Saldanha, Richards Bay and Coega, according to DoE. The department estimates that private sector investment related to the gas-to-power programme will be R64-billion over the next four to five years, including port, pipeline, power generation and transmission infrastructure. A further 1 500 MW of gas-to-power has also been approved by the national energy regulator.

Government policy and planning is now aligned behind gas, and rapid implementation of gas-to-power will be enabled with private sector technology, experience and investment. There will never be a better time for South Africa to adopt gas as a reliable and cost-effective source of power.

Gas-to-power is a proven technology deployed in thousands of installations worldwide, reliably delivering power and security of supply at competitive prices for peak demand periods. It is quick to install and has a favourable carbon footprint.

Gas power becomes even more competitive as coal prices rise, gas prices fall, and carbon taxes are implemented. Gas can be used as a less expensive alternative to diesel to meet peak demand, as a very flexible supply to complement fluctuating power supplied by South Africa’s renewable-energy sector, or for baseload power.

In its September 2015 study, ‘South Africa’s big five bold priorities for inclusive growth’, McKinsey says natural gas would not just diversify South Africa’s energy mix but also unlock new industries. Decisive moves to encourage investment in gas-to-power would position South Africa well for down-stream manufacturing and servicing for a burgeoning sub-Saharan African gas sector.

The capital costs for gas turbine power stations are much lower than their coal and nuclear equivalents.  Gas-fired power plants can be quickly powered up and down to meet fluctuating demand. This means gas can increase the flexibility already provided by the country’s existing hydropower capacity and pumped storage schemes.

Open-cycle gas turbine power stations can be built in less than two years, and combined cycle plants in less than three years. And because gas turbine power stations tend to be smaller, the benefits of localisation can be spread more evenly around the country.

Gas is a reliable power source. It will also add to South Africa’s reserve capacity, and contribute to improving grid stability whilst reducing carbon emissions.  It is a critical existing proven technology and forms the basis of industrial development in its own right.

The Department of Trade and Industry’s 2015 Industrial Policy Action Plan refers to the profound potential for transformative gas industrial policy, and calls for “ongoing work to develop a roadmap for gas-based industrialisation”.

The National Development Plan includes gas in its proposed energy mix. Gas-to-power generation featured in President Jacob Zuma’s 2016 State of the Nation address, and in Finance Minister Pravin Gordhan’s recent Budget.

The 2013 update to the 2010 Integrated Resource Plan (IRP) explicitly recognises the case for gas-to-power infrastructure.

Eskom currently runs four open-cycle gas turbine (OCGT) power stations with a combined capacity of 2 400 MW. The two biggest are Ankerlig (1 327 MW) in Atlantis, Western Cape, and Gourikwa in Mossel Bay (740 MW). They currently run on diesel, at vast expense.
Based on last year’s load factor the capital cost of converting Ankerlig and Gourikwa to run on gas could be recouped through the savings on diesel in less than a year, and both plants would be 10% more efficient.

New combined cycle gas turbine power stations produce less than half the carbon emissions of new coal plants (388 kg/MWh as compared with 947 kg/MWh for coal). Gas-to-power produces 30% less CO2 emissions than the diesel or petrol equivalent.

A new power station built in Düsseldorf, Germany, and commissioned in January 2016 recently broke three world records as the most efficient and environment-friendly gas-fired power plant on Earth. The Düsseldorf facility burns natural gas with an overall efficiency rate of 85% and is helping Düsseldorf to reach its goal to become climate-neutral by 2050.

In South Africa, government has a key role in the unlocking of the full potential of gas, including regulation to encourage investment, facilitation of infrastructure, and skills development. And South Africans would do well to look abroad at the thousands of gas-fired turbines in service internationally, delivering hundreds of thousands of hours of reliable service, at low environmental cost, and to economies which we should aspire to be like.

Globally, 20% of electricity is generated by gas. In South Africa it is close to zero. But it looks as if we might be about to start catching up.


Dall’Omo is chief executive of Siemens Southern and Eastern Africa