Electric Vehicle Research Project: Eskom/Nissan briefing; Co-generation Projects: IDC & SA Calcium Carbide briefing

Meeting report

Electric Vehicle Research Project: Eskom and Nissan briefing
Mr Barry MacColl, Eskom General Manager: Research, Testing and Development, and Mr Ross Garvie, Nissan SA Marketing Manager, delivered the presentation. Electric vehicles dated back to the late 19 century, but fell out of favour, because gasoline was cheap and readily available. Since mid-2000s electric cars were back in use, mainly due to the need to reduce greenhouse gas emissions. Sales of electric vehicles have been slow with approximately 100 000 sold worldwide.

Several car manufacturers, such as Renault, Mitsubishi and Nissan, had electric car models. The Nissan Leaf had a seating capacity of 5 adults, a motor of 80kW, a Lithium-ion battery of 24 kWh and two modes in which it could be charged: normal charger took 7-8 hours and quick charger charged the battery to 80% capacity in half and hour. The main benefit of the electric car was that it generated no emissions in operation. The running cost was 2c per mile versus 12c per mile for a petrol car. Maintenance was also about 10% of what it would be for a petrol car.

The challenge of the electric car was that it was more expensive at around R400 000 vs R222 000 for a comparable petrol car. Its range was limited to 160km on a full battery vs 600km on a full tank. Currently the infrastructure did not exist in households or public spaces to charge electric vehicles. The most significant challenge was the burden on the electricity supply of the country if these cars were bought in large quantities.

Eskom was embarking on a three-year research project to ensure the company was prepared for the future. For the project, ten Nissan Leaf Electric vehicles were handed to Eskom head office at MegaWatt Park on 28 May 2013. Charging stations had been installed.

Eskom research questions to be addressed were:
▪ Where and when will Electric Vehicles be charged?
▪ What is the energy demand of the vehicle?
▪ How can Eskom minimise the charging requirements on the existing grid?
▪ How will customer usage patterns vary?
▪ Can the vehicle be used as a demand management device through remote control of charge and discharge cycles?
▪ What electric vehicle tariffs could be incorporated in future tariff regimes that would encourage the use of the electric vehicle and/or minimise its impact?
▪ Could electric cars have a future in the fleet requirements of Eskom?
▪ What are the customer perceptions, infrastructure requirements and the carbon value chain metrics?

The vehicles would be rotated throughout Eskom to ensure a good sample. The market would decide if electric vehicles are to be a large part of future mobility solutions. Given its potential impact on the electricity grid, Eskom is embarking on a three-year research project to ensure the company is prepared for the future.

Discussion
Mr S Radebe (ANC) asked what kind of vehicles Nissan used during the pilot process and if electric SUV vehicles and bakkies would also be produced.

Mr Garvie replied that Nissan started with one vehicle, the passenger car, because this market was the biggest and strategically it gave the company the best environment to experiment and learn. It was busy with research on other vehicles such as mining machinery. It had a roadmap to the future, with electric scooters, two-seater cars, buses and trains in development.

Mr Radebe asked what the price of a hybrid vehicle would be.

Mr Garvie replied that in SA as in countries abroad, the cost of new technology was high, but came down over time as volumes grew. The hybrid Toyota Prius used both systems, electricity in slow conditions and petrol for speeds over 40km/h. This hybrid cost around R400 000, and the electric vehicle would be slightly more expensive than that, but the running cost per km was less than that of a petrol car. A petrol-only car would use roughly R150 000 worth of petrol over five to six years of use. An electric car would use roughly R35 000 worth of electricity for the same period.

Mr L Greyling (ID) asked what the service intervals and maintenance costs were for an electric car, as it had no engine with moving parts, compared to a petrol car with moving parts.

Prof S Mayathula (ANC) asked if the car had to go for services at all. He asked if only the batteries and tyres needed to be changed.

Mr Garvie replied that maintenance costs were about 10% of that of a petrol car. It had to go for a battery health check every 15 000 km. Tyres, brake pads and wiper blades wore out and would have to be replaced.

Ms N Mathibela (ANC) asked what the cost implications of an electrical car would be for a household.

Mr MacColl replied that the electric car would raise the electricity bill and decrease the petrol bill. The electricity price was an emotive issue for consumers. People spend lots of money on airtime and petrol, but did not mind price increases on these commodities as they did electricity price increases. The amount by which the petrol bill would decrease was greater than the amount by which the electricity bill would increase. Rand-wise it would be cheaper, but whether this fact would matter to the consumer, he could not predict.

Mr J Selau (ANC) said the difference between electricity on the one hand, and petrol and airtime, was that airtime and petrol were optional choices, while electricity was a necessity.

Mr MacColl replied that the point was well made. Electricity was a basic right like water and price hikes affected everyone.

Mr Selau asked if petrol stations would also provide recharging facilities for electric cars.

Mr MacColl replied that petrol stations could be used as fast charging stations, as long as petrol stations did not see electric cars as a threat. He thought that the lobby had to start approaching some of the franchise petrol stations to ask their opinion on this matter. They could have the 'quick charge' charging points.

Mr Radebe asked if a solar charging system would not be cheaper and more practical.

Mr MacColl replied that solar charging stations were technically possible. South Africa had around six hours of usable sunlight a day. A 4kW solar installation would currently cost R30 000-R40 000. It was expensive, but there was nothing stopping a business or individual from installing a solar charging station. One also needed innovation in financing to overcome the challenges of upfront investment in clean technology. It would be practical if one could buy the vehicle and the charging station in the same package, and pay it off over the lifespan of the vehicle.

Mr Radebe asked if two batteries could not be on board the car at any one time, following the principle of a spare wheel on a car.

Mr MacColl replied that if one carried a spare battery on board, it would be carrying dead weight as the batteries were fairly heavy and also very expensive. It would increase the energy use of the car.

Mr Greyling said the Joule car had a system where batteries could be exchanged, like gas cylinders. Would this be possible with the Nissan Leaf?

Mr MacColl replied that the idea of swopping the flat battery for a fully charged one was in the R&D of the manufacturers. It would mean that the car owner never owned the battery, much like a gas cylinder, which was exchanged for a full one. It was an exciting concept and a possible way forward. It was not possible with the Nissan Leaf as the battery was situated in a sealed compartment and was not accessible to the user of the car.

Mr Greyling asked what the lifespan of the battery was.

Mr Garvie replied that the battery would last eight to ten years and could be used for other purposes when it is no longer suitable to be used to power a car. It could be used to store solar energy for example, because it would retain 80% of its storage capacity.

Prof Mayathula said that one was advised to allow cell phone batteries to go completely flat before recharging them. He asked if the same applied to the electric car battery.

Mr Garvie replied that no damage could be done to the battery by charging it while it was half full, because the technology was much more advanced that the technology used in cell-phone batteries. The batteries had no memory function and could be charged anytime. What did reduce the lifespan was the number of time batteries had been quick-charged. This entailed a 400V of huge current flowing directly into the battery, versus the normal charge which was a trickle charge. The quick charge heated up the battery and this influenced the longevity of the battery, but also not severely.

Ms Mathibela asked what the expected life span of an electric car would be.

Mr Garvie explained that the lifespan of the electric car was the same as any other car. There was less wear and tear on an electric car, because it had fewer moving parts, therefore components could outlast those of a petrol car.

Mr Radebe said it was a good concept, but asked what the impact of electric cars would be on electric generation and consumption in the country, keeping in mind the current challenges with electricity supply necessitating load shedding.

Mr Greyling was excited by the prospect of the electric car and the huge opportunities it could offer, but mindful of the challenges. Previously SA had problems with load shedding and energy constraints but when the Medupi (Limpopo) and Kusile (Mpumalanga) power stations became operational, it would put an end to the short term energy crisis the country was experiencing. He also did not expect that there would be a huge increase in the number of electrical vehicles, putting pressure on the electricity supply over the next two to three years. This indicated to him the need for time-of-use meters.

Mr MacColl replied that the ten vehicles in operation at the Eskom headquarters would not cause a power crisis. The vehicles were charged every third day. This meant that they were using the same amount of electricity that three houses would have used. This meant that the impact was minimal, but one million vehicles would be the equivalent of 300 000 homes and the impact would be significant. If they were spread around the country, the grid could be able to supply the demand, but if they were located within one city, there would be a problem. This was part of the research: The prediction of sales figures, the energy demand and if the current Eskom infrastructure would be able to supply the demand. The power shortfall was a temporary issue and that would be resolved in the near future.

Ms Mathibela said some rural areas and townships experience frequent interruptions in electrical power supply. How practical would an electric car be in such an environment, where the current would often not be available to charge the battery of the car.

Mr McColl replied that it was logical that in an environment where the electricity supply was unreliable, a person would think twice about buying an electric vehicle. He understood that if the network was unreliable, electric cars were not a viable option.

Mr Greyling asked how much energy was available in the evenings after the peak usage period ended at 21h00. With time-of-use metering, power could be made cheaper after 21h00 (after the peak), and if electric cars were charged then, the running costs of such a car could be even cheaper than the figures given.

Mr MacColl replied that at the moment Eskom did have pump storage capacity which it tried to charge during the evening. In off peak periods, Eskom used its excess capacity to fill up dams at Palmiet and at the Drakensberg. Water was pumped uphill, in order to generate electricity when discharged the next day. At the moment Eskom did not have enough capacity to fill those dams during the night. The pump storage schemes could do with more energy, to fill up the dams in the night shift. This was a temporary measure to cope until more capacity came online. When Eskom had more capacity online, those dams would be full by 03h00 and could be filled above capacity and the excess could be used to charge electric cars. Peak demand was 39GW and low demand early in the morning was 12GW. This difference, once the pump storage was full, could be used to charge cars during the night.

Mr Greyling said the car as it currently existed was mainly meant for urban mobility. Few people would be prepared to pay R400 000 for a car with which they could not make long journeys. The same person would have to own another car for longer journeys.

Mr Selau was happy with the concrete move towards a green economy in the form of the electric car. However, the challenges were the limited distances it could travel, time of re-charge and the price. The car could not be used over long distances, because there were no facilities for re-charge.

Mr Garvie replied that the point where battery technology development was at, at the moment, was holding back the range of travel. The debate was if more batteries should be installed to enlarge the range. If this happened, the vehicle had to be bigger, or passenger space had to be sacrificed. Over the next five-ten years, electric cars would have equal range to fuel cars. Battery technology was developing at an extremely rapid rate, to the extent that second and third generation cars would not have the range constraints the current Nissan Leaf had.

Currently, if a person wanted to make a longer journey, he could swop his car at the dealership for a petrol car. The day-to-day shuttle car could be the electric car and the car for longer distances could be a petrol car. This was not really a concern, because at R400 000 plus the electric car was typically not a car that would be bought by a single car household, so there would be petrol cars to make longer journeys with. In Japan and the US this was the pattern.

Mr Greyling said some people were derisive about electrical vehicles and said that life cycle emissions in terms of building the vehicle were far more than for a petrol car.

Mr Garvie replied that the life cycle emissions for producing petrol car vs those for an electric car were very similar. As a vehicle manufacturer, he said that producing petrol cars were efficient today because of the scale of operations globally. In the beginning, as a new production technique was developed for producing lithium-ion batteries, there was a lack of an economy of scale, but this would get better and better over time. For him the main question was: What happened in use of that vehicle? There was a carbon chain to produce any kind of vehicle and there was a carbon chain to develop electricity. There was a carbon chain to produce fuel and to get fuel to fuel stations. The question should be: What happened at the pump? There were emissions from a petrol car, but no emissions from an electric car. Using a 1.5 or 1.6 L petrol car for five or six years would produce 20 tons of CO2. Over the same period, an electric car would produce no additional CO2. This was the benefit and the trade-off.

Mr MacColl replied that, as part of Eskom, it had to be said that electric cars were not entirely emission-free, as there were emissions generated during the production of electricity. Currently, to produce one kW hour of electricity, 980g of CO2 was produced. This was too high and had to be brought down as a country through the implementation of cleaner technologies. When this happened the carbon chain of electric vehicles would become even better. It was true that the car did not produce emissions, but running the car was not entirely emission-free, as electricity production generated CO2 emissions. The lower they were, the better.

Prof Mayathula asked when this car would be launched, because Eskom and Nissan seemed to disagree on whether the car generated CO2 emission or not. This was an important aspect from the point of view of the Committee, because it would influence the decisions the Committee would support in terms of the way forward for the country.

Mr Greyling said he was just back from Berlin where a car share scheme, consisting of 2 500 cars parked around the city, was in operation. A person could swipe his card, drive the car to where he needed to be and park it anywhere in the city. The price was 29c per minute driving. Electric cars were well suited for a scheme like that where it could be used as a mode of public transport. Would the roadmap for SA include a scheme like this?

Mr MacColl said he saw the car share scheme in action in Switzerland. It was typically a red car parked at the train station. The client would swipe his credit card and get in and drive the car to where he wanted to be. Electricity powered transport was essentially about the future of mobility. Currently cars were used in a manner which left the car static for 23 hours and driven for one hour per day, which is not making efficient use of the asset. It was a waste in the sense that a lot of CO2 was generated during its production, but the car is almost unused. The future of mobility was that a person would not own a car, but the community would own the car pool and drive it collectively. If humans as a race wanted to use its transport more efficiently, humans needed to make a quantum leap away from current thinking around these issues. He subscribed to the pool concept, but whether it would take root in SA would have to be seen.

Mr Selau asked what Eskom was looking at in terms of the market?

Mr Selau said the SA vehicle market was growing fast. The plan to integrate the electric car into the transport mix of SA, had to be focused on the growing market. How much infrastructure was needed? The electric car had to be promoted without getting rid of petrol vehicles too fast. In his opinion, perhaps the Nissan was marketed too quickly to the whole world.

Mr Garvie replied that Nissan would like the electric car market to take off, but it was realistic in the sense that it realised that electric cars would further diversify the market for consumers. There would be petrol and electric, diesel and electric and hybrid cars. At this stage 50 million vehicles were sold annually in the world. In SA there were roughly 500 000 electric cars, a miniscule fraction of the world market.

Nissan had sold roughly 65 000 cars over a two-year period. It was a slow process, globally and it would be the same in SA. When Nissan launched the Nissan Leaf later in 2013 in South Africa, it would start regionally rather than nationally and let it grow organically. It would start in a city centre like Pretoria or Gauteng. Nissan had no illusions to dominate the market with electric cars immediately. Part of the reason was the cost and it would take time for the cost to come down.

Mr Selau asked for an explanation on how the charged car battery could be used to power a house. He understood how the household electricity supply could power the car.

Mr MacCollI replied that it would take a mind leap, but one had to understand that once the energy was in a battery, it could be used, like a cell phone battery or the 12V lead-acid car batteries people used to power their television sets with. A battery was energy in a box. The technology existed to pull the energy out of the battery and use it to power all or some of the circuits in the house. Eskom would work with Nissan and other car manufacturers to develop technology which could also pull energy out of the battery to power the household.

In a house there were circuit boards and circuit breakers. Some of those circuit breakers controlled the lighting and plugs. This circuit board could be rewired so that part or all of the circuits could be powered by the car. This would give rise to smart metering and smart grids. If a house had solar panels as well, it also meant that consumers could start making decisions on where to get his energy from, at what price and at what time of the day. The consumer would have applications that would make these choices possible and it would empower the consumer. This was the future of electricity supply in the world.

The Chairperson said the presentation talked about flattening the demand curve by powering households in part by charged car batteries. What percentage would be coming from the cars?

Mr Greyling said his understanding was that SA had 1.4 GW pump storage capacity. Now he heard that the peak was 39GW and the low was 12GW.Why was there not more excess capacity? Did the smelters use more electricity at night? Could Eskom do a presentation on this issue at a later stage?

Mr MacColl replied that a large part of the answer was the gas turbines which ran at night, but they would be switched off as soon as possible. He would speak to Mr Greyling one-on-one, or he could come back to the Committee with a more comprehensive explanation.

Mr MacColl added there were many drivers which were going to revolutionise electricity. A revolution was needed in the technology as well as in the mindset, for example around sharing cars. It would revolutionise mobility.

Mr Greyling said for electric vehicles to be used on a large scale would require a revolution in the way SA society saw mobility and energy, but the use of electric cars could also bring about that revolution, because the storage capacity of the vehicle could also motivate people to put solar panels on their roofs, because in a sense it also contained a battery.

The Chairperson was interested in the US model in terms of fleet requirements for Eskom or any other state-owned institution. How big were the bakkies that the presentation envisioned – one, two or three tons?

Mr MacColl said the typical utility vehicles he had seen in other countries were one-and-a-half to two ton bakkies which made 100 – 200km round trips. He did not see the big trucks Eskom used switching over to electricity because of their function and the long distances they had to cover to reach sites. However, the Eskom Stellenbosch office could use a fleet of electric vehicles, because the Stellenbosch-Franschoek area was fairly small.

The Chairperson said a number of State Owned Enterprises (SOEs) and other departments needed to be approached. The Project focused only on the national departments. Were any metros interested?

Mr MacColl replied that the Department of Trade and Industry (dti) had put together a working group of concerned parties. At the moment there were no municipalities or metros on that working group, but he would make it clear to the working group that municipalities were represented on that panel. He appreciated the point being made. The cars would be used in metros and municipalities and it was crucial that they had to be involved.

The Chairperson asked what safety considerations were taken into account, in the light of these cars having to be charged in public. Safety was a pertinent issue wherever electricity was used.

Mr MacColl replied that vehicles could be charged in the rain. The charging system was sealed. The charging systems were touch-friendly, so children and livestock that touched it by accident, would not be in danger. However, as with all electricity appliances and installations, the risk remained. The car itself was inherently a safe appliance, like a fridge or a washing machine.

Ms Mathibela asked if, if she left the car at OR Tambo Airport on Tuesday, the battery would still be charged when she returned on Friday.

Mr Garvie replied that the battery did not discharge when the car was not running.

Mr Radebe asked what the impact of this technology would be on jobs. Would the fuel industry lose any jobs and would this technology create new jobs? Would they even each other out?

Mr Garvie replied that there was the potential to create jobs up- and down-stream. It was a new type of service industry. Nissan did not see the electric car as replacing petrol cars. It was only diversifying the mix and adding another option to a growing demand. The world’s population was expanding. With that, there needed to be new opportunities as well as a diversified mix of solutions. This was one of those solutions.

Mr Garvie added that at the moment it was not feasible to produce the car locally, although this might change at a later stage. There were manufacturing plants in Japan, the UK and the USA. The Technology Innovation Agency (TIA) was the government agency which looked at how the production of certain components could be localised.

Mr MacColl said the IDC and TIA were involved in the manufacturing of components for these vehicles in SA. There was a programme launched, called the e-Mobility Programme, in collaboration with Nelson Mandela University and other role players, where the team looked at which components could be manufactured locally.

Mr Selau said the high initial cost of getting the car operational meant that the project needed more role-players like government and the markets. It was likely to get a lot of support.

Mr MacColl replied that he believed capital investment was needed. The question was: Who would put the capital up for infrastructure? Consumers would have to install the charging stations in their own homes. Who would be responsible for putting up public charging stations, would still have to be debated. Who would install it? Who would pay for it? Policy would have to be set on these matters.

Mr Radebe said in 1988 there was a project with a South African designed electric car, the Joule, but government did not have the capital to put forward to establish it. Would the same not happen in this case?

Mr Greyling said one of the reasons why the Joule never went further, was because no car manufacturer was prepared to set up a plant and manufacture the car. He asked if Nissan planned to set up a plant in SA to manufacture components and if it would form part of its global value chain.

Mr Garvie did not feel qualified to comment on the Joule case. Globally the business model for the Nissan Leaf project was over 5 billion USD and it was developed over many years. It was a project that Nissan wanted to commercialise and grow in the future.

Mr MacColl confirmed that this development was at Nissan’s cost. Eskom only did the research study on the possible impact of electric vehicles on the grid.

Mr Selau said Eskom was now collaborating with Nissan on this project, but government was interested in the revolution in the automobile industry, not only as it related to Nissan. Were there other companies, especially SA companies, also involved in innovation in this field? Twenty years ago when he was still working in the industry, he was already using electrical forklift motors. How did these evolve? He was talking strictly SA innovation here.

Mr MacColl replied that developments in the electric forklift were not much other than the weight. Forklifts used their heavy lead-acid batteries as ballast. Basically an electric forklift was an electric vehicle. They had been around since the 1800s. They just became more efficient and longer range.

Mr MacColl said Eskom was not only working with NISSAN. There were other manufacturers like BMW which was on the verge of releasing an electric car onto the market in SA. The Nissan Leaf was the only car that was commercially available on the market in SA at this stage.

Mr MacColl commented on who would pay for future infrastructure development. He was not sure. This was a debate which still had to happen.

The Chairperson said the presentation took the country to new frontiers. He was aware of the need for changes in attitude. Challenges had been highlighted by presenters and Members alike. The Committee would be journeying along with other portfolio committees and government departments like the Departments of Trade and Industry, Science and Technology, Environmental Affairs and other relevant entities on the way towards a green economy.

Co-generation: briefing by Industrial Development Corporation (IDC) & SA Calcium Carbide (SACC)
Ms Rentia van Tonder, IDC Head: Green Industries, and Mr Raoul Goosen, IDC Specialist, delivered the presentation. Co-generation was the generation of electricity from industrial waste products in the form of material, heat or gas.

Opportunities included:
▪ Electricity from waste heat or fuel made the existing industry more efficient & reduce electricity cost
▪ Large industry with furnaces and kilns: ferro-chrome, ferro-manganese, silicon, carbide, platinum, cement, lime, steel, carbon black (ca 2000 MW potential)
▪ Sugar Industry (1000 MW from bagasse); Pulp & Paper (500 MW from waste)
▪ Over time it generated electricity at lower cost than Eskom supply, due to “free/low cost” fuel
▪ Capital repayment 40-80 c/kWh for ca 8 years and cash cost (O&M) of 10-25 c/kWh
▪ Positive drivers (applicable for biogas as well):
▪ Increasing power prices, carbon tax to be implemented in 2014, tax incentives for efficiency (12I & 12L).

Negative factors:
It was not the core business of companies, leading to a lack of commitment from large players to participate in feasibility studies/project development, the paybacks were longer than core business projects; it relied on core business for feedstock.

SA Calcium Carbide (SACC)
Mr Hennie de Jager, SACC Production Manager, gave a short overview of the history of the SA Calcium Carbide plant. It produced some 72,000 tons of calcium carbide per annum. SACC was the only producer of calcium carbide on the African continent. It had an annual turnover of some R500 million per annum (approx. US$53 million). Carbon carbide was used in the steel industry (to desulphur steel); to make acetylene welding gas and acetylene carbon black (as pigment and to make zinc carbon batteries). More than 50 % of production was exported. SACC had 300 direct employees, and many more in its value chain (raw materials mining, logistics).
The chemical reaction which produced calcium carbide had carbon monoxide as a by-product.

SACC Cogen Benefits
▪ A 15 - 20% reduction in electricity (energy) utilisation by SACC
▪ Maintaining SACC operations by mitigating power price increases (30% of costs) and hence protecting 300 jobs and 1 000 indirect jobs as well as SA value-add of R 500 million per annum.
▪ Combatting climate change - registered Clean Development Mechanism (CDM) project with United Nations Framework Convention on Climate Change (UNFCCC) - carbon credits for international sale.

Discussion
Mr Selau said the Committee had spoken about carbon capture for years. He was happy that the country was at a stage where it could produce electricity from waste, but he had difficulty with this concept. He asked if the carbon monoxide and hydrogen were the intended products produced at SACC, or were they waste products or by-products of the production process.

Mr de Jager replied that the project idea came from the landfill gas site at Marianhill, Durban, where waste was being burned to generate electricity. Carbon monoxide was a by-product of calcium carbide production. The factory had to take care of the carbon monoxide, because it was a poisonous gas. Most industries push carbon monoxide up a chimney and burn it to create carbon dioxide, which was a gas that occurred naturally in the atmosphere, and released it into the atmosphere. This would be the requirement of the plant’s air emission licence. At the SACC Co-Gen plant, carbon monoxide was put through the engines, combusted and used to make electricity.

Mr Selau asked if sugar plantations were planted solely for the purpose of electricity generation or if the waste products, left after sugar production, were burnt to generate electricity.

Mr Goosen replied that waste was any energy not used in the industrial process. It could be material, gas or heat. Traditionally these sources of energy were not used in SA, because the price of Eskom electricity used to be very low. The sugar industry only harvested cane at certain times of the year. The mills would only run for nine months of the year. It fell during winter which was the period of peak demand. Worldwide, the sugar industry generated electricity from the bagasse, the leftover fibre. The electricity producing process did not use sugar or maize, but the leftovers of sugar and maize production. Extra jobs could be created by the need to collect the waste material. It made the industry’s production costs lower and it earned revenue from the waste.

Mr Selau said the presentation talked about waste from the ferrochrome and other industries: “…electricity from waste heat or fuel to make industry more efficient”. What waste was the presentation referring to?

Mr de Jager replied that steel or ferrochrome manufacturing plants or any plants where a flare was burning, was probably venting carbon monoxide or another waste gas and could use it to generate electricity.

Mr Selau said in last part of the presentation, it said “…government was about to make Power Purchase Agreements (PPAs) with Independent Power Plants (IPPs). Co-gen people were not interested”. What did they want instead?

Ms van Tonder wanted to make two general comments. Firstly, the comment made that companies did not want PPAs was a bit harsh. There was an outcry from companies to government to create an enabling environment. Companies wanted to co-generate electricity, but needed government to make it possible. Companies needed incentives as was done with wind and solar energy, because that was taking off. There was a lot of engagement with the Department of Energy (DoE) at the IPP Office, which were jointly established by the IDC, DoE and National Treasury. Currently, government was looking at what the industry wanted. There was more openness. There was still an issue with the PPAs. If one took a saw-milling company as an example. Most saw-milling companies were in desperate need of serious levels of investment to support them to be more sustainable. They also relied on their forestry assets. Most companies could not sign a ten- or fifteen-year PPA. She personally asked the CEO of SAPPI if he would be prepared to sign a 20 year PPA. He had said no. He would rather invest in his saw-mill to get it up to speed. This was part of the challenge. Some industries were seasonal, for example the sugar industry plants which only operated for nine months of the year. For three months of the year, they could not supply electricity. The parties needed to find a framework PPA which could accommodate this situation. Government told the IDC it would put out a RFI – Request for Information – and invite companies to come and explain what they needed to get their co-gen projects off the ground. The IPP office would have to negotiate with these companies. This was a very different approach from the one followed up to this point. The current approach was that there was one standard agreement – take it or leave it. It was probably necessary, because there were so many different players, but it had to change in order to get progress. This process would hopefully start within the period June-August 2013. The test would however be to see how flexible government would be.

Mr Greyling said when the Director General of the Department of Energy addressed the Committee about two months previously, she said that a number of co-gen projects had been promised, but were never delivered. This proved to be untrue, because here was a project that did deliver. His asked the DG what government could do as an incentive to stimulate the creation of co-gen projects to bring them onto the grid. There was an energy crisis at the moment and 3500 MW of energy could be added to the grid through co-gen projects. He could not see why government had not moved faster.

Ms van Tonder replied that Mr Greyling asked which incentives were needed to get companies working on their co-gen projects. Perhaps incentives were needed to kick-start the process and it would happen. The IDC had a Green Efficiency Fund, launched three years ago with KFW, the German development bank, specifically targeting energy efficiency for small to medium enterprises (SMEs) and companies. Of the R500 million, only R135 million had been committed to date and R15 000 of this had been committed to the SACC co-gen project. The biggest challenge was to make companies aware of the benefits.

At this stage the IDC was complementing the Integrated Demand Management (IDM) incentives. If the IDM incentives at Eskom fell away, it would be sad. To date more than 3000 MW had been saved. The IDC Board had asked what the cost was compared to building a new power station. It was three to six times cheaper. One could not underestimate the benefit from the IDM at this point in time.

She did not believe that she had answered the question: What was necessary to unlock co-gen projects? She could only say that this was a very exciting point in time. There would be a lot of activity in this field in the coming months. Carbon tax would be levied on companies from 2014, which would force companies to think differently about co-gen projects.

Mr Greyling said for this SACC project there had been a one-year lead time. What was the average lead time for many of these projects?

Mr de Jager replied that the project was initiated in the beginning of 2010. It took three years to commission. A typical project would take less than five years to realise.

Mr Goosen added that lead times could be between six months and two years. Companies like SAPPI and MONDI already had most of the behind-the-scenes work, like Environmental Impact Assessments (EIAs), done already.

The Chairperson asked if there was a possibility to reduce the lead time. Five years was a long time. He thought it could be less due to the fact that one was developing something on existing infrastructure.

Ms van Tonder replied that the comment on lead time was valid. The context of today was very different from five years ago. The environment had changed. It should be easier and possible to move much faster. If the feasibility studies took six months, and the company had made the decision, it was a question of sitting with the board to get its agreement. Construction could start within a year. The one challenge was: What is the incentive that would kick-start the process? This needed to be addressed.

Mr Greyling said the National Energy Regulator of SA (NERSA) said Eskom should not promote energy efficiency in the long run, as long as another agency in government took responsibility for it. The Committee had to monitor it to ensure that it happened. Businesses had to do it in their own interests. If businesses did not do it, government had to step in. What kind of incentive scheme did government have to set up to make sure that this co-gen energy came online as soon as possible? Was it a capital subsidy, a tax break or paying for the electricity generated? Could the IDC and SACC representatives advise the Committee on what scheme would work best?

Ms Mathibela said according to the presentation, SACC started in 1952. It stopped in the early 80s because of sanctions. Then the government wanted rubber. Why did it stop?

Mr de Jager replied that to make synthetic rubber, one needed a chemical called poly-isoprene which was a natural by-product of petroleum production. Currently it was imported from the Middle East, but in the 1980s it could not be imported due to economic sanctions. In order to make poly-isoprene, calcium carbide was made, which was used to produce acetylene gas which was then deconstructed and re-constructed to make poly-isoprene, which was then used to make rubber. It was a very complex and long way of making rubber. If one could get the poly-isoprene cheaper as a raw material, one rather bought it instead of making it. The factory from where SACC used to operate was still producing rubber and SACC produced calcium carbide.

Ms Mathibela said there was a lot of electricity at that time. Whose responsibility was it to make sure that there was enough electricity? Electricity users had increased since then.

Ms Mathibela said the presentation stated that waste belonged to the municipality. How did the municipality manage waste? They did not keep their waste in one place. Was this correct, or did they need people to oversee waste management.

Ms van Tonder replied that municipalities were spending lots of money on programs to manage and utilise their waste more efficiently. With respect to municipalities, she thought there were many capacity challenges. Many municipalities approached the IDC for advice, but the IDC referred them to the Development Bank of Southern Africa (DBSA), which was actually responsible for that particular function.

The IDC was engaging with government on the three-year contract that municipalities could sign on their waste, because the pay-back periods for these projects were not three years. If municipalities could enter into longer term agreements on the tender basis, like eight to ten years, it would assist the IDC from a funding perspective. What the IDC also proposed was to have Special Purpose/Project Vehicle (SPV)-type structures, where the municipality was not a necessarily shareholder of that entity. In this case one would look at the Public Private Partnership (PPP)-model, which had its own challenges and was time-consuming.

The Chairperson asked if the presenters could re-hash why the PNCP floundered.

Mr Goosen said the reason why the Pilot National Co-gen Project floundered was because it had a fixed price which it was prepared to pay for a certain amount of electricity, but the cost of generating electricity varied depending on the industry involved. This was why government was using a different approach. Now the industries would be able to make proposals to government which the industries were more comfortable with.

Eskom Integrated Demand Management (IDM) programme
Mr Andrew Carr, Sebenzana Consulting Managing Director, said some co-gen projects had excess power which they wanted to sell. These projects would want a suitable Power Purchase Agreement (PPA). Other co-gen projects generated electricity for self-use or embedded generation. The Eskom IDM Grants had supported embedded electricity generation such as the SACC Co-gen Project. Embedded generation did not need PPAs because it did not sell excess electricity. This was the most energy efficient type of project, especially from a cost perspective. It was inherently driven by energy efficiency. In Germany, 15% of the country’s energy came from this type of source. Energy efficiency underpinned IDM grants. Eskom had been creative and had to be applauded for exploring incentives and stimulating growth in this sector. It was a capital incentive and it made a lot of sense.

SACC and similar companies could wait for the peak electricity tariffs 2016/17 or move now and be pioneers with these incentives. SA wanted to make these projects happen now. In the interest of the national psyche, the industry and value for money. The time for companies to get involved was now.

He felt strongly that this type of co-gen project needed the IDM grants to push them into action as soon as possible. NERSA said the industry would do it themselves. He respected the fact that NERSA had a different view, but felt that government could not wait for the industry, but had to help the process along.

He also understood the view that ideally it should not be located within Eskom, but at this juncture, Eskom understood electricity, carried national accountability to hold it together despite the diverse role-players and had a key role to deliver. He agreed with Ms van Tonder that Eskom’s young IDM programme had to be applauded and encouraged.

Mr Goosen said another company close to SACC closed down and retrenched 300 staff, because it did not want to invest in infrastructure to generate electricity. These were the two choices – invest in co-gen projects or close down.

Mr de Jager said manufacturing plants in SA competed on a global scale with China and it was becoming more and more difficult to stay competitive. Without the co-gen electricity, SACC would have become uncompetitive within two to three years.

The Chairperson said the process of getting co-gen projects started could not be left to chance. He proposed public hearings on these matters during the third term. At this stage it was out of interest, because conceptually government supported it. Companies with co-gen projects as well as the company that decided to close rather than invest needed to be convinced to attend the public hearing as well to state their case. There was some flexibility in terms of the electricity produced; 800 MW vs potentially 3500 MW. One had to ask if it was enough.

As oversight body, the Committee had to be sure that there was an adequate policy in place. With Medupi and Kusile power stations nearing completion, people were asking what would happen beyond that. There had to be energy available to allow the economy to grow. It never occurred to him that PPAs and incentives similar to those for wind and solar energy generation would be helpful. It would be helpful to ask the department at the public hearing why it had never considered these incentives, or if they were considering a different option.

Around 2002/3 a young man approached the Chairperson with the idea of turning the landfill sites into electricity generating centres by burning waste, but despite his best efforts, nobody was prepared to listen to him. Today, the Ethekwini/Durban Metro municipality was doing exactly that at Marianhill.

Mr Selau said SACC was the only producers of calcium carbide on the continent. It sold 50% locally and exported 50%. With a view to beneficiation, he thought 50% for export was too much. Could the mandate of SACC not be expanded to producing other commodities as well in the interest of job creation?

Mr Greyling asked if the 800 MW Ministerial determination was in the IRP or was it separate from what was originally planned for in the IRP. He supported the idea of public hearings on co-gen as part of a process of reviewing the IRP. What was in the IRP currently, was only 3200MW of savings over the next twenty years. This meant that the IRP was too conservative. He felt that the Committee had to review the assumptions which underpinned the IRP. When the Committee called for public hearings it had to make sure that institutional arrangements did not prevent money from getting to the co-gen projects where it was needed. The Committee had to make sure all the co-gen projects were financed. The public hearings had to happen in a way that was very action orientated. The aim had to be to get projects which were ready, up and running within the next six months, in the light of the current energy crisis.

Ms van Tonder replied that IRP 2010 did provide for co-gen and the 800 MW determination was in line with IRP 2010. She agreed with a review of the IRP 2010. The IDC had already raised it with the DOE. From a renewable energy perspective, the IDC was involved in a number of Concentrated Solar Power (CSP) projects which it believed was a perfect example of a plant which the IDC could put up for R2.50 and not R6 per kW/h. From this perspective, the IDC requested the review of the IRP 2010. The IDM and energy efficiency opportunities were immense.

There was a finance proposition in Jan Kempdorp. The IDC had assisted an abattoir to put up an energy plant, by burning the waste it generated. It generated close to R1 million of energy per year. The investment from IDC was between R2 million and R3 million. This abattoir also had an IDM grant. The IDC was sensitive to double dipping. It monitored how money was allocated. IDC was providing a form of bridging finance through the energy efficiency funds.

Closing remarks by the Chairperson
The Chairperson thanked the presenters and said both presentations were provocative. Humans loved comfort zones, but mind-sets needed to shift as the first presentation pointed out. Regarding the second presentation, he was glad that members and stakeholders agreed with the public hearings on co-gen. The Committee had a tradition of independently looking at things. The Committee had to put measures in place to start contributing and get as close as possible to the 3500 MW of electricity generation that had to be contributed by co-gen projects. The Committee had visited such initiatives during study tours for example Nampak, which worked closely with the CSIR. The visit to this facility made him realise the importance of this type of project. SACC provoked the Committee to take this matter to a higher level. The Committee appreciated what Eskom and others were doing. Attaining the 3500 MW faster would save jobs, and create better prospects of sustainability.