ATC140313: Report of the Portfolio Committee on Energy roundtable discussion on co-generation and tri-generation of electricity on 30 January 2014, dated 12 March 2014
of the Portfolio Committee on Energy roundtable discussion on co-generation and
tri-generation of electricity on 30 January 2014, dated 12 March 2014
Subject of the report
The subject of this report is to report back to the
National Assembly (NA) on the Portfolio Committee on Energys findings after
scheduling a roundtable discussion on: Co-generation and tri-generation of
Improving the energy efficiency
of our manufacturing facilities, buildings and homes can help us meet our
energy challenges affordably. It can save consumers money of their energy
bills, drive business competitiveness and economic growth and jobs, enhance
grid reliability and flexibility, and help protect public health and the
environment. Combined Heat and Power (CHP) systems are strong examples of how
energy-efficiency technologies can help achieve these significant benefits for
end-user facilities, utilities and communities.
Co-generation or CHP is the
simultaneous generation of both electricity and heat from the same fuel, for
useful purposes. The fuel varies greatly and can include coal, biomass, natural
gas, nuclear material, the sun or the heat stored in the earth.
In the South African context, cogeneration also refers to the production of
electricity and useful heat from a fuel/energy source which is a co-product,
by-product, waste product or residual product of some underlying industrial
process. It differs from conventional generation in that it is coupled to an
industrial process of the host plant.
Co-generation is attractive to
policy makers and private users and investors because it delivers a range of
energy, environmental and economic benefits, including:
Dramatically increased energy efficiency.
emissions and other
Increased energy security through reduced
dependence on imported fuel;
Cost savings for the energy consumer;
Reduced need for transmission and distribution
Beneficial use of local energy resources
(particularly through the use of waste, biomass and geothermal resources
in district heating and cooling systems), providing a transition to a low
Just over 40 people, representing Parliament, Industry,
Academia, Municipalities and Financial institutions attended the Roundtable on
Co-generation and Tri-generation, organised by the PCE at the South African
National Energy Development Institute (SANEDI) offices in Sandton on Thursday,
30 January 2014.
Members who formed part of the
delegation included: Mr SJ Njikelana (Chairperson of the PC on Energy and
Leader of the delegation)
, Mr S Radebe, Ms B Tinto, Ms N
and Mr L
delegation was supported by the following staff members: Mr A Kotze (Committee
Secretary), Mr P
(Content Advisor), Mr S
(Researcher) and Mr M Dodo (Committee Assistant).
who were invited to attend the roundtable discussion included:
City of Johannesburg
Chamber of Mines
Energy Intensive User
Industrial Development Corporation
National Energy Regulator of SA
SA Local Government Association
SA Sugar Association
Department of Public Enterprises
Banking Association of SA (BASA)
Pulp and Paper Manufacturers
Association of South Africa (PAMSA)
The objective of the report is as follows:
Provide an overview to members of the
Portfolio Committee on Energy of the implications and impact of a carbon tax in
the South African context;
The Chairperson, the Hon. Sisa J. Njikelana welcomed everyone and indicated the reason for the roundtable.
Subsequently thereafter various industrial players were
invited to discuss their successes and issues related to their experiences with
co-generation and tri-generation.
The telecommunications industry, represented by Vodacom
and MTN indicated that they have focused on Solar and gas generation options to
reduce their demand on the grid and to ensure energy security. In terms of
their industry, they have successfully introduced solar and tri-generation into
their energy mix but some challenges remains, these were listed as:
The price of methane gas
The availability of gas
The small incentives to reclaim heat
The above solutions reduce the energy load
but cannot take them off grid as yet.
Bio Co-generation Industry
Next, broadly speaking, the bio fuel industry,
represented by the sugar, pulp and paper and sawmilling industry presented
their viewpoints. They indicated that these industries have been producing
co-generation power for years as there is ample availability of fuel being
the by-products of their industries. The industries utilizes not only the
electricity, but also the heat generated within their processes and have an
over capacity that can be fed into the grid. The sugar industry indicated that
they have 14 mills that utilize less than 10 MW each and hence can export 700
to 1000MW to the grid. Pulp and Paper, and indicated that they each can
generate an additional 300MW for export. These industries indicated that they
are looking for a procurement programme, similar to the REIPPP, and that
barriers be removed, for them to re-invest in generation capacity. This
industry indicated that there are issues with wheeling charges and Nersa was
engaged on this in November 2012 with no outcome to date.
The coal mining industry also indicated that there is
massive potential to generate electricity from coal fines that are discarded by
the mining industry. Most mines have a lifespan for 20 to 40 years, producing
this waste and hence have the potential to generate power for this period. In
summary, coal mines can generate power from:
Low grade waste (coal)
Methane exhausted from coal mines
Hydro (by dropping water down mineshafts.
Points raised that are a concern for the industry to
invest in generation capacity include:
It was indicated to the Portfolio Committee that in
India, coal mines are not allowed to discard coal hence they have invested in
generation capacity, to utilize the waste. The Ferrochrome industry also
indicated the potential to generate power and can generate power at below
Eskoms rates. At lease 200MW can be generated from waste gas and a further
180MW from thermal power (steam). This can be installed at a cost of R18m per
MW and the projects need about eight years to break even.
Energy Intensive User Group (EIUG)
The Energy Intensive User Group raised the following
issues that affect investment in co-generation:
A secure supply of gas is required, process
gas can be utilized but a secure supply, e.g. from Mozambique is required.
The period offered by the Municipalities for
the Power Purchase Agreements, e.g. three years, is not acceptable for companies
to raise finance for own generation
The EIUG also indicated that there are
problems with grid connections and wheeling.
Local government, represented by SALGA, had the
following input. SALGA agreed there are challenges around the PPAs with
Municipalities, however there are also some success stories and some players in
the sugar industry in KZN are beneficiaries of this. They also indicated that
it is not the intention of Municipalities to frustrate industry. Some
industries, watching developments in the REIPPP programme, have been moving the
goalposts making it difficult for municipalities. Municipalities also indicated
that, contrary to belief that Municipalities will lose out if industry starts
co-generating, it is not the case. Municipal tariffs for electricity are made
up of tariff costs and infrastructure costs. The tariff costs are mostly the
Eskom costs and as such are of no benefit to Municipalities, whereas the
infrastructure costs will need to be paid by co-generators when using the grid.
This is utilized to maintain the grid. In conclusion, Municipalities indicated
that they are willing to negotiate and discuss challenges with industry. The
telecommunications industry indicated that this is already happening, at the
request of Municipalities.
Eskom indicated that they have contracted in 400MW of
co-generation (this has been there for eight years) but indicated that there is
no market for co-generation currently. The demand for co-generation will
increase and industry needs to study the IRP documentation carefully as Nersa
will only licence what is in this document. Further, if DoE makes a
declaration, Eskom will purchase that power as specified in the declaration.
Industry needs to note that there needs to be a willing buyer buyer-willing
seller within an acceptable policy environment for this industry to succeed.
Eskom also indicated that the MYPD3 cycle has funded co-generation till the
cycle is completed and hence cannot purchase co-generation for the next four
years. Hence industry needs to deal with the policy environment, to bring in
more co-generation. Further, industry needs to note that there will be wheeling
charges and these will be cost reflective.
Department of Energy
The DoE indicated that the REIPPP is a new programme in
SA and hence there were a fair degree of permutations and problems that needed
to be managed down. Further SA has a vertically integrated utility and this
posed further challenges. This was a steep learning curve for them and hence
although government agreed that co-generation should be part of the energy mix,
the roll out of policies has been slow. DoE also indicated that some policies
reside outside the DoE, making the policy environment more difficult. The DoE
indicated that it aims to have some of the policy documentation ready by March
and requested that all players involve themselves in the process and issues at
Society for International Cooperation)
On an international perspective, GIZ Germany, did an
assessment of the co-generation market in SA and indicated that they were not
convinced that this was required as SA does not have cold winters. Hence SA needs
to look into the market and potential for co-generation in large industries.
GIS Germany feels that Eskom should fund co-generation but that there should be
incentives from industry also. Institutions like SANEDI can play a role by
addressing the skills shortage issue and setting up training programmes.
The Industrial Development Corporation (IDC) indicated
that they do have an appetite for these types of investments but the Power
purchase investment periods need to be long enough. Further, there needs to be
a fair and consistent market, for them to finance projects. There also needs to
be a market and if one is not available, it should be created.
With regard to generation of power from the coal,
Members indicated environmental concerns but the industry responded indicating
that environmental issues can be managed.
Members also indicated that the DoE needs to
push this forward and ensure delivery of the appropriate policy documents, as
changes are required to enable supply options, not making it onto the grid.
The Members strongly supported the call that
the participants submit comments on the draft IRP document that was recently
released for public comment
The roundtable supported the proposal that a
meeting/conference be held soon so as to ensure issues raised be addressed.
The Members further indicated that
Development Financial Institutions and SALGA need to assist the industry by
addressing their concerns.
remarks by the Chairperson
In Conclusion, the Chairperson indicated that a
keenness and willingness of all parties to engage, as well as an adequate
skills base, is required, to ensure success of this industry. This must be
through a national platform to ensure commitment from all.
Speakers office endorses the facilitation of a national symposium by the
Portfolio Committee on Energy, assisted by any relevant body/
that will create a National Platform for
commitment and promotion of co-generation and tri-generation.
In the interim, the South African Local Government Association
(SALGA), the Department of Energy, the Development Financial Institutions
and those businesses who are affected, convene meetings to address
concerns that have been raised during the discussions.
The Speakers office endorses commissioning of in-depth research on
comparative analysis on legislation that enables co-generation and
Report to be considered.
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