Business Day Live – SA FACES its worse power crisis in 40 years. Eskom has now admitted in Parliament that, after five years of electricity shortages, we are likely to face another five. A decade of power constraints will cripple aspirations to grow our economy.

We need to understand how this crisis emerged and how we can fix it; we need a commission of inquiry to consider deep-rooted power sector reforms.

The realisation that Eskom cannot fix the power crisis anytime soon is dawning slowly on the government. Eskom was seen as integral to the developmental state, and its mega coal power stations — Medupi and Kusile — were meant to power the economy into the future. However, we now know that these new power units are years late, way over budget, and are constraining rather than facilitating economic development.

ESI Africa – South African electricity tariffs are set to increase on average by 12.69% on 1 April 2015 for consumers who purchase directly from the state-owned power utility, Eskom. Municipal consumers will pay the increased tariff from 1 July 2015 after the bulk purchase price increase has been factored into the retail tariffs.

The increase was announced by the electricity regulator, Nersa, this week to implement its earlier decision to grant Eskom additional R7.8 billion revenue from electricity tariffs, over only one year.

In line with our recent press release on cogeneration, “Local industrial cogeneration ignored while Eskom grid falters“, the respected South African weekly, Mail & Guardian, had published their own article on this important energy topic.

The M&G is written by Lynley Donnelly and asks the question, “Can untapped power ease crisis?”. Sebenzana Managing Director, Andrew Carr, is quoted extensively in the article.

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Plans to alleviate South Africa’s power problems hit another snag this week when a leading business newspaper revealed that bringing new power into the national grid through the Renewable Energy Independent Power Producer Procurement Programme (REIPP) hit a technical obstacle – Eskom lacks the infrastructure to connect many of the recently selected renewable energy independent power producer projects until their grid is strengthened.

“The problem is that the majority of winning bids are solar and wind energy projects. These projects sound great and are lobbied by high-profile, powerful pressure groups – but developers typically locate them where the sun shines or wind blows the most,” says Andrew Carr, managing director of independent engineering consultancy, Sebenzana.

As a result, wind or solar generation projects tend to be located in areas where traditionally the industrial loads are low and hence the Eskom grid is relatively “light”. This is in direct contrast to cogeneration and industrial embedded power generation projects waiting to happen across the country. These projects, which have been largely neglected until now, typically sit adjacent to existing industrial loads and many are in a position to use grid infrastructure already in place.

“As good as renewable energy projects are in the long term, South Africa’s energy needs are immediately critical, and the emphasis should be placed on generation that can be implemented rapidly from areas that already have a robust Eskom infrastructure,” says Carr. “South Africa’s power problems could be substantially alleviated through ‘cogeneration’ projects, where industry generates its own electricity and passes surplus power on to the national grid,” he continues.

Cogeneration offers a number of distinct advantages over other IPP opportunities:

• Generally, cogeneration projects have the shortest development lead times to deliver electricity to the grid – many within an eighteen-month to thirty-month time horizon
• Since industry is already located in high-demand electricity areas, Eskom’s existing infrastructure is already sufficient and does not need to be strengthened
• The electricity generated is often consumed near the point of generation – minimising electricity losses due to transmission and distribution
• While cogeneration is not a renewable energy, it is highly energy efficient and reduces carbon emissions relative to electricity generated

“South Africa has large players in the resource, manufacturing, sugar and paper and pulp sectors ideally positioned to invest in cogeneration projects,” says Carr. “These projects would typically generate electricity for the host site, reducing transmission losses. Surplus electricity can then be supplied into Eskom’s grid,” he continues.

Industry players estimate that between 800 and 2 000 megawatts of cogeneration opportunities are available, but efforts to invest in cogeneration projects are hampered by a lack of an effective long-term procurement process. The long-term viability of cogeneration projects for industry relies on the assurance that in ten or fifteen years they will still have the opportunity to sell their surplus electricity back into the national grid.

“It’s tremendously frustrating for industry knowing that there are solutions that can rapidly alleviate pressure on the national grid, and yet see those solutions stymied by a lack of effective legislation or procurement processes,” Carr concludes.