Power for Africa

May 7th, 2012, Published in Articles: Energize

by Mike Rycroft, editor

The RFI issued in December 2011 by the Department of Energy for non-renewable IPPs achieved an amazing response totaling some 61 000 MW, 50% more than our total generating capacity. Sub-Saharan Africa is said to be an energy poor region, but this response shows that the potential to generate adequate electricity for the region’s needs exists.

Although rumour has it that 40 000 MW of this amount come from a Grand Inga proposal, this still leaves 21 000 MW of smaller generation projects on offer. Much of this is said to be from outside the country, and a limit of 15% has been set on imported electricity, which may reduce the number of eligible projects considerably. One can assume though,  that the proposals were serious, were carefully prepared, and viable primary energy sources had been identified, as well as reasonable project plans drawn up. The small allocation to IPPs in the IRP means that very few of these offers will be taken up. What happens to those who aren’t successful?

Mike Rycroft, editor

Sub-Saharan Africa is seen as an energy poor, but energy hungry area. From the response to the RFI it would appear that there are no shortages of primary energy sources and there are plenty of potential IPPs out there who are prepared to take the risk of generating electricity for sale within the area. If the IPPs are prepared to establish generation plant outside this country for sale within this country then surely sale within the countries where they are located is a possibility.

The problem seems to be a circular one. Finance can only be obtained if there is a guaranteed off-taker or PPA in place, but investment from potential off-takers requires a guaranteed proven source of energy. This is in spite of the opinion that if electric power is provided, there will be customers. Which is probably why most power utilities in Africa are government owned- who else can take the risk?

Following close on the heels was the announcement that the second renewable energy IPP window was also heavily oversubscribed, receiving 79 tenders representing 3233 MW against 1275 MW on offer. Again there appears to be a large number of companies prepared to take the risk of generating electricity for sale in this country, and again the question can be asked of what happens to those who are unsuccessful?

Both of these processes deal with generation of electricity for sale to the grid. There is another market developing which may absorb a substantial part of the potential generation capacity. Own generation or on-site generation is becoming more and more popular, albeit on a small scale.

The technology that opened this door is rooftop solar PV on industrial or commercial premises, and this is taking off at such a rate that it is no longer the headline news item that it was a year ago. New systems are being installed on a regular basis and only make the headlines if a new record capacity has been achieved. PV seems to have achieved glamour status level where the desire to own the item takes precedence over the savings achieved and payback period.

This market is driven to a large extent by the requirement to reduce energy consumption and threats of punitive measures if the prescribed targets are not achieved. This is really a requirement to reduce energy drawn from the grid and the conventional approach was to introduce energy efficiency measures. It is becoming obvious to consumers that another way of reducing energy drawn from the grid is to generate your own. Own generation, especially if using renewable resource becomes an attractive alternative to internal energy savings, and is seen as an acceptable means of demand side management by Eskom and others.

Most systems installed to date are owned by the consumer, but there is an emerging move to what can be described as on-site or customer-embedded IPPs, where the IPP generates electricity on the customers site, downstream of the customers meter, and for the exclusive use of the customer. There is currently one known system operating on this basis in this country, and there are reports of more in the pipeline. Systems of this type have been in operation for several years in the USA, where the IPP installs PV on the roof of the customer’s premises and sells the renewable energy to them.

Energy efficiency measures must reach a point of diminishing returns at some stage, and may be considered a limiting factor in growth and expansion. If the cost of renewable energy continues to decrease, as has been predicted, will this not pose a threat to the energy efficiency industry? At some stage the point must be reached where EE measures cost more than generating your own electricity and the availability of cheap sustainable energy from on–site generation becomes the dominant factor in decision making. There may well be a market for IPPs outside the ISMO/grid environment.

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