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Accelerating South Africa’s transition with gas power and renewables

www.ge.com/gas-power/future-of-energy In April 2021, the country announced it aims to reduce its annual (GHG) emissions Executive Although Africa contributes ~5 percent to global (CO2) emissions, to 398–440mn tonnes the African Development Bank (AfDB) Summary expects the costs of change on per year (tpy) by 2030, the continent could rise to $50bn each 28 percent less than South Africa’s year by 2040, with a further 3 percent leaders must decline each year in GDP by 2050.1 its 2015-set targets South Africa, which generated 86 percent with the launch of an work urgently of its from in 2020, sees updated draft of the addressing as an urgent with international priority. Addressing this priority requires Nationally Determined strong commitments and, consistent counterparts policy and regulatory frameworks. Contribution (NDC). to reduce the The country has made progress. The 2019 Integrated Resource Plan, the Green impact of Transport Strategy which enhanced climate change. the recently implemented Renewables are the fastest growing source are examples of the government’s of new power generation capacity and commitment to emissions reduction. electricity. Research shows South Africa’s The Nationally Determined Contribution energy mix will evolve to include greater is South Africa’s commitment in terms of amounts of renewables, even as coal the United Nations Framework Convention remains the dominant beyond 2040. on Climate Change (UNFCCC) and its (PA) to contribute to 2

Accelerating South Africa’s energy transition with gas power and renewables 2 Figure 1), gas power can serve as an enabler solutions to funding shortfalls, Executive Summary for greater renewables penetration and, (Continued) accelerate the retirement of coal assets, both of projects from beginning to end.5 South Africa’s energy needs are urgent. on overall emissions. The near-term impact Through proper coordination between all of coal-to-gas switching could represent is needed to transform participants, South Africa’s Gas Programme the country’s economic development. could be the inclusive approach which brings reduction in South Africa. The government As the country increases access to—and along workers and communities historically and key stakeholders continue to deliberate demand for electricity—renewables and reliant on the country’s vast coal sector. gas provide a powerful combination to on the social impact of a transition from address the CO emissions challenge. its current high emission economy to a 2 low-carbon climate resilient economy. The complementary nature of renewables GE believes that the accelerated With the country’s unemployment deployment of renewables rate sitting at a record high of over 30 solution to change the near-term together with gas power trajectory on emissions reduction. percent, large infrastructure projects could play a role in spurring economic can change the trajectory growth and creating opportunities for GE believes gas will not just for climate change, enabling jobs, new skills and industrialization. be a backup fuel but also the substantive reductions in new baseload capacity for the While there is no universal blueprint for emissions quickly, while in Coal Repurposing Programme implementing a coal-to-gas transition, many parallel continuing to advance case studies exist from countries like Poland, for many reasons. The focus of China and India that provide applicable the technologies for low or near this whitepaper is to elevate references on the socioeconomic impact zero-carbon power generation. the emphasis on renewables of transitioning to a greener economy.4 and gas power as the urgently needed solution to reduce carbon Beyond recognition of the It’s not an either/or proposition between emissions in the near term.3 importance of infrastructure roll renewables and gas, but rather a out for economic growth, other multi-pronged approach to reducing crucial considerations for South carbon emissions with renewables and gas power at its core.6 Africa as it embarks on its Gas renewables into the . Programme include, building GE is uniquely positioned to play a partnerships between private and leading role helping customers navigate With large gas reserves in Mozambique, the energy transition through its scale, Angola, and other parts of the region (see breadth, and technological depth.

Key SSA Countries with Largest Gas Reserves (2020)

Total 334 Cameroon 5 Equatorial Guinea 5

Congo 10 Angola 14 Mozambique 100 Nigeria 200

0 50 100 150 200 250 300 350 400 Reserves in Trillion Cubic Feet

FIGURE 1 Source: Statista 2021

Accelerating South Africa’s energy transition with gas power and renewables 3 Introduction

THE SOUTH AFRICA CONTEXT

In October 2020, South African President Cyril Ramaphosa launched the Economic Reconstruction and Recovery Plan to drive investment in infrastructure, local production of goods, employment stimulus implementation and development of the power sector.7 and sustainable electricity is South Africa’s most urgent need. The country seeks 4–6 GW of power in the near- term to ease current constraints.8

Industrial Research (CSIR), South Africa lost between R60 billion and R120 billion in 2019 due to load shedding. Thus, to transform the South African economy, spur re-industrialization and contribute to increased regional trade, a stable and reliable power supply is required.9

With ongoing technical and commercial a looming supply gap. The announcement Reliable power supply reforms at the state utility, Eskom, coincided with the release of a request the government expects new variable for proposals (RfP) for the procurement of is a prerequisite for capacity, including 2.6 GW of solar and 2,600 MW under the wind to be added in accordance with the IPP Procurement Programme’s (REIPPP) economic development bid window 5, comprising 1,600 MW of and many industries Procurement Programme (REIPPP). onshore wind and 1,000 MW of solar PV. The South African government understands The Risk Mitigation IPP Procurement the over-reliance on coal poses a risk to by power sector climate change and its Climate Change technology agnostic approach could mean Commission is working to ensure thermal, renewable and storage solutions will COP21 commitments are met. Africa’s energy sector the procurement for gas an even more Currently, coal accounts for 86 percent of attractive option for the future of energy. problems need urgent the country’s energy mix and its ageing solutions. But South Africa’s energy needs 10 The country’s Just go beyond the short-term. Transition plan will ensure the move to a low-carbon energy future creates more The unbundling of Eskom’s generation, opportunities for the communities that transmission and distribution entities will are likely to be impacted the most. enable a competitive energy system that promotes increased investor participation. The Department of Resources and Energy (DMRE) on 18 March 2021, announced eight preferred bidders for the Risk Mitigation IPP Procurement Programme (RMIPP), which aims to procure 2 GW of power to bridge

Accelerating South Africa’s energy transition with gas power and renewables 4 The changing years with the launch of the drive industrialization and economic Renewable Energy Independent growth, nor combat climate change. energy landscape Power Producer Procurement Figure 2 below shows how South Africa’s (REIPPP) Programme. energy mix will evolve to include greater The continent’s energy needs are critical. amounts of renewables, even as coal remains Renewables are the fastest growing source According to the World Economic Forum, the dominant fuel beyond 2040 according of new power generation capacity and electricity demand will triple by 2040 to the International Energy Agency (IEA). electricity. This is driven by public awareness as incomes rise, populations grow, and An alternative to consider in the energy and greater concern for the environment, governments push their industrialization future narrative is a pairing of gas and lower associated costs for renewable power renewables. Government will need to design generation, and policies that incentivize the fossil projects is necessary to support transparent policies that support the large adoption of renewable technologies. The replacement of coal with gas and renewables. International Energy Agency reports more energy costs for the poorest in society. than half of the global renewable capacity added in 2019 achieved lower power costs South Africa’s revised Integrated Resource than the cheapest newer coal plants. lower CO emissions (<320g/kWhr) than Plan targets a decommissioning of 10 GW 2 other fossil (~1,000g/KWhr for coal), In South Africa and parts of the region plans to supply 20 GW of the additional providing a lower-carbon alternative to with large gas reserves gas power can power needed with renewables and gas.11 be an enabler for broader renewables KEY DRIVERS FOR CHANGE renewables into the energy system. to the reduction of CO2 emissions. Addressing climate change is an The H-class technology has higher G A S A S A C L E A N E R power density. It can be deployed and urgent global priority—and the ENERGY SOURCE be operational at scale in approximately Africa. The country has seen an While renewables are the fastest coal plant's footprints, making it easier growing source of new power generation, to accelerate decarbonization.* increased drive for alternate South Africa and the rest of the region energy sources in the last few cannot rely solely on renewables to * Decarbonization in this paper is intended to mean the reduction of carbon emission on a kilogram per megawatt hour basis.

South Africa’s Electricity Generation by Technology

400

300

200 TWh 100

0 2012 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

Coal Bioenergy Hydro Back-up Generators Gas Nuclear Oil Other Renewables Wind Solar PV

FIGURE 2 Source: IEA, 2020 World Energy Outlook (Stated Policies Scenario)

Accelerating South Africa’s energy transition with gas power and renewables 5 High growth countries like China have Bay Area of China. Guangdong- Hong Kong- NOx, SOx and particulate matter. In addition, been very deliberate about putting in place Macao Greater Bay Area (GBA) is a group of policy reforms focused on the coal-to-gas cities put forward by China to strengthen gas turbine, can also provide a pathway to energy transition to accelerate international cooperation and promote net-zero-carbon emissions through the use low-carbon, inclusive, coordinated and of low and zero-carbon fuels—including industrialization targets. They perhaps set sustainable development projects. The plant hydrogen—and carbon capture utilization an example that South Africa and other and sequestration (CCUS) technologies. African nations may emulate. Today, China’s gas power to the Guangdong province in reforms expect to reduce alignment with national goals to transition coal’s share of electricity generation to less from coal-to-gas and further decarbonization. than 58 percent from 68 percent. In 2020, the Chinese state-owned power utility 2 Guangdong Energy Group Co., Ltd ordered emissions of all fossil power generation The complementary three 9HA.02 gas turbines—GE’s largest nature of renewables less than 50 percent of the CO2 emissions of a Dongguan Ningzhou combined cycle power similarly sized coal plant, and lower emissions and gas power is needed plant in Guandong province, in the Greater levels for other pollutants such as mercury, to change the near-term trajectory on emissions reduction.

Accelerating South Africa’s energy transition with gas power and renewables 6 of CO2 emissions. The introduction of • High capital cost for the construction Outlook for Gas of approximately 2,600 km gas pipeline connecting the gas reserves G A S S U P P L Y D Y N A M I C S to supply market in Gauteng, IN SOUTH AFRICA on the decline and have raised questions Mpumalanga and Kwa-Zulu Natal about the Gas Programme focused on • Operational and political risks to be is seen as a power plants as the main consumer. mitigated for the cross country pipeline destination fuel to aid South Africa’s ambitious renewable (Brulpadda gas condensate and Luipend-1X Area 1 and 4 development focused generation goals. well) coupled with shale gas reserves and on LNG liquefaction and sale GE believes natural gas will not just be These challenges limit gas supply to a backup fuel but also the new baseload alternatives to gas supply. See Figure 3 below. South Africa as short or medium-term capacity for the Coal Repurposing opportunities coupled with reticulation of are far from reality with a lot of development gas infrastructure to be developed. LNG power plants have the lowest emissions milestones and regulatory barriers yet to be is seen as the quickest way of bringing impact compared to other fossil fuels power crossed. The alternative source of gas from gas to South Africa and being used as the plants. Their deployment, accompanied by the Mozambique Rovuma Basin presents basis in developing the Gas Master Plan. CCUS and/or hydrogen, would represent major challenges that need to be resolved a meaningful and long lasting reduction before molecules can reach South Africa:

MOZAMBIQUE MALAWI Mozambique ANGOLA ZAMBIA Rovuma Basin

ZIMBABWE INDIAN OCEAN

SOUTH NAMIBIA BOTSWANA ATLANTIC Pande-Temane OCEAN Gauteng, Mpumalanga and Kwa-Zulu Natal

SWA. Discovered Fields Producing Fields Shale Gas Gas to Liquid Plant Condensate, LES. Brulpadda Gas Free State Gas Pipeline Condensate and Luipend-1X, SOUTH AFRICA Northern Cape

Mossel Bay-PetroSA

FIGURE 3: Gas reserves and pipeline infrastructure in South Africa and Mozambique Source: Africa Energy Atlas 2020-2021 edition

Accelerating South Africa’s energy transition with gas power and renewables 7 LNG has become a fuel of choice for decarbonization in countries without adequate commercial gas reserves due and the country’s economic struggles to its competitiveness and 2020 reached 70.4 Mtpa with the United have raised a few potential issues on: States, Russia and Mozambique being the bankability either as a bridge • Government’s implementation approach; integrated Gas-to-Power Programme operations of liquefaction facilities or destination fuel. or decoupling the gas supply solution saw an increase of nearly 10 percent of from the Power generation Programme global capacity (38.8 Mtpa) in 2019.12 • The role of Transnet and the Central Energy Fund (CEF) in the construction LNG MARKET Global LNG Trading is projected to double and operation of an LNG infrastructure terminal and distribution pipelines The LNG market in recent years has capacity under construction adding shifted from a typical long-term seller about 15 percent to global capacity when • The risk mitigation strategies for market to a buyer market, where spot operational.13 GE projects that the timing LNG Sales and Purchase Agreement and interruptible contracts are traded. is right for South Africa to implement (LNGSPA) for both the anchor consumer The advancement in technology and its Gas-to-Power Programme and take (IPP) and other industrial customers increase in liquefaction projects will be advantage of the current LNG market • The Forex risk associated with the key drivers to achieve competitive dynamics. However, regulatory clarity on switching from coal (SA Rand and favorable LNG supply dynamics in the Transnet’s role, Eskom’s liquidity issues traded) to LNG (US Dollar traded) next two decades. Liquefaction projects

Accelerating South Africa’s energy transition with gas power and renewables 8 These undoubtedly have created inertia ROLE OF TRANSNET AND T R A N S F O R M I N G S O U T H in the gas market and have stymied THE CEF IN REGULATION AFRICA’S INDUSTRIES the progress of consultation awaiting Government directives on its strategy. The market is concerned about the delay of the Gas-to-Power Programme coupled The Energy market currently views the Gas- with three updates of the Integrated South Africa’s economy to-Power Programme as either an integrated Resource Plan (IRP) draft since 2015. The approach or as decoupling Gas Supply role of key state-owned enterprises like is driven mostly by its Infrastructure from the Power Generation Transnet and CEF in the Gas Programme industries. The decline Programme. Either of the two presents its licensing regime for commodity import, in economic activities to make a call on its preferred approach. infrastructure and pipeline operations still in the country is partly THE GOVERNMENT'S of the port infrastructure and pipelines IMPLEMENTATION APPROACH (time lag item) and strategy on the Coegha attributed to power supply and Richards Bay deployment are still insecurities and continued Import infrastructure lingering in the market. The IPPs, OEMs, gas development will be quicker suppliers and lenders await government’s preferred implementation approach. to implement in an integrated approach model than LNG SOURCING RISK MITIGATION STRATEGY decoupling gas supply. Whilst the integrated approach to sustain operations The current structure of Transnet presents a “hub and spoke model” with a Tolling opens opportunities for long- and attract investors. arrangement. However, this creates: term LNGSPA linked with 1. market residual risk from PPA, the decoupled approach aggregating demand gives the option of spot buy 2. project-on-project risk and interruptible LNGSPA. in the oil and gas industry. 3. operational risk of Transnet’s ability Lenders and gas suppliers prefer long-term to meet the project timelines, and supply contracts on a take-or-pay basis. It is imperative that extensive gas policies Although a state entity like Transnet’s role and developmental goals are established 4. operational requirements and in the gas structure may reduce the take-or- volumetric risk of satisfying the pay obligation for the LNG supply, it creates it comes with. Besides Gas-to-Power, counterparty risk in the Gas-to-Power developing the gas infrastructure will Programme which will prejudice the integrity Lenders will request the risk mitigation of the gas supply stream whilst adding a layer petrochemical industries. For instance, strategy for the gas supply to the IPP, and of cost to the gas supplied at the delivery logistics companies switching from the role of Government is also linked with point to the power plant. An integrated diesel to LNG for their long-haul trucks whether it can accept liabilities and if yes, approach with Government taking an equity will see an estimated cost saving of whether it will meet its default obligations. stake will deliver competitive LNG molecules. between 15 percent and 25 percent.14 However, a bundled approach allows the Gas-to-Power project consortium to manage FOREX RISK MITIGATION STRATEGY project-on-project risk (LNG Terminal and Power Plant Infrastructure). The consortium Whilst the Consumer Price Index (CPI) of also bears the liabilities for failure to coal is linked to the South African Rand, dispatch power either because of Gas supply that of LNG import is linked to the US operations or power plant operations, hence dollar. Gas suppliers prefer payment of LNG ensuring all requirements of Lenders are delivered in US dollars whilst Government met to facilitate project implementation. communication has been in SA Rand. The Risk Mitigation IPP Procurement Programme (RMIPP) provided some mitigation strategies and same is expected of the Integrated Resource Plan (IRP).

Accelerating South Africa’s energy transition with gas power and renewables 9 Policy frameworks Change in RE and Gas Target by 2030 17.74 will guide 18 investment 16

DOES THE EXISTING 14 11.93 POLICY AND REGULATORY 12 11.44 FRAMEWORK SUPPORT R E P L A C I N G L A R G E 10 C O A L W I T H G A S A N D 7.96 8.28 8 RENEWABLES? 6.38 6 South Africa’s Integrated Resource Plan

(IRP) sets out a power generation road map Installed Capacity in GW 4 for the country and this has gone through a 2 series of revisions mostly driven by change in assumptions and the need for cleaner energy. 0 The 2018 IRP laid out a plan that will increase Gas/Diesel PV Wind the energy mix of gas to 15.7 percent (11.9 2018 IRP 2019 IRP GW) and wind and PV to 25.6 percent (19.4 GW) by 2030. However, in the latest IRP FIGURE 4: Wind and PV expected to contribute 33 percent of installed capacity released in October 2019, the share of gas according to the 2019 Integrated Resource Plan (IRP) has reduced to 8 percent and that for solar and wind increased to 33 percent. See Figure 4. This clearly shows the shift from more gas to more decentralized renewable energy to Per Capita CO2 Emissions in South Africa, UK, India and China replace coal. 14 GE cautions against policies which aim to 12 predict the future, setting narrow pathways for technologies and energy sources. 10 Energy policy framework needs to balance 8 send the right signals to markets for a cost 6 4 With South Africa’s unemployment Emissions (Metric Tons Per Capita) Per Tons Emissions (Metric rate sitting at a record high of over 30 2 2 CO percent, large infrastructure projects 0 could play a role in spurring economic 1960 1970 1980 1990 2000 2010 2016 growth and creating opportunities for jobs, new skills, and industrialization. South Africa United Kingdom India China FIGURE 5 IMPACT OF CHANGING Source: The World Bank Data FUEL MIX ON CO2 E M I S S I O N S The country’s heavy reliance on coal than a diesel plant.16 Hydrogen and carbon South Africa is the 14th largest emitter is the major contributor, with coal- capture, storage and utilization (CCUS) are of greenhouse gases in the world, both viable pathways toward low to near- emitting 467.5 million tons of CO2 15 percent of total CO2 emissions. zero emissions from power. According to in 2018 and accounting for only McCoy Power Reports, GE has over 35 years 1.28 percent of global emissions. However, the country has will see a drastic reduction in the carbon in terms of MW and unit count with H2 and higher per capita emissions footprint of the country. Gas produces 50 to 60 percent less CO when combusted than a gas turbine is capable of burning a 50/50 than China, India and the 2 typical coal plant and 30 to 40 percent less H /natural gas fuel blend by volume. UK as shown in Figure 5. 2 Accelerating South Africa’s energy transition with gas power and renewables 10 GOVERNMENT’S COMMITMENT TO EMISSIONS REDUCTION

South Africa signed the Paris agreement The government understands that gas is crucial to enable the transition 1 November 2016. In response to the Paris from coal to renewable energy. agreement’s call for countries to set out long South Africa’s favorable term climate strategies, the country’s cabinet conditions for and its approved the goal to become a net zero economy by 2050.17 solar potential will also be utilized to help meet the 2050 target. FIGURE 6: Deepsea Stavanger The 2019 Integrated Resource Plan (IRP) Drill rig, arrived in Cape Town on outlines how the power sector will be A carbon tax was also introduced in February 13 August 2020 reformed to help meet their target. 2019 covering combustion The government is committing to emissions, industrial processes, product use decommission and repurpose coal emissions and fugitive emissions such as those from coal . The proposed carbon According to the Climate Action Tracker, plants, reducing the percentage tax rate is R–120/tCO2e (USD 8/tCO2e). South Africa’s 2019 Integrated Resource Plan of coal in the energy mix from (IRP) will only enable the country to meet its ~90 percent to 45 percent by 2030 2030 Nationally Determined Contributions exemptions, resulting in an expected tax rate (NDC’s) target. However, more measures and 5 GW of coal still forecasted 19, 20 between R6–48/tCO2e (USD 0.4–3/tCO2e). need to be implemented beyond the IRP to be operating post 2050. to meet the Paris Agreement target of well Achieving their emissions target and below 2° C. still having 5 GW coal plant operating companies and 75 percent of national means the country plans to invest emissions. A leading Steel Company has in carbon capture and storage.18 estimated that, they could pay up to 600 million Rand ($54.5 million) as carbon taxes a year at the current tax rate.21

Accelerating South Africa’s energy transition with gas power and renewables 11 FUNDING AVAILABLE POWER MARKET ATTRACTIVENESS Partnering and FOR GAS PROJECTS There are several factors that make South Financing Africa’s gas power market attractive. These renewable energy as the push for clean include: While there is no universal blueprint for energy advances. However, the World • Available demand for gas either as implementing a coal-to-gas transition, many Bank and its private sector arm, the baseload or backup to Government’s case studies exist from countries like Poland, International Financial Corporations are aggressive renewables goal; China, and India that provide applicable still committed to ensuring that Africa references on the socioeconomic impact gets the needed support to industrialize • Progressive policy as evidenced in 22 of transitioning to a greener economy. and grow its economy. Thus, it continues Government’s commitments to the Paris 24 Agreement, coal repurposing Programme Beyond recognition of the importance of infrastructure roll out for economic energy; growth, other crucial considerations for POLICIES • Gas availability in the region, international South Africa as it embarks on its Gas LNG availability and market innovation Programme include, building partnerships TARIFF MODELS in pricing and infrastructure technology between private and public sectors, coupled with South Africa’s gas discoveries; South Africa, considering the changes that of projects from beginning to end.23 have taken place in the energy sector. • A track record of rolling out large The National Energy Regulator infrastructure Programmes, i.e., the Through proper co-ordination between all of South Africa (NERSA) in Renewable Energy IPP Procurement Programme (REIPPP) with 6000 MW participants, South Africa’s Gas Programme can be the inclusive approach which brings procured from 2010 to date; regime has initiated steps to along workers and communities historically • Sound institutions, particularly the deep reliant on the country’s vast coal sector. reform the methodology used local lending capability. recent energy dynamics.25

Accelerating South Africa’s energy transition with gas power and renewables 12 The LNG infrastructure consists of: GE’s Blueprint with the help of GE’s Digital Power Plant • A dedicated new built Floating Storage and capabilities, which help to unlock power for the Energy that had previously been inaccessible. Nanook, with a storage capacity of 170,000 m3 Transition Capabilities, including the digital control cubic meters per day of gas system, use real-time data to deliver better • A 6.5 km gas pipeline connecting the FSRU system reliability and is operations, while providing valuable to the power facility through a mix of generation sources. No predictive insights for higher reliability • Ocean LNG, a joint venture of Qatar single form of power generation is optimal and optimization. Petroleum (70 percent) and ExxonMobil in every situation or economy. For example: (30 percent), signed a long-term LNG wind and solar are variable but consume no GE’s 9HA units deliver exceptionally Sales & Purchase Agreement with the fuel and emit no CO ; gas-fueled generation 2 low life cycle costs per megawatt-hour. CELSE (Project Company) to supply emits CO but is dispatchable (i.e., has output 2 The economies of scale created by this 1.3 Mtpa of LNG for the project. that can be readily controlled between high-power density gas turbine are maximum rated capacity or decreased to unprecedented. Moreover, the turbine The power plant infrastructure was built on zero) to help balance supply and demand; 511,622 m2 (51.16 ha) site consisting of: hydro power often requires dedicating customers to maintain stable power • Three 7HA Gas turbines production and to reliably accommodate grid carbon, renewable and dispatchable, and can variations through quick start up, rapid load • A steam turbine provide long-term, low-cost . changes and other features. It can reach from • Three heat recovery steam generators (HRSG) start to full load in less than 30 minutes. This GE believes in and promotes additional • 33 km transmission line and a sub station renewables capacity, augmented where operations not just for large power plants needed with gas generation to provide and utilities but also for captive power plants or small grids. It also enables the greater GE, the major equipment OEM use of renewable energy by enabling quick decarbonize the energy sector. Given the time was also awarded the engineering, it takes to deploy new renewables and to weather changes. procurement, and construction coal-to-gas switching represents a potential GE’s 9HA also accommodates both gas (EPC) contract. GE also entered quick win for emissions reductions. and liquid fuels with wide gas variability into a Contractual Service and has the capability to transition from As a technology and service provider gas to hydrogen, paving the way to a more Agreement (CSA) and a long-term for the full length of the energy value operations and maintenance chain, GE has a unique perspective on the energy transition and has a suite (O&M) agreement for the project. of complementary technology. AN INTEGRATED LNG TO For South Africa however, POWER MODEL IN PORTO DO SERGIPE (1.5 GW), BRAZIL GE's 9HA gas turbine is the best Under the terms of the PPAs, the project has guaranteed an annual capacity payment of 26 solution. GE’s HA gas turbine portfolio The 1.5 GW Sergipe project approximately BRL 1.6 bn (USD 311.1 million), Integrated LNG-to-Power project in Brazil and more than 100 units ordered by more than with pass-through fuel and operating costs

40 customers across 20 countries. Our station in Latin America.The project was according to dispatch. The project provides cleaner, more reliable large-scale power for technology, expects to achieve 1 million 925 million) bond backed by the Swiss Export growing communities and helping facilitate operating hours of commercial experience Credit Agency. Inter-American Investment Brazil’s transition to lower-carbon energy. in the coming months. Weighing nearly Corporation (ICC) and The International 400 tons, as much as two big blue whales, Finance Corporation (IFC) provided the debt GE believes the Sergipe LNG-to- GE’s 9HA is the result of a US $2 billion facility, which comprises USD 288 million and USD 200 million respectively. Power Integrated approach can be replicated in South Africa under the Integrated Resource conversion of fuel to electricity to help meet Plan (IRP) implementation. increasingly dynamic power demands. Accelerating South Africa’s energy transition with gas power and renewables 13 The Path Forward: Recommendations basic human right and it’s what’s needed to transform South Africa and the rest of the continent’s industries. Renewables and gas provide a powerful combination to addressing the CO2 emissions challenge.

GE believes that accelerated and strategic implementation of the Gas Master Plan is have successfully implemented 27 deployment of renewables and gas power a Gas Generation plant. The Integrated their Gas Programme through can change the trajectory for climate change, approach reduces risk exposure and enabling substantive reductions in emissions facilitates the LNG Supply infrastructure. The the bundled approach of quickly, while in parallel continuing to government’s strong position of Transnet’s Gas-to-Power (example is advance technologies for low or near zero- role in import infrastructure is formidable. the 1.5 GW Sergipe LNG to carbon power generation. This can be achieved via equity participation Power Project in Brazil). in an import Terminal by Transnet whilst GE’s 9HA gas turbine is at the heart of the linking the LNG commodity Sales and Addressing climate change will require Purchase Agreement with the Power government and consumer action. GE is Purchase Agreement (PPA). uniquely positioned to play a key role through reliable, and sustainable power. Replacing its scale, breadth, and technology depth. To successfully implement the is a major way to decarbonize. The 9HA Integrated Resource Plan (IRP) We have been a key player in the power Programme, GE believes the industry since its inception more than following capabilities to support the heavy a century ago and have a suite of renewables planned for the South African grid. Government will need to adopt complementary technology including gas- the bundle approach whilst International Developers & IPPs, gas acquiring an equity stake to hydro, small modular reactors, battery suppliers and lenders understand and are ensure skills transfer over the storage, hybrids, and grid solutions needed experienced in the Gas-to-Power Programme. for the . Issues raised by market players need to be course of the programme. New addressed to facilitate the implementation entry LNG market countries of the Integrated Resource Plan (IRP). This the market will implement international practices and precedent in developing the contractual and legal framework especially when the LNG to Power Programme is We believe it is our responsibility to support this transition at its infancy in sub-Saharan Africa. through our relationships with customers, policy makers, Concerns raised by the Industrial Gas and consumers, collaborating to build an energy system User Association (IGUA-SA) that the Gas Programme is dependent on new that works for everyone. power project whilst neglecting industrial consumers are legitimate, however, the only anchor demand available to accelerate the

Accelerating South Africa’s energy transition with gas power and renewables 14 AUTHORS

Sarah Michelle Mills Joyce Apanga Wells Richard Gyasie-Hayford

CONTRIBUTORS

Vuyelwa Mahanyele Noz Dlengezelemotsitsi Michael Konadu Anne Ezeh Jim Donohue Gina Alteri

REFERENCES

1–2 Africa Power Monitor. Issue 295. April 8, 2021. 3,6 GE analysis – Accelerated Growth of Renewables and Gas Power Can Rapidly Change the Trajectory on Climate Change (2020) 4 https://hsf.org.za/publications/focus/focus-60-january-2011- making-south-africa-work-rules-of-the-game/PPerkins.pdf 5 7 Africa Energy Newsletter. Feb 28. 2021 8 South Africa 2019 Integrated Resource Plan (IRP) 9 https://businesstech.co.za/news/energy/367714/south- africas-load-shedding-horror-show-in-3-graphs/ 10-11 International Energy Agency Africa Energy Outlook 2019 12 IHS Markit, Global LNG: 2019 was a record-breaking year, January 21, 2020 13 International Gas Union 2019 World LNG Report 14 https://www.engineeringnews.co.za/article/regional-developments- expected-to-ignite-south-africas-gas-economy-2020-08-28/rep_id:4136 15 https://ourworldindata.org/co2/country/south-africa?country=~ZAF 16 https://www.eia.gov/tools/faqs/faq.php?id=73&t=11 17 https://unfccc.int/node/61201 18 South Africa 2019 Integrated Resource Plan (IRP) 19-20 https://www.climatechangenews.com/2019/02/20/south- africa-set-introduce-long-awaited-carbon-tax-june/ 21 https://climateactiontracker.org/countries/south-africa/current-policy-projections/ 22 23 https://hsf.org.za/publications/focus/focus-60-january-2011- making-south-africa-work-rules-of-the-game/PPerkins.pdf 24 https://projects.worldbank.org/en/projects-operations/project-detail/P149521 25 https://www.esi-africa.com/industry-sectors/transmission-and-distribution/ 26 https://www.nsenergybusiness.com/projects/porto-de- sergipe-power-plant-barra-dos-coqueiros/ 27 IHS Markit, LNG Strategic Report: LNG Import Outlook South Africa, 9 October 2020

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