Electricity MARCH 2017 2 Report Edited by Sheila Barradas, David Shepherd and Ria Theron
Total Page:16
File Type:pdf, Size:1020Kb
Electricity MARCH 2017 2 Creamer Media’s Electricity Report March 2017 A review of South Africa’s electricity sector Picture by WBHO The material contained in this report was compiled by Mariaan Webb and the Research Unit of Creamer Media (Pty) Ltd, based in Johannesburg. Special credit is given to Creamer Media’s Terence Creamer, whose articles were widely used in the compilation of this report. The information in this report is correct as of March 14, 2017. Report edited by Sheila Barradas, David Shepherd and Ria Theron. Ordering information To subscribe to Research Channel Africa or purchase this report contact: Creamer Media (Pty) Ltd Tel +27 11 622 3744 Email [email protected] Cover picture by Duane Daws 3 Creamer Media’s Electricity Report March 2017 Table of Contents � List of abbreviations and acronyms 4 � Key developments 6 � Overview 8 � State-owned electricity provider Eskom 9 – Generation developments 10 • Nuclear power 12 – Capacity expansion 13 • Medupi 13 • Kusile 15 • Ingula 15 – Financial status and tariffs 16 – Coal supply 20 – Environmental impact 23 � Independent power producers 25 – Renewable energy 25 – Coal baseload 29 – Gas to power 30 – Cogeneration 31 – Peaker projects 31 � Electricity planning 32 – Nuclear 35 � Demand initiatives 38 � Transmission 40 � Distribution and electrification 41 – Electricity theft 42 � Southern African Power Pool 43 � Outlook 45 � Sources 47 Picture by Bloomberg by Picture 4 Creamer Media’s Electricity Report March 2017 List of abbreviations and acronyms BEE black economic empowerment capex capital expenditure CBIPPPP Coal Baseload Independent Power Producer Procurement Programme CFL compact fluorescent lamp CHP combined heat and power CISF Centralised Interim Storage Facility CO2 carbon dioxide CSIR Council for Scientific and Industrial Research CSP concentrated solar power DoE Department of Energy DRC Democratic Republic of Congo EAF energy availability factor Ebitda earnings before interest, tax, depreciation and amortisation EDF Electricite de France FGD flue gas desulphurisation FSRU floating storage regasification unit Gump Gas Utilisation Master Plan IDM integrated demand management IEP Integrated Energy Plan INEP Integrated National Electrification Programme IPP independent power producer IRP Integrated Resource Plan IDZ industrial development zone JV joint venture LNG IPPPP Liquefied Natural Gas-to-Power Independent Power Producer Procurement Programme MIGA Multilateral Investment Guarantee Agency MYPD multiyear price determination Nees National Energy Efficiency Strategy Nersa National Energy Regulator of South Africa NNR National Nuclear Regulator NOx nitrogen oxide NRWDI National Radioactive Waste Disposal Institute OCGT open-cycle gas turbine OCH Optimum Coal Holdings 5 Creamer Media’s Electricity Report March 2017 List of abbreviations and acronyms (continued) Outa Organisation Undoing Tax Abuse PPA power purchase agreement PV photovoltaic RCA Regulatory Clearing Account REIPPPP Renewable Energy Independent Power Producer Procurement Programme RFI request for information RFP request for proposal RFQ request for qualification SAPP Southern African Power Pool Sarec South African Renewable Energy Council Sona State of the Nation SWH solar water heater TDP Transmission Development Plan TISF Transient Interim Storage Facility Picture by Bloomberg by Picture 6 Creamer Media’s Electricity Report March 2017 Key developments March 2016: Power utility Eskom synchronises the first two units of its Ingula pumped-storage scheme, on the border between the Free State and KwaZulu-Natal, to the national grid. March 2016: The National Energy Regulator of South Africa grants Eskom a partial clawback of revenue and cost variations recorded during the first year of the third multiyear price determination, which runs for five years until March 31, 2018. March 2016: The World Bank Group’s Multilateral Investment Guarantee Agency extends €698.90-million in guarantees to Eskom to support transmission infrastructure investments, which will help it alleviate grid bottlenecks holding up the connection of new renewable-energy projects. April 2016: Eskom approves a new fleet renewal strategy based on the economic viability of each station as opposed to a purely age-based decommissioning of power stations. April 2016: The National Energy Regulator of South Africa proposes to introduce a coal benchmark cost – an average rand/tonne cost of coal – as part of its final decision on Eskom’s multiyear price determination process. May 2016: The Department of Energy confirms plans to procure a 600 MW gas-fired power generation project, to be developed as a public–private partnership. A private ‘strategic partner’ will work with the State-owned companies to implement the project, with private-sector partners playing the lead role in developing, financing, operating and maintaining the facility. May 2016: The Department of Energy issues an expression of interest to canvass the appetite of independent power producers to develop, finance, construct and operate three new Northern Cape solar parks of between 400 MW and 700 MW, in partnership with State-owned companies. July 2016: Eskom is granted an extension until April 1, 2017, to submit a new multiyear price determination – the fourth in the series. The utility had originally been given three months, from March 1, to make its submission, following its successful Regulatory Clearing Account application to the National Energy Regulator of South Africa for the 2013/14 financial year. July 2016: The African Development Bank extends three loan facilities, collectively valued at R20-billion, to Eskom to fund general capital requirements. August 2016: The North Gauteng High Court sets aside the National Energy Regulator of South Africa’s (Nersa’s) approval of Eskom’s third multiyear price determination (MYPD) Regulatory Clearing Account adjustment for the 2013/14 financial year. A group of energy-intensive businesses approached the court, claiming that Nersa and Eskom had failed to follow the prescribed MYPD methodology. Nersa has appealed the judgment. September 2016: Eskom synchronises the second 800 MW unit at its Medupi coal-fired power station project, in Limpopo, to the grid. Unit 5 is expected to become commercially operational by March 2018. September 2016: Eskom warns that South Africa will face the same electricity shortfall as it did in 2008, unless the country has additional nuclear power on line by 2035. October 2016: Energy Minister Tina Joemat-Pettersson says Eskom’s balance sheet will be used to leverage funding for the New Nuclear Build Programme. Eskom will raise the money on international markets and will be the owner- operator of the programme. October 2016: The Department of Energy names the 557.3 MW Thabametsi and the 306 MW Khanyisa coal-fired power station projects, in Limpopo and Mpumalanga respectively, as the preferred bidders of the first bid window of the Coal Baseload Independent Power Producer Procurement Programme. The projects have a combined investment value of R40.20-billion. November 2016: Brian Molefe announces his resignation as CEO of Eskom and is replaced by head of generation Matshela Koko as interim CEO. Molefe’s resignation follows the publication on November 2 of the Public Protector office’s ‘State of Capture’ report, in which Molefe’s relationship with the controversial Gupta family featured strongly. Board member Mark Pamensky also stepped down following the release of the report. November 2016: South Africa’s ranking in a continent-wide renewable-energy index plummets, reflecting the market uncertainty that has arisen as a result of Eskom’s refusal to sign power purchase agreements with preferred bidders named following the most recent auctions held under the Renewable Energy Independent Power Producer Procurement Programme. 7 Creamer Media’s Electricity Report March 2017 Key developments (continued) November 2016: Ratings agency Standard & Poor’s (S&P’s) Global Ratings lowers Eskom’s credit rating a further notch into subinvestment. S&P’s cuts Eskom’s long-term corporate credit rating to BB from BB+, two steps below the investment threshold. December 2016: Eskom releases a request for information (RFI) to the market for its Nuclear New Build Programme, which will add 9 600 MW to the national power grid when completed. The RFI aims to gather data including experience related to recent nuclear projects, capacities and costs, proposed financing solutions and localisation opportunities. December 2016: The Constitutional Court dismisses the application by US nuclear services provider Westinghouse to review the award of the tender for the replacement of the six steam generators at the Koeberg power station, in the Western Cape, to French energy group Areva. December 2016: The Department of Energy releases the long-awaited draft Integrated Resources Plan (IRP), which makes proposals about the target energy generation mix to 2050. The draft IRP base case delays the introduction of new nuclear energy significantly from the previous IRP, which covered 2010 to 2030, and gives a greater role to gas, solar and wind power than in the prevailing IRP. The public comment period was expected to end on March 31, 2017. December 2016: The first unit of Eskom’s Kusile coal-fired power station, in Mpumalanga, is connected to the grid, adding 800 MW to the country’s power system. December 2016: The second unit of Eskom’s Medupi coal-fired power station, in Limpopo, is loaded to full capacity for the first time,