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Wind projects with a combined capacity of 984 MW have been registered with the National Energy Regulator of South Africa (Nersa), a development that the South African Wind Energy Association (SAWEA) sees as representing a shift from the single buyer model that has hitherto underpinned renewables investment to a more open arrangement.

The change, SAWEA says, has been brought about by the removal of the licensing requirement for private generation plants that are proceeding on the basis of bilateral power purchase agreements with private off-takers.

Prior to this development, 3 442 MW of wind was procured through the country’s public procurement process, although not a single wind project progressed to preferred bidder status following the sixth bid window, after Eskom claimed that the grid capacity on which the projects were premised had been absorbed.

It has been reported that the pipeline of private wind and solar projects currently stands at above 9 000 MW, while analysis by Trade & Industrial Policy Strategies senior economist Gaylor Montmasson-Clair shows that 2 500 MW of such projects were registered with Nersa in the first quarter of 2023 alone.

SAWEA believes that both private and public markets are required to significantly increase the penetration of renewable energy and that the development of the private off-taker market represents a maturing of the industry.

“The private off-taker market model is very different to the public programme and together, these two structures will allow for the procurement of new capacity to meet the need of the country as a whole, and to facilitate the implementation of the targeted energy mix,” SAWEA CEO Niveshen Govender says.

“Tariffs in the private PPA market will be determined by bilateral negotiations between willing buyers and willing sellers,” Govender adds.

Cabinet reports that a target has been set to save about 1 000 MW, or the equivalent of one stage of loadshedding, through demand side management (DSM) measures, but has provided no details as to what initiatives will be introduced and at what cost.

Presenting the outcomes of Cabinet’s April 26 meeting, Minister in The Presidency Khumbudzo Ntshavheni described lowering electricity usage, especially during the evening peak from 17:00 to 21:00, as representing a “win-win” solution. She argued that DSM initiatives could reduce pressure on the power grid and save households and firms money “without affecting business productivity or quality of life”.

“The aim is that collectively we must save electricity by switching off non-essential appliances, using gas to cook, installing energy efficient light bulbs, and switching off appliances like geysers when not in use,” Ntshavheni said, noting that such efforts had proven effective in the run-up to the 2010 FIFA World Cup.

“The target is to save about 1 000 MW of power, which is equivalent to one stage of loadshedding.”

Cabinet called on business, industry and residential customers to join the DSM campaign being pursued by Eskom with the support of the National Energy Crisis Committee (NECOM).

The DSM initiative was one of several plans outlined by NECOM and Eskom to reduce the intensity of loadshedding ahead of the high-demand winter months, but the utility had not yet formally released its winter outlook.

Most of the DSM programmes that had been mooted were unlikely to be able to be implemented immediately, however, and there was thus growing concern that Stage 6 loadshedding, the highest stage to be officially implemented to date by Eskom, could well be breached in the coming months.

On the supply-side there were also few immediate options to provide relief, besides using the open-cycle gas turbines more intensively and Electricity Minister Dr Kgosientsho Ramokgopa had already indicated that the utility had a R30-billion diesel budget for 2023/24.

At a recent National Demand Management Indaba some short-term savings options were raised, including by the Energy Intensive Users Group, which proposed increasing financial incentives for demand response and even suggested that government reconsider power buybacks during winter as a way to avoid higher levels of loadshedding.

It is understood that such a buyback scheme, which would see large electricity consumers remunerated for agreeing to cut demand, has been canvased with both Eskom and Ramokgopa but that no agreement had yet been reached regarding its implementation.

Former Eskom CEO André de Ruyter continued to draw a direct link between corruption at the State-owned utility and ongoing loadshedding during his much-anticipated, but ultimately unsatisfactory, virtual appearance before the Standing Committee on Public Accounts (Scopa) on Wednesday.

To the obvious frustration of committee members, De Ruyter declined to provide any new details regarding the startling allegations he first made during a television interview in February.

During that interview he revealed that a senior politician was directly implicated in criminal activities at Eskom but that no action had been taken despite the matter having been raised with senior government and law enforcement officials.

He confirmed in a written submission to the committee that information arising from a privately-funded and commissioned intelligence report had been shared with Minister Pravin Gordhan, National Security Adviser Dr Sydney Mufamadi, as well as with General Fannie Masemola and former Eskom chairperson Professor Malegapuru Makgoba. The submission also highlights that, following the meetings, official investigations had seemingly been initiated and that there had been 43 arrests.

De Ruyter, therefore, refused to divulge further information, nor name individuals involved, arguing that doing so could undermine ongoing investigations, compromise the safety of certain individuals and potentially place himself in legal jeopardy.

Only limited questioning was made about the credibility of the intelligence report, despite a News24 exposé published ahead of the hearings, which raised serious questions about the quality of the report, as well as the integrity of the lead investigator.

De Ruyter remained forthright in his position that there was a direct connection between corruption within Eskom, which he said was conservatively costing the utility R1-billion monthly, and power cuts that were being implemented daily.

Asked specifically about a comment made by Electricity Minister Dr Kgosientsho Ramokgopa, suggesting that corruption was not the reason for the collapse of the Unit 1 flue duct at Kusile on October 23, which left three units inoperable and Eskom without 2 100 MW of generation capacity, De Ruyter aligned himself with a statement made by the National Union of Mineworkers (NUM) on the issue.

In a March statement, the NUM Highveld Region said it “categorically and emphatically” disagreed with the Minister’s version that corruption in Eskom did not play a role in loadshedding.

De Ruyter said procurement irregularities at Kusile involving Hitachi and Chancellor House had resulted in serious design problems with the boilers that had a direct bearing on the flue collapse last year.

“If the boilers [at Kusile] had been appropriately designed, the issue of a higher exhaust-gas velocity, which caused the carry-over of ash and gypsum into the duct that eventually collapsed leading to the outage of three units, would not have taken place,” he said, noting that the sequence of events that led to the boiler contract was controversial and had led to Hitachi concluding a $19-million legal settlement in the US with the Securities Exchange Commission.

De Ruyter also highlighted the role that the purchase of coal with a higher ash content had played in the collapse and noted that Kusile had been premised on coal arising from the New Largo mine, which had not been built and was, thus, currently relying on coal transported in by truck.

“I believe the corruption in the coal supply chain played a contributing role to the collapse of the duct at Kusile.”

Asked whether criminal cartels linked to the road transportation of coal in Mpumalanga had played any role in the delay of the construction of New Largo, he responded thus: “With any question of this nature, the departing principle should be to ask who benefits and clearly the people who benefitted from a delay in the opening up of New Largo . . . are those transporting coal by road.”

In his writte...

Engineering News editor Terence Creamer discusses the significant changes the Electricity Regulation Act Amendment Bill is likely to bring about; the unbundling progress already made under the existing Act; and the impact of loadshedding and mixed messages in relation to the electricity sector on South Africa.

No immediate clarity has been provided as to how the current proposal to extend the life of certain coal stations beyond their scheduled retirement dates has been aligned with the conditions of a R254-billion Eskom debt-relief package, which was unveiled by Finance Minister Enoch Godongwana in February.

During a Standing Committee on Appropriations briefing convened in Parliament on the Eskom Debt Relief Bill, Eskom interim CEO Calib Cassim confirmed that the conditions prevented Eskom from investing in any new greenfield power generation, including renewables.

It was also confirmed that any generation-linked capital expenditure (capex) would be confined to the maintenance of the existing fleet, as well as the investments required for the coal-fired power stations to meet minimum emission standards and, in the case of Medupi, to install flue-gas desulphurisation units.

Investments are allowed to be undertaken, however, to strengthen and expand Eskom’s transmission and distribution networks, but the utility will require written permission from the Finance Minister should it wish to undertake any new borrowing to fund such projects.

No specific clarity was provided as to whether generation-linked maintenance and environmental capex could be applied to units that have hitherto been earmarked for retirement, including units at the de-mothballed Camden power station that are meant to begin decommissioning in 2024.

Extending the life of such units would require funding, both to ensure that the unit is in a condition to operate safely and in compliance with environmental standards beyond its dead-stop date, as well as to purchase the coal, water and other primary inputs that are necessary to generate electricity.

The life-extension proposal was first made by Electricity Minister Dr Kgosientsho Ramokgopa following his tour of the ailing coal fleet and has since been accepted by the governing African National Congress, making it likely that it will become policy as South Africa scrambles to tackle intensifying loadshedding.

Delaying the decommissioning of certain stations is premised on an argument that new cleaner generation is unlikely to be introduced in time to close the deficit left by the shutting of the stations and the Minister has even claimed that the delay will not derail South Africa’s overall decarbonisation programme or the country’s net-zero by 2050 aspiration.

Nevertheless, the proposal could well jeopardise South Africa’s access to further concessional funding under the $8.5-billion Just Energy Transition Partnership concluded in 2021 with France, Germany, the UK, the US and the European Union.

However, the focus of questioning by Parliamentarians was on whether Eskom would meet the conditions on the debt-relief package after failing to meet the conditions associated with previous bail-outs, which amounted to a combined R181-billion over the past five years.

Under the terms of the latest package, Eskom will be allowed to convert the National Treasury loans to equity, which will strengthen its balance sheet by increasing its equity while reducing debt over the coming three years from R454-billion at the end of December 2022 to R356-billion by the end of its 2026 financial year. Government would also take over up to R70-billion of the utility’s debt at that time through an arrangement that was yet to be determined.

Acting CFO Martin Buys said that Eskom was required to prove compliance to the National Treasury quarterly and had also been granted a quarter grace period to remedy any noncompliance. Should it fail to comply, there would be no debt-to-equity conversion and the transfer would have to be reflected as a loan in Eskom’s financial statements.

Under a scenario where Eskom complies, Buys said the fact that the National Treasury would be responsible for servicing Eskom’s debt, the utility’s cash from operations would be free to be used for the capital programme.

“For this financial year, FY24, there will be aroun...

Mineral Resources and Energy Minister Gwede Mantashe has published an explanatory summary of the much-anticipated Electricity Regulation Act Amendment Bill, which is now poised to be introduced to the National Assembly for consideration.

In his introductory note to the summary Mantashe sets out the purpose of the proposed amendments to be the following:

the strengthening of the National Energy Regulator of South Africa (Nersa);

the strengthening of the provisions related to licensed and exempted activities;

an amendment to Section 34 of the Act in order to clarify the circumstances under which the Minister may make Ministerial determinations;

to provide for the establishment for the Transmission System Operator (TSO) and to define its duties, powers and functions;

the assignment of the duties, powers and functions of the TSO to the State-owned National Transmission Company South Africa (NTC); and

to provide for an open market platform that will allow for competitive electricity trading.

The draft Bill indicates that the TSO will be responsible for the transmission network, system and market operations, and will also house a central purchasing agency to conclude or enter into contracts for the procurement of both capacity and energy.

These roles are likely to be heavily debated during the parliamentary process.

While Cabinet approved the Bill’s submission to Parliament on March 29 and it has been tabled to Parliament, Engineering News understands that it has not yet been formally referred to the Portfolio Committee on Minerals Resources and Energy.

This committee will play a key role in facilitating consideration of the Bill by lawmakers, including the hosting of public hearings.

While the changes outlined in the Bill are relatively modest when compared with electricity market reforms elsewhere, they represent a significant shift for the South African electricity supply industry, which has hitherto been dominated by the vertically integrated State-owned monopoly, Eskom.

In his State of the Nation address in February, President Cyril Ramaphosa said the Bill would transform the energy sector and establish a competitive electricity market.

In parallel, Eskom has been preparing to unbundle its generation, transmission and distribution businesses and, in line with the current Act, is seeking to have three licences approved for the NTC, which will initially be established as a subsidiary of Eskom Holdings, but with its own independent board.

Eskom group executive for Transmission Segomoco Scheppers told a Nersa hearing on April 11 that once the national transmission, trading, as well as import and export licences had been secured, it would seek lender consent for the restructuring.

Should the licences and consent be forthcoming, it is possible that the NTC could become effective by the end of June.

As legislation and regulation is updated, however, it is unlikely that the NTC will remain a subsidiary of Eskom Holdings, with full separation prevented currently mainly because of the financial complexities involved in light of Eskom’s large debt burden.

For the time being, it is envisaged that the transmission assets will be transferred to NTC, while the debt attributed to NTC will reside with Eskom Holdings but reflected in the form of an equivalent inter-company loan.

There is no intention to privatise NTC, which has the character of a natural monopoly.

Transnet Port Terminals (TPT) is optimistic that its emerging strategy of entering into long-term agreements with original-equipment manufacturers (OEMs) for the supply and life-cycle maintenance of key port-handling equipment will position the business for significantly higher levels of efficiency across its 16 terminals, which have faced significant disruption in recent years.

CEO Jabu Mdaki tells Engineering News that the strategy will be deployed in phases and involves contracting directly with the OEMs for 11 pieces of key equipment, initially starting with rubber-tyred gantry cranes.

The scope of the tender, which closes on May 2, includes the asset lifecycle management of the equipment by the OEMs and also covers the spares replacement, as well as the maintenance and refurbishment of the equipment.

“The anticipation is to have the contracts for the first batch of equipment in place by September.

“These will be over a period of 10 years for acquisition and 20 years for asset lifecycle management,” Mdaki explained during an interview.

“Over the next five years, TPT will invest in over 700 pieces of equipment ranging from ship-to-shore cranes, rubber-tyred gantry cranes and straddle carriers to haulers, trailers and forklifts.

“Of this number, over 40% will be delivered in the next two years,” he reports, adding that the strategy has been approved internally and is in full compliance with the Public Finance Management Act.

“We also want to use this exercise to standardise on the equipment that we have across the terminals.”

TPT expects to invest just over R8-billion over the next five years.

Mdaki, who has extensive experience in engineering and maintenance, says the OEM strategy deviates from the previous piecemeal procurement approach and has been developed in an effort to improve equipment availability and reduce downtime.

Having been the former operations head at the privately owned Richards Bay Coal Terminal, he admits the procurement protocols he found when joining the State-owned entity in 2020 represented something of a “culture shock”.

“The protocols that you have to follow even when you have an emergency are extremely different to what I experienced in the private sector, where I could mobilise a supplier so that we could start recovering the machines almost immediately.

“At a State-owned enterprise, one needs to either follow a protracted open procurement process or seek permission to secure the equipment or spares required from a confined list of suppliers, which is also time consuming.”

Mdaki believes transitioning to a situation whereby TPT has long-term contracts in place with OEMs will dramatically improve turnaround times in the case of failures, which should help the division improve its overall efficiencies.

TPT, which is responsible for the handling of seven key commodities, namely containers, automotives, coal, chrome, iron-ore, manganese and magnetite, and is currently exploring gas, has been prioritising turnaround activities in parallel with the OEM strategy, following a difficult operational period.

Besides the disruptions associated with the Covid-19 lockdowns, the unit has been rocked by the 2021 cyberattack, the April 2022 KwaZulu-Natal floods and a strike, which affected its operations in the third quarter of last year.

Mdaki says all the events highlighted the need to build greater resilience into the fabric of the organisation and he believes the institutional structures that have been developed will ensure that it is in a better position to respond to external shocks in future.

Following the cyberattack, threat protection and monitoring solutions have been installed across TPT information technology systems, along with various protocols, including continuous cybersecurity awareness training for employees. TPT currently employs 8 861 people across its terminals.

Mdaki said this greater resilience was evident in TPT’s recovery from a nine-day strike in November, returning to full service du...

Energy and chemicals company Sasol’s business continues to be impacted by a volatile operating environment and continued operational challenges, but, despite this, it delivered a stronger performance in the third quarter of its 2023 financial year, compared with the second quarter.

The company’s operational mitigation plans in South Africa are starting to show early signs of improvement, president and CEO Fleetwood Grobler says in a production and sales metrics report for the nine months ended March 31.

“We continue to focus our efforts on navigating external challenges, while improving operational stability and maintaining our safety focus,” he adds.

Sasol reports that the energy business continues to benefit from a stronger oil price and refining margin environment, with operational mitigation plans showing early signs of business improvement.

The company is on track with the phased roll-out of its full potential programme in its mining operations, with incremental improvements noted in productivity and coal quality delivered to the Secunda Operations (SO).

The coal stockpile remains well above target, supporting consistency in coal blending and supply to Sasol’s operations, it highlights.

At SO, Sasol says it has seen higher production volumes for the third quarter, compared with the second quarter, owing to increased equipment availability and improved reliability.

Additionally, the second reformer came back online in March, well ahead of plan, providing increased operational flexibility on the reforming units to maximise natural gas feedstock to SO.

In the period under review, Sasol says it experienced an electrical outage where its teams responded swiftly, thereby minimising the impact on its operations.

Sasol says it also experienced operational challenges at its Natref refinery, which negatively impacted on run rates in the third quarter.

The company continues to review its crude procurement strategy to reduce the high premiums on West African crude purchased, it notes.

The ORYX gas-to-liquid plant, in Qatar, encountered a leak on one of the diesel tanks in March, resulting in the shutdown of Train 2. Sasol expects start-up of the plant by the end of this month.

In the chemicals business, while overall demand and supply chain constraints have improved in recent months, prices, unit margins and demand remain below historical levels, Sasol points out.

Total sales volumes were 6% lower in the nine months compared to the prior period, while third-quarter volumes remained flat compared with the second quarter.

This was owing to higher sales volumes in Africa and Eurasia, offset by lower sales in America as more merchant ethylene was derivatised into higher-value products.

The Ziegler alcohol unit in Lake Charles has since resumed production at the end of the third quarter, in line with the plan.

The average basket price decreased by 3% compared with the prior period, while third-quarter prices were similar to that of the second quarter.

Price increases were seen in Africa on the back of improved demand, while prices in Eurasia and America reduced owing to recent lower feedstock and energy costs.

OUTLOOK

Full-year guidance remains unchanged across most segments, with the exception of Natref.

Sasol has revised its guidance for Natref downward to 500 m3/h to 530 m3/h given the challenges experienced in the third quarter.

Further pricing and demand volatility is expected for the remainder of the financial year, in light of the global macroeconomic environment and the potential for ongoing disruption from Eskom and Transnet on Sasol’s suppliers and customers in South Africa, the company says.

It notes that a coordinated effort is under way with Transnet to address the supply chain constraints associated with all Sasol products.

Engineering News editor Terence Creamer talks about South Africa's significant existing automotive manufacturing capability; the need for policies and incentives to be put in place to support the production of new energy vehicles; the views of government and the automotive original-equipment manufacturers (OEMs) regarding a support framework for battery electric vehicle (BEV) production; and the challenges OEMs face in convincing their overseas parent companies that South Africa remains an attractive investment destination despite loadshedding and logistics problems.

South African energy company Aqora is investigating the possibility of opening a vertically integrated gigafactory in the country, able to produce anodes, cathodes and lithium-ion batteries for the automotive industry, as well as batteries for stationary storage applications.

While Aqora may be relatively new, its founder, Deshan Naidoo, is well known in the automotive industry, where he has been a business leader and member of the National Association of Automotive Component and Allied Manufacturers leadership since 2017.

He began his career at a boutique investment firm and is also the founder of an investment holding company.

Naidoo says the envisaged multibillion-rand integrated battery project will leverage numerous international partnerships, and could potentially start production in 2026, if everything goes according to plan.

The current blueprint entails setting up the plant in the Eastern Cape, in a special economic zone (SEZ) close to a port and some of South Africa’s major vehicle producers.

The aim is also to transport battery minerals that can be found in Southern African Development Community (SADC) countries to a central hub for processing – with this hydrometallurgical hub also located in an SEZ – with downstream manufacturing then happening in South Africa.

“By co-locating processing facilities in the SADC, our aim is to greatly reduce Scope 3 carbon emissions when producing battery precursors and the complete battery packs,” says Naidoo.

Scope 3 emissions are the result of activities from assets not owned or controlled by a company, but that the organisation indirectly affects in its value chain.

Minerals for the processing facility could, potentially, be procured from Botswana, South Africa, Mozambique, Zimbabwe and the Democratic Republic of Congo.

Naidoo says the South African automotive industry must turn to battery manufacturing to safeguard its automotive export market amid the global shift to electric mobility.

He believes Africa has all the minerals and knowledge required to produce batteries.

“If we do not ensure beneficiation of our raw minerals, Africa will continue to be the scratch patch of the world. It is also very clear that global battery production will not be able to meet global electric vehicle demand going forward, due to current limited global mining capacity.”