presentation to parliamentary portfolio committee : energy ... · presentation to parliamentary...
TRANSCRIPT
Industrial Development Corporation & SACC
11 June 2013
Towards Green Industrialisation
Focus on Cogeneration & SA Calcium Carbide Cogen Project
Rentia van Tonder SBU Head: Green Industries
Raoul Goosen Specialist: Green Industries
Hennie de Jager Production Manager: SA Calcium Carbide
Presentation to Parliamentary Portfolio Committee : Energy
2
Content
Fuel Based Green Energy
2
3
Background: Green and IDC Green SBU 1
SA Calcium Carbide 4
5
Conclusion 6
SA Calcium Carbide Cogen Project
Cogeneration
Green Industries SBU: Focus
Energy efficiency
Heat,
Electricity
& building
efficiency
Cleaner
production /
Industrial
Efficiency
Transport
Efficiency
Waste to Energy
Fuel Based Energy
Co-generation
Emission and pollution mitigation
Air pollution
control
Waste
Management/
Recycling
Clean
stoves
Bio Fuels
Bio Ethanol Bio Diesel
Renewable Energy: Non-Fuel Power
Wind Power
Generation
Concentrated
Solar Power
Solar Photo
Voltaic Power
Services related
to renewable
energy & energy
efficiency
Local
manufacturing
related to
renewable
energy & energy
efficiency
Hydro
Fuel Based Energy
12% Energy Efficiency
4%
Renewable Energy
76%
Biofuels 8%
Green Portfolio R10,4 bn
R7.5 bn
R1.4b
R422m
Green Industries SBU: Committed portfolio
High-Level Sector Development Strategies to achieve objectives
Indu
stry
Goa
ls
To be carbon neutral by 2050: Emissions in SA should be reduced to 1 tonne per person per annum
IDC
Goa
ls
To play a leading role in the development of the green economy through investments in Green Industries
Foc
us
Are
as
Energy Efficiency Renewable Energy Fuel based green power Bio fuels
Key
Str
ateg
ies/
Initi
ativ
es
• Increased focus on
implementation of GEEF and
Afd funding aligned with key
objectives
• Implementation of EE &
usage of local components as
identified
• Support, develop & fund
Esco’s
• Develop and Finance wind power
projects to stimulate local wind
turbine manufacturing
• Develop and finance
concentrated solar power
projects with focus on
diversifying post COD
• Develop and finance photo
voltaic solar power projects to
stimulate local PV component
manufacturing
• Increase focus on Hydro and RE
in rest of Africa
• Develop commercial or
demonstration waste to energy
(include biomass) projects
• Initiate and develop co-
generation opportunities with
large industrial players • Fast track focus and projects on
Biogas as feedstock for clean
transport
• Development of Bio Ethanol industry,
create conducive regulatory
environment, focus on Cradock
project & its implementation
• Biodiesel: review approach & way
forward
• 2nd generation technologies: review
viable technologies and partner
where appropriate.
Pot
entia
l
Con
stra
ints
• DSM fund availability
• Roll out for SWH,
affordability
• Limited local manufacturers
of components ie LEDs and
CFLs
• Tariffs to come down
significantly and RE to reach
grid parity in 5 years
• Costly Bid process
• Small IPP process to be
confirmed asap
• COFIT / wheeling
• Incentives for biogas
• Feedstock security
• Legislation: Fuel blending specs &
cost
• Mandated upliftment
• Feedstock – biodiesel
• 2nd generation – viable
technologies
Fuel Based Green Energy: Industry structure
Municipal solid waste or
Biomass or Tyres
Grown biomass
Organic waste
Sewage sludge
Animal litter
Feedstock
Waste Gas
Pyrolysis
Sorting
Anaerobic Digestion
Combustion Incineration or
Waste heat
Gasification
Primary Process
Steam turbine or organic rankine
cycle
Electricity
Industrial fuel
On-site heating
Vehicle fuel
End Use
Recycling
Co-generation Internal gas combustion
Gas Cleaning
Liquefied Biogas (LBG)
Compressed Biogas (CBG)
Steam
Piped gas
Secondary Process
• Fuel to co-generation plant (waste-heat or off-gas) is a by-product from an industrial process which
manufactures carbide, cement, ferrochrome, steel, glass, platinum, etc.
• Industrial process itself is heart of the core business of the fuel supplier / host
• Co-generation at end of industrial process is an “add-on”, not under control of the co-generation plant
Fuel Based Green Energy: “Waste” to energy and Co-generation
Feedstock
Offtakes
Revenue
Process various options
Investment decision
Project
Feedstock (Fuel) security:
• No feedstock security, no start
• Challenge: Long term supply agreement to cover
debt tenure + 2 years
• Quality, quantity, price & period
• MFMA requirements for municipalities
Process/Investment options:
• Driven by feedstock qualities, quantities term
and off take options
• Typical cost R15-35m/MW
• High load factors (eg >75%)
Offtakes:
• Low O&M cost, so if Offtake/feedstock price
RATIO strong, then repay debt quickly and low
cost power
Co-generation
Opportunities:
Electricity from waste heat or fuel to make
existing industry more efficient &
reduce electricity cost
Large industry with furnaces and kilns :
ferro-chrome, ferro-manganese, silicon,
carbide, platinum, cement, lime, steel ,
carbon black (ca 2000 MW potential)
Sugar Industry (1000 MW from bagasse);
Pulp & Paper (500 MW from waste)
Over lifetime generates electricity at
lower cost than Eskom supply, due to
“free/low cost” fuel
– Capital repayment 40-80 c/kWh for
ca 8 years and cash cost (O&M) of 10-
25 c/kWh
Positive drivers (applicable for biogas as well):
Increasing power prices,
Carbon Tax proposed,
Tax incentives for efficiency (12I & 12L),
Eskom IDM for own use – cancelled by NERSA
DTI MCEP & CIP grants - uncertain
Negative factors:
• Not core business; Lack of commitment from
large players to participate in feasibility
studies/project development.
• Paybacks longer than core business projects;
• Relies on core business for feedstock
IDC approach:
• Developed senior debt term sheet for Co-gen
• Sub debt with equity kicker,
• Equity/development funding (minority stake)
if host co-fund feasibility and obtained board
approval.
SA Calcium Carbide factory in Newcastle
SA Calcium Carbide
SA Calcium Carbide Operations
• SACC produce some 72,000 tons of calcium carbide per annum with a capacity to produce up to 90,000 tons pa
• From local materials – limestone (largest customer in SA); anthracite and electricity
• uses 50 % of Newcastle’s electricity
• SACC are the only producer of calcium carbide on the African continent
• Annual turnover of some R 500 million per annum (approx. US$53 million)
• Supply all local users – steel industry (to desulphur steel) ; to make acetylene welding gas and acetylene carbon black (as pigment and to make zinc carbon batteries)
• More than 50 % of production exported – so R 500mil forex +ve
• 300 direct employees, and many more in value chain (raw materials mining, logistics)
SA Calcium Carbide Furnace
SACC Process
Principal objective : Electricity supply (demand reduction)
Previous SACC Operation
SACC – after Cogen Project
Engine Genset 1 of 4
SACC Cogen Project Highlights
• 8MW electricity co-generation project
• utilizing the submerged arc furnace waste off-gas
• displace Eskom fossil fuel derived electricity
• saving 20 % of SACC use (10 % for Newcastle)
• as a Clean Development Mechanism (CDM) initiative;
• commissioned Dec 2013 – after 1st soil turned in Jan 2012
• R105 million capital cost requirement for this project over
a financing period of 10 years
SACC Carbon Credits
Eskom IDM Support
• Eskom on a massive drive to reduce consumption from National Power Grid, so supported this initiative by SACC by partially fund this DSM project by compensation for electricity saved over the next three years (during weekdays from 06:00-22:00)
• All this electrical energy generated is consumed on site, thus reducing SACC’s consumption from national grid. Resulting in reduced emissions of greenhouse gasses and CO2 emissions from Eskom - due to reduced electricity demand from SACC from grid
0
5000
10000
15000
20000
25000
30000
35000
40000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Actual Furnace Grid Consumption Pre-Implementation [kWh]
Expected Grid Consumption Post-Implementation [kWh]
SACC Cogen Project Benefits
• 15 - 20% reduction in electricity (energy) utilisation by SACC
• Energy efficiency supporting growth needs of Newcastle Municipality (10 % more power)
• Support of the local community with a rural school green (solar) energy solution
• Contribute favourably to the Sustainable Development of the Newcastle municipal region by introducing job opportunities to plant operators, plant technicians, contractors, maintenance personnel and plant equipment suppliers
• Maintaining SACC operations by mitigating power price increases (30 % of costs) and hence protecting 300 jobs and 1000 indirect jobs as well as SA value add of R 500 mil pa
• Combatting climate change - registered CDM project with United Nations Framework Convention on Climate Change (UNFCCC) - carbon credits for international sale
Typical Co-generation opportunity
• Host generates “waste” fuel or heat
• “Waste” fuel or heat cannot be stored or limited storage is possible
• Could be augmented with additional fuel such as coal or gas
• Host can produce 5-20% of own needs, some cases much more
• Requires integration with existing process
• Host company has extensive engineering and operating competence but maybe limited project power implementation experience
• Electricity generation is not core business
Fuel Based Green Energy: Attractiveness of Cogen
• High Load Factor (24x7) – directly reduces demand when industry uses (load following)
• Utilises “waste” and produces “green” power at low cost (“free” fuel)
Fuel Based Energy
Why has little cogen happened?
• White Paper on Renewable Energy (2003) - 10 000GWh by 2013
– Highlighted technologies to be deployed in the 1st phase (2005 to 2007) included sugar-cane bagasse (fibre that comes from crushing the sugar cane) for cogeneration
• (Eskom) MTPP in 2008 – prices from 2013/14 reducing to 35 c/kWh in 2018
• PNCP and COFIT floundered
• IRP 2010 – 2030 (May 2011): MTRMP for power before 2016, but slow progress.
• 800 MW determination Dec 2012
so now a RFI/P is due, but requirements and PPA uncertain
PPA options and issues:
1. “traditional PPA” based on an energy-
charge (c/kWh) - includes penalties for
non-delivery; for LT (15 yrs) – NOT AN
OPTION, as Fuel not guaranteed
2. PPA akin to a feed-in tariff (COFIT
concept) - an energy-payment (c/kWh), but
difficult to guarantee fuel supply (like wind),
but different – needs significant DSCR or
guarantee
3. PPA with a capacity charge (fixed
component) plus a variable charge. ie.
buyer takes on some/all of fuel-supply risk
4. Simple capital subsidy as per the IDM
subsidy arrangement from Eskom
Conclusions
• Cogen - using “waste” heat or fuels, and increased efficiency of CHP (2x efficiency of power only, ie. Eskom generation) - saves fossil fuel usage & makes SA more energy efficient
• Due to “free” fuel, after capital investment repaid, produces at low cost
• It reduces demand directly, so reduces peak demand and has excellent load factor, unlike other renewables (without storage) – so reduces national investment required in power generation capacity directly (unlike wind, PV)
• In national interest to facilitate investment soonest, especially given tight power supply - it is lower cost than Medupi and Kusile and cleaner & saves coal use
• IDC positioned to support industry/developers who have the opportunities (“waste” fuel)
Also supporting development and use of fuel cells (improved efficiency) that can substantially increase platinum demand (if power of Eskom supplied by FC would double PGM demand - increase SA revenue 4x)
Offtake/Incentive to invest (PPA or capex grant) is needed, as otherwise industry may not
invest, as not core business, and best return given when power prices peak in real terms (4
years away)
Industrial Development Corporation
19 Fredman Drive, Sandown
PO Box 784055, Sandton, 2146
South Africa
Telephone 011 269 3000
Facsimile 011 269 2116
E-mail [email protected]
Thank you
SA Calcium Carbide factory in Newcastle
CHP (Cogen) Technologies