Presentation to Parliamentary Portfolio Committee : Energy. Industrial Development Corporation & SACC

Transcription

1 Presentation to Parliamentary Portfolio Committee : Energy 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

2 Content 1 Background: Green and IDC Green SBU 2 Fuel Based Green Energy 3 Cogeneration 4 SA Calcium Carbide 5 SA Calcium Carbide Cogen Project 6 Conclusion 2

3 Green Industries SBU: Focus Renewable Energy: Non-Fuel Power Wind Power Generation Solar Photo Voltaic Power Concentrated Solar Power Hydro Heat, Electricity & building efficiency Energy efficiency Cleaner production / Industrial Efficiency Transport Efficiency Services related to renewable energy & energy efficiency Local Fuel Based Energy manufacturing related to Waste to Energy renewable energy & energy Co-generation efficiency Emission and pollution mitigation Bio Fuels Air pollution control Waste Management/ Recycling Clean stoves Bio Ethanol Bio Diesel

4 Green Industries SBU: Committed portfolio Biofuels 8% R1.4b Fuel Based Energy 12% Energy Efficiency R422m 4% Renewable Energy 76% Green Portfolio R10,4 bn R7.5 bn

5 Potential Constraints Key Strategies/Initiatives Focus Areas IDC Goals Industry Goals High-Level Sector Development Strategies to achieve objectives To be carbon neutral by 2050: Emissions in SA should be reduced to 1 tonne per person per annum To play a leading role in the development of the green economy through investments in Green Industries Energy Efficiency Renewable Energy Fuel based green power Bio fuels 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 cogeneration 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 2 nd generation technologies: review viable technologies and partner where appropriate. 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 2 nd generation viable technologies

6 Fuel Based Green Energy: Industry structure Waste Gas Grown biomass Organic waste Steam turbine or organic rankine cycle Combustion Incineration or Waste heat Steam Internal gas combustion Electricity Co-generation Animal litter On-site heating Anaerobic Digestion Fuel to co-generation plant (waste-heat or off-gas) is a by-product from an industrial process which Sewage manufactures sludge carbide, cement, ferrochrome, steel, glass, platinum, etc. Gas Cleaning Industrial process itself is heart Gasification of the core business of the fuel supplier / host Municipal Co-generation solid at end of industrial process is an add-on, not under control of the co-generation plant Liquefied Compressed Piped waste or Pyrolysis Biogas (LBG) Biogas (CBG) gas Biomass or Tyres Sorting Recycling Vehicle fuel Industrial fuel Feedstock Primary Process Secondary Process End Use

7 Fuel Based Green Energy: Waste to energy and Co-generation Feedstock 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 various options Investment decision Project Offtakes Revenue 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

8 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 c/kwh for ca 8 years and cash cost (O&M) of 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.

9 SA Calcium Carbide factory in Newcastle

10 SA Calcium Carbide

11 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)

12 SA Calcium Carbide Furnace

13 SACC Process

14 Principal objective : Electricity supply (demand reduction)

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16 Previous SACC Operation

17 SACC after Cogen Project

18 Engine Genset 1 of 4

19 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 1 st soil turned in Jan 2012 R105 million capital cost requirement for this project over a financing period of 10 years

20 SACC Carbon Credits

21 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 Actual Furnace Grid Consumption Pre- Implementation [kwh] Expected Grid Consumption Post- Implementation [kwh]

22 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

23 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

24 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

25 Why has little cogen happened? White Paper on Renewable Energy (2003) GWh by 2013 Highlighted technologies to be deployed in the 1st phase (2005 to 2007) included sugarcane 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 (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 energycharge (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

26 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)

27 Thank you Industrial Development Corporation 19 Fredman Drive, Sandown PO Box , Sandton, 2146 South Africa Telephone Facsimile

28 SA Calcium Carbide factory in Newcastle

29 CHP (Cogen) Technologies