African energy producers gearing up to supply Eskom
African energy companies are gearing up to supply South Africa with electricity following the publication of the determination by the Department of Energy (DOE) to procure as much as 3 750 Mega Watts (MW) of base-load electricity from cross-border sources.
The development signals a reversal of the decades-old trend that saw South Africa exporting power to its neighbours.
“This has been incorporated into the country’s Integrated Energy Plan,” says Shumba Energy managing director, Mashale Phumaphi. “We have already had engagements with both governments [Botswana and South Africa] to determine the course of action.”
Shumba Energy is listed on the Botswana Stock Exchange and is in the process of developing two baseload coal-fired projects suitable for cross-border energy procurement: the Mabesekwa Export Independent Power Producer (IPP) in the north-east of Botswana, and the Sechaba Coal IPP near Palapye (roughly 350km from Gauteng as the crow flies). “These two projects are ideally positioned to handle the complete investment required to provide bankable energy to the cross-border grids of southern Africa,” says Phumaphi.
The cross-border procurement of power will work in the same way as the Renewable Energy Independent Power Producer Procurement Program (REIPPPP), with the Department of Energy adjudicating bids and Eskom being the nominated buyer.
Potential IPP’s like Shumba are awaiting further clarification on how the adjudication process would work. There are two ways it could go – either through a tender process whereby they would release a Request for Proposal (RFP), or via direct negotiations.
An RFP would stipulate what bidders would have to do to qualify, including presenting indicative tariffs which would then lead to preferred bidder status. But there may not be enough bidders to supply the 3 750 MW that has been allocated. “So it might mean they engage via direct negotiations,” says Phumaphi.
Shumba’s two projects would amount to 900MW. There are a few other projects on the go in Botswana, and there may be one or two from Mozambique and Zimbabwe. Connecting to the grid is one of the key challenges. For Shumba’s Sechaba Coal IPP this does not appear to be too much of a problem. The project is located in the eastern side of the country, about 350km (as the crow flies) from Gauteng, the presumed final consumer of the power. “The Botswana Power Corporation will connect us via a 400KV (high voltage) power line to a sub-station located 25km away,” says Phumaphi. From there it would connect into cross-border transmission infrastructure. The Mabeskwa Export IPP further north requires more work.
Should both bids be successful, they would not be able to provide relief to South Africa’s energy constraints until at least 2020. The process is about two years away from “financial close” following which construction would commence.
A 300MW power plant would come at a cost of US$600 million-US$800 million – roughly $2.2 million per MegaWatt according to Phumaphi. Over a thirty year life, that would translate to 45 million tonnes of coal, a resource Shumba can comfortably meet.