Selling back to the grid?

[duncan drennan]

I remember going on a visit to Palmiet during my masters, and one of the things we discussed was the movement towards deregulating Eskom.

At that stage there was a general worldwide move towards deregulation of electrical grids, but that lead to a number of issues all over the world, particularly in California.

Essentially this process would have opened up the market to new players. Similarly to the Telkom situation we have a single supplier that the whole country is dependant on. Until now, Eskom has done a pretty good job of making sure we have electricity, and that we have it at a really cheap rate (SA's abundance of coal helps with this).

One of the things that would have come out of this is that private entities and individuals would have been able to sell electricity to Eskom.

Surely it would make sense to make strong moves towards this? There would then be an incentive for private investment in the energy industry in SA. It would have to be strongly regulated to ensure the stability of the national grid, but could open up a whole new industry.

[OldGoat]

Eskom will look at private companies selling back to the grid.
The only problem is the red tape and regulations that are in place as determined by the NER (National Energy Regulator) makes it difficult for smaller businesses.

[Dave A]

Reading up on that California business, I can understand why the South African proposition was not met with much enthusiasm.

I see some major obstacles:

• Private suppliers are not going to be keen to invest whilst Eskom is in the market.
• There is a fairly high risk of unfavourable regulation by government, if not now, at some point in the future.

You'd need some sort of an edge to get in and viable. For example, if you owned the Cape Penninsula Nature Resserve setting up a wind farm might well be viable. But just in saying that, one gets an idea of the scale involved. This is a game for big corporations.

In saying that, are there any good small scale examples that are working out there though? Perhaps where a power utility is only supplying a town or smallish city?

[Dave A]

Confirmation that there might be progress on this.

Brian Dames, the managing director of Eskom's enterprise division, said he had received applications totalling 5 000MW of power for the 900MW in co-generation capacity Eskom was seeking. Eskom would choose only the most viable projects.

The last paragraph of a Business Report story here. But take moment to read the rest of the story for the odd giggle. My personal favourite was:

Bongani Nqwababa, Eskom's finance director, said that despite load shedding, the group would sell as much electricity in this financial year as it did last year, due to growth in demand.

Remarkable. And there I was thinking the level off on sales volume might be related to stagnant production capacity.

I hope Bongani does not become our minister of finance anytime soon.

[Dave A]

Private enterprise has stepped up to the challenge.

A new 1 040 megawatt power station built by the private sector could be up and running at the Coega industrial development zone by 2010, alleviating the power crunch.

Ipsa, an independent power plant developer that is listed on AIM in London and on the JSE's Altx, will build the Coega power plant, which can ultimately have a capacity of 1 600MW.

The fast-tracking of the project follows the signing yesterday of a memorandum of co-operation between Ipsa and the Central Energy Fund (CEF).

Peter Earl, Ipsa's chief executive, said yesterday: "This is enough to give Alcan the minimum they need in 2010."

This comes after Eskom warned last week that it might not be able supply the Rio Tinto Alcan aluminium smelter with power in 2010, as agreed.
full story from Business Report here

Now why did we have to wait until our back was to the wall to do that? Amazing how quickly things can happen when they have to.

[RKS Computer Solutions]

Thought that just came up? Don't you reckon big corporations who are spending billions of R/$/Euros to build aluminium/steel plants, can foresee this and put an extra $4mill aside to build their own wind farms close to their plants in order to supply most of their own energe, thereby saving loads of long-term costs?

Just an idea

[Dave A]

Build a power station with a running cost of about 10c per kWh or pay Eskom 12c per kWh?

When is the next shareholders meeting again?

I think break even on a power station is a bit far down the road when you're in a business which can recoup that kind of capital outlay way quicker by sticking to your core business.

[Chatmaster]

Build a power station with a running cost of about 10c per kWh or pay Eskom 12c per kWh?

When is the next shareholders meeting again?

I think break even on a power station is a bit far down the road when you're in a business which can recoup that kind of capital outlay way quicker by sticking to your core business.

Well, the other side to the story is, what if they have a power failure? What would the damage be? At the current moment it seems like power failures will be much more frequent, so there is a real risk involved for them and a real benefit in perhaps setting up their own electricity...

[Dave A]

Eskom would be buying a new smelter for them.

Why do you think Eskom won't cut them off?

[Chatmaster]

Eskom would be buying a new smelter for them.

Silly me for thinking something else

[RKS Computer Solutions]

Dave, I agree in principal, but taking the load-shedding into account, if a company has to work that into a pre-build budget and have the possibility of losing millions from a Single-point failure(ie Eishkom), I still reckon it's a more viable option, at least for companies in SA now and over the next few year.

Yes, there is more capital layout from the start, there are more management decisions to be made and handled on a day-to-day basis, but facing the very real possibility of having to shut down your plant, costing you $50mil losses per hour, the capital spent on putting your own backup solution in place starts sounding like a good idea...

Couple that with the fact, bearing SA Goverment not getting their knickers in a twist, that agreements could be made with Eskom in order to sell the excess or unneeded power back to the grid, the 10c versus 12c situation is starting to look a lot different.

[Chatmaster]

I also think that the 12c has now moved up to 14c after the budget speech, so maybe it is getting more realistic for them to consider it.