An embedded cogenerators response Andrew Carr

 Large industrial players ◦ smelters, pulp and paper mills, refineries, steel producers, chemical plants, large mining houses, etc.  Smaller industrial players: ◦ Niche plastic and chemical producers, hospitals, prisons, manufacturing processes, agro- processing, confectionary producers, independent miners, etc.

 High energy efficiency  No/little need for new transmission infrastructure  Quick implementation for many projects  High capacity factors  Typically electricity is produced where it is consumed  Competitive space developed by private sector

Net Importers of electricity (Embedded Generators) Net Exporters of electricity (“IPPs” that sell power) Typically see electricity as a utility and non-core (threat) Likely see electricity as a core product Use all of the “cogeneration” electricity “within the fence” May use some of the “cogeneration” electricity; but exports “beyond the fence” Net Exporter Net Importer

Net Importers of electricity (Embedded Generators) Net Exporters of electricity (“IPPs” that sell power) Reduces grid “demand”- classic demand side management (DSM) Does reduce grid “demand”, but is typically aiming to supply electricity Typically 1-3 year planning horizons Typically 7-20 year planning horizons Net Importer Net Exporter

 The Industrial Sector needs support to develop cogeneration projects; two important typical incentives; ◦ Power Purchase Agreements (PPAs) through Procurement Programme ◦ Capital Incentives for Cogeneration/ Energy Efficiency Projects  These two enablers each enhance the viability of cogeneration projects

Capital IncentivesPower Purchase Agreements (PPAs) Short term Capital injection to overcome initial private CAPEX outlay over 3 years Long term PPA to assure income over the 5-20 years Successful Example: ESKOM’s Integrated Demand Management (IDM) initiatives Successful Example: Renewable Energy Independent Power Producer Procurement (REIPP) Programme Typical Term: Up to 3 year term over which “incentives” are realised against Cogeneration performance Typical Term: 5-20 years realised against Cogeneration performance Contractual Burden: Low Contractual Burden: High

Net Importers of electricity (Embedded Generators) Net Exporters of electricity (“IPPs” that sell power) Use all of the “cogeneration” electricity “within the fence” May use some of the “cogeneration” electricity; but exports “beyond the fence” Reduces grid “demand”- classic demand side management (DSM) Does reduce grid “demand”, but is typically aiming to supply electricity as well Key Incentive: Capital Incentive i.e. ESKOM’s Integrated Demand Management (IDM) initiatives Typical Incentive: Sector typical Power Purchase Agreement (PPA) Note Capital Incentive may be applicable too.

 The entity typically sees electricity as non-core, and a business threat  A capital incentive programme will accelerate efficient cogeneration from private sector  No power purchase agreement (PPA) involved, as power is used on-site  No impact on the grid  These projects represent Demand Side Management (DSM) or Integrated Demand Management (IDM) projects, and alleviate the already overburdened grid

 ESKOM have an existing Integrated Demand Management (IDM) Programme  Has enabled a few Cogenerator Projects  Reported that these ESKOM IDM initiatives have been suspended by ESKOM and/or NERSA due to funding constraints.  Severe blow to the embedded cogenerator potential  Accelerate the Reinstatement of the Capital Incentive Scheme to realise Cogeneration in this sector

An ESKOM IDM Sponsored Project

 Up to 6.4MWe will be generated equating to approximately MWh per year or 3 983MWh per month of cogeneration  Indication of the electricity produced due to “cogeneration” over a typical 24 hour are shown below. 24 Hours Kilowatts electrical

 This project has contributed and contributed favourably to the Sustainable Development of its region  Increased job opportunities in an Industrial center  Transfer of specialist technology and economic growth into the Industrial center.  Combating of climate change by reductions in carbon emissions and water consumption.  Alleviated Transmission and Distribution Constraints