Submission on the cogeneration of

electricity
25 July 2013

AGENDA

Introducing Prana Energy

The type of projects covered by our submission

Characteristics of Waste Energy Recovery projects

What we need from Government

Questions

Introducing Prana Energy

Prana Energy

Prana Energy started developing cogeneration projects in

2006;

We are considered to be one of the leading project

developers in the cogeneration space;

We formed a JV with Exxaro in 2007 (Exxaro On-Site)

with the specific aim of the JV being developing
cogeneration projects as these projects were perceived to
be the low-hanging fruits back then;

Exxaro On-Site submitted cogeneration projects with a

combined capacity of 930 MW into Eskoms Pilot National
Cogeneration Programme (PNCP) in 2007 but withdrew
these due to a poor PPA;

We have roughly 200MW of projects which can be

The type of projects

covered by our submission

The type of projects covered by our

submission
Covered by
our
submission
Electricity
recovered from
waste
The co-generator has no
control over the fuel
source - at the end of an
industrial process
Ferrochrome smelters
Ferromanganese smelters
Cement kilns
Steel manufacturing
Etc.

Not covered
by our
submission
Combined Heat
and Power
(CHP)
The co-generator
has significant
control over the fuel
source
Pulp and Paper
Sugar
Biomass
Natural gas
Etc.

Characteristics of Waste
Energy Recovery projects

Cogeneration from waste

energy recovery

Quick to implement relative to new-build coal (circa 24

months)

As green as electricity from wind, solar and hydro i.e. it

reduces carbon emissions

It also typically have further environmental benefits e.g.

reduced air pollution

The grid connection points are already in place no

additional transmission infrastructure required

The electricity is not exported back into the grid as

generation is typically less than the on-site consumption
i.e. reduced grid losses

Fantastic grid alignment (almost like base-load) see next

slide

Fantastic grid alignment

If the demand from the
industrial process on Eskom
is LOW, the cogeneration
plant produces LESS
electricity

If the demand from the

industrial process on Eskom
is HIGH, the cogeneration
plant produces A LOT of
electricity

Economic Comparison of
Technologies Avoid
c/kWh

peaking /
mid merit
plant
costs?

Avoid
Reduction
deep grid
on
connectio transmiss
n costs
ion losses

Solar (PV)

140*

/X

/X

Solar (CSP)

165*

/X

/X

Wind

100*

/X

/X

Hydro (small)

106*

/X

/X

80*

/X

/X

140*

/X

/X

Natural Gas

80-150**

/X

/X

Coal

80-120**

/X

/X

320-420**

/X

/X

Biogas
Biomass

Peaking
(diesel)

*Energy
Based on REIPPP round 3 caps
80-130
** Estimates

What we need from

Government

What we need from

Government
1. We need continuity of policy....

We have been developing 2 cogeneration projects

(Waste Energy Recovery) with generation capacity of
60MW;

These projects are only viable if there is an IDM type

subsidy available but given that this was the case until
April of this year, we spent in excess of R15m on
developing these projects;

In April, the IDM subsidy was abruptly taken away as

part of NERSAs MYPD3 ruling;

No alternative is being offered... i.e. a total discontinuity

in policy

These projects may have to be terminated at a time

What we need from

Government (cont.)

2. The cheapest / quickest / best way to make these projects

happen is a once-off up-front capital subsidy
This is similar in nature to the IDM subsidy which existed at
Eskom for cogeneration projects until March / April this year
and which already enabled a number of cogeneration
projects successfully
Our request is that the IDM subsidy which previously
existed within Eskom be re-activated (very easy to do)
until such time as an alternative mechanism exists (as per
the NERSA ruling)
Our further request is that sufficient funding be made
available to Eskom (from an alternative source?) and that
they be given a temporary mandate to tailor the amount
of the IDM subsidy to enable these projects as long as

Up-front capital subsidy

Subsidy makes the price

of cogenerated
electricity comparable
to that of Eskom

Up-front capital subsidy

(cont.)

Cheap.... the IDM subsidy at ZAR 5.25m/MW works out to

roughly 8 c/kWh for the Prana projects already submitted
to Eskom. It is far cheaper than anything else but the size
of the subsidy required will differ from project to project

Quick.... the IDM infrastructure and legal framework

already exists at Eskom and is being used for other
energy efficiency projects

Alignment of interest.... There is perfect, self-regulating

alignment of interest as the owner of the cogeneration
plant has to provide the rest of the capital i.e. there is a
very strong incentive to make sure the plant produces
electricity

A proven mechanism... It already worked in South Africa

and is widely used internationally

Thank you