About the Gas To Power Programme

In 2012, the Minister directed in her determinations that new generation capacity should be procured from hydro, coal and gas sources to support the South Africa’s base load energy mix and generation from gas and cogeneration as part of the medium-term risk mitigation project programme. The determinations require that 3126MW of baseload and/or mid-merit energy generation capacity is needed from gas-fired power generation to contribute towards energy security. The gas required for such power generation will be from both imported and domestic gas resources.

As the basis of supporting the objectives of the Integrated Energy Plan the Department is, at present, finalising a Gas Utilisation Master Plan (the “GUMP”) for South Africa. The GUMP is a roadmap for the development of a gas economy. It analyses the potential and opportunity for the development of South Africa’s gas economy and sets out a plan of how this could be achieved. One of the key objectives of the GUMP is to enable the development of indigenous gas resources and to create the opportunity to stimulate the introduction of a portfolio of gas supply options. The demand from the Gas to Power Programme will provide a market for a potential supply of gas. It will also provide long term gas demand sinks for future indigenous gas supplies.

The initial period of the development of South Africa’s gas industry could be anchored on the demand provided by the Gas to Power Programme. The potential to link the Gas to Power Programme to supply a limited amount of gas, marketed in the form of a gas supply agreement (GSA), for use of industrial and other users is therefore also being explored.

In the absence of available natural gas within South Africa and to ensure new capacity is delivered in timescales commensurate with the objectives of the medium term risk mitigation project it is recognised that it will be necessary to import gas, inter alia, in the form of either liquefied natural gas or compressed natural gas. As a consequence the Gas to Power Programme could be designed as a potential means to catalyse the importation of such gas.

It is anticipated that Eskom Holdings (SOC) Limited, in its capacity as the single buyer of electrical energy, will be the sole buyer of electrical capacity and energy generated under the Gas to Power Programme.

Where a project developer anticipates providing a power generation solution (a) supplied by LNG or (b) with an installed capacity in excess of 500MW, then, based on analysis of a number of least-cost dispatch scenarios for the South African power system for the years 2020, 2025 and 2030, it is anticipated that such solution will provide mid-merit energy and the following annual average load factors may be expected:

 

Year Installed Capacity Load Factors
2020 3 000 MW or 1 000 MW 35% or 50%
2025 3 000 MW 35%
2030 3 000 MW 35%

 

Only small seasonal deviations from the annual average load factors (stated above) are expected. It is anticipated that monthly average load factors in the winter months will be slightly lower when compared to summer months. Intra-day flexibility is required, with lower load factors during night and higher load factors during the day and evening peak hours.

Where a project developer anticipates providing a power generation solution (a) supplied from a gas source other than LNG or (b) with an installed capacity of less than 500MW, the it is expected to state its anticipated power generation regime (i.e. whether this is baseload energy or mid-merit energy) and its preferred mode of operations (i.e. whether the plant is dispatchable or self-dispatched).

In South Africa’s presently constrained power supply environment the Department would like to investigate early gas power generation opportunities. As such, the Department encourages project developers to provide potential solutions to deliver gas fired power generation as expeditiously as possible. The generation of such early power may come from reducing the timeframes to build out and develop the gas to power value chain or it may come from an interim early power generation facility as part of the development of the longer term gas to power value chain.

The Gas to Power Programme commences with a formal Request for Information (the “RFI”). The RFI is intended to solicit information from participants in the gas to power industry. The Department intends to use the information provided in response to this RFI in designing an appropriate procurement framework and finalising any regulatory amendments that may be appropriate. Accordingly, the Department urges every project developer who anticipates submitting a bid response in the Gas to Power Programme to provide the Department with a response to the RFI for each and every proposed project that it intends submitting in the Gas to Power Programme. All information submitted will assist in the planning of the location(s), infrastructure, the Distribution System and/or Transmission System and other relevant infrastructure necessary to support the Gas to Power Programme and associated GSAs. The Department, in its sole discretion, anticipates engaging with some project developers who submit responses to the RFI to discuss their projects with a view to seeking clarity in relation to information contained in such responses to the RFI.

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